In this series of articles, we are going over the top mistakes business owners make when they decide to sell their business. (Missed any of the parts? You can catch up on our series here: Part 1, Part 2, Part 3, Part 4, and Part 5)
If you think it is time for your business’s ownership to change hands, you need to have an exit strategy that can get you the best possible returns. It is important to take all the necessary steps to ensure you obtain the top value for your business and secure your retirement.
There are some common missteps that can significantly reduce your chances of scoring a good deal, and can even block you completely from selling the business while it is still performing well. Our sincere recommendation would be to take care of mistakes before the business is placed on the market for a qualified buyer to take over.
No Professional Advice? Deadly Mistake
The sixth deadliest mistake business owners make is selling their business without professional advice. You may not feel the need to access a third party expert opinion, as you might think that nobody knows your business better than yourself. Yet right there lies the issue… You know your business well, but you are not an expert at the business of selling businesses! Selling a business is a lengthy and complicated process that requires experience and a set of particular skills to master.
You are obviously great at running your business, as you have brought it to a position to be sold lucratively. However, once you begin the selling process, you may realize, like so many others have, there are so many components that have to come together to make a successful sale possible, to such a degree that doing it on your own can be truly overwhelming. As a result, you might fail to find the right buyer, fail to successfully go through a sales deal or end up not getting the money your business deserves.
There is no need to shy away from quality professional advice. This advice may come from an array of resources, including CPAs, lawyers, business brokers, business coaches and others. People whose job it is to facilitate important deals like the sale of a business. When the time comes to sell the business, most owners are surprised to find out the amount of work that goes into it. With experienced professionals on your side, the process becomes systematic, yielding efficient and effective results.
Why Professional Help Is Essential
There are numerous financial and legal issues that need to be resolved before, during and after the sale of your business. Expecting to do it on your own is rather naïve. Your business advisor can help you prepare for the sale process, while a business broker can prepare your business, get it valued accurately, find interested buyers and pre-qualify them to filter out the best ones. Negotiating a mutually beneficial deal is not easy. You would do well to get all the legal, financial and deal-making help you can get.
Having access to a professional advisory team can be crucial when contemplating issues like stock vs. asset sale, setting the right asking price, valuations of asset and equipments, royalties, guarantees, tax responsibilities, liabilities, assumption of lease, seller financing, your responsibilities once the sale is executed etc. Trying to do all these things yourself, while continuing to run your business, is close to impossible.
It is important to accept the fact that selling a business is a full-time job that is better left to professionals. Putting in a few extra hours a week is not likely to get you the buyers and deals you are looking for. Marketing your business effectively and attracting multiple interested buyers while maintaining confidentiality is next to impossible. Striving to improve the value drivers of your business, while going through the intricacies of a sales deal is not easy.
How Professional Help Can Support The Sale Of Your Business
Selling a business is a once-in-a-lifetime opportunity for most entrepreneurs, and it is extremely important that you do it right, as your financial future hinges on it. Not having any legal or brokerage experience and the lack of objectivity required to fashion an effective deal are just some of the reasons you should consult with seasoned professionals. A comprehensive financial and legal due diligence and proper valuation of your business’s assets can be better performed by objective third-party advisors and experts.
Considering the importance of objectivity, skills, and experience to carry out an effective sales deal, it is surprising how many owners insist on attempting to do everything on their own. This is what we call the “DIY Syndrome”. It would be like performing brain surgery on yourself… It simply makes no sense! Most business owners opt for this DIY approach in hopes of maintaining total control over the proceedings of the sales process, only to quickly find their inexperience leading to things spiraling out of control.
Tasks You Can Lean On Professional Advisors For
Preparing and marketing the business, structuring an effective deal, carrying out fruitful negotiations, preparing financial and legal documents and agreements, dealing with multiple buyers and closing the deal in time are some of the concerns when contemplating changing the ownership of a business. With all the complexities involved when selling a business, refusing to recruit professional guidance is a risk to selling the business successfully.
It is important to have a well-thought out exit strategy. Finding the right buyer and preparing your business for selling takes time and can often times be frustrating. Realizing the right time to sell can be crucial. Many business owners that do not have a well-planned exit strategy just close their business because they cannot find a buyer, or they leave a lot of money on the table when they sell. Professional brokers have market connections that can help with the buyer search and allow you to sell your business at the optimal time.
One of the main reasons business owners hesitate to hire the professional legal, financial and brokerage services when selling the business is the cost of the services. What they fail to realize is how much more money they can make by spending a little on the right professionals. Third-party professionals can help business owners get more money, with fewer taxes in many cases, yet only 10-20% of business owners use a third-party intermediary.
Choosing to abstain from utilizing professional advice can be detrimental to your business’ sale prospects. Selecting a competent third-party to represent the business owner dramatically increases the chances that the business will be sold, for the highest purchase price, under the absolute best terms and conditions.
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