7 Overlooked Things That Can Scuttle Your Efforts To Sell A Business
Reason to sell a business
If you want to sell a business, you should check several things. The first thing when you want to sell your business is to identify a solid reason why you want to sell your business. Most business sellers fail to answer that answer conclusively. A discerning buyer will want to know why you are selling. Are you selling because the business is struggling? If yes, you have to show the buyer what exactly is worth buying. In this article, I will look at what you should avoid before hitting the market.
Not understanding your target buyer
There are two groups of business buyers. One group wants your technology—sometimes just your unique business position. They want to amplify the scale of your operations. They will refer to your business as an undervalued asset. If they take your business, they will most probably hit it big. The other category is interested in buying your business to operate it. They don’t want to start a company from the ground up. They want one that has its systems and functions intact.
The two categories of buyers are interested in different things at your company. One wants the trade secrets while the order wants the financials. One will look at your customers, sales forecasts, cash flow, serviceable contracts and such things. The other one will look at patents, exclusive deals, key ingredients, and such things. If you know your target buyer, you know what to focus on. If you don’t, you will focus on the wrong things, which will cost you a deal. Take a side—strategic or financial market.
Half of Americans work for small businesses. However, a significant number of them are notorious for keeping sham paperwork. Some cannot even tell you when their pre-existing permits and licenses expire. Some cannot know their annual sales. Most of them are so clumsy that they don’t even know when they should file returns with the tax man. At the very least, be organized and orderly.
Missing or shoddy records are characteristics of a business that will find it difficult to get a buyer. If it does, it will cost the buyer time and resources to streamline it in formal ways. Buyers will want to buy your business at a throwaway price, which will scuttle any efforts of getting you a good deal. Be ready to prove your business net worth through a proven checklist. Furthermore, unkempt records are a red flag. It can mean the business owner is not organized.
Lack of efficient business operations
Financial buyers want seamless business operations and functions. They want a workable business model that is transferable and trainable. If it falls short of that, it will be a gamble on top of the other. Why would any sane buyer take such a position? The odds are stacked against anyone who will be interested in your business. As a result, you will get a low price point offer for your company. Most certainly, you will refuse to sell ultimately losing your opportunities.
It starts with documenting your business processes. Start with a clear and coherent business plan. The buyer will want to see a 3-5-year projection of your business—it had better be justifiable. Define what you do. Be sure to say how you do it. Show the buyer how you have been doing it over the years. Invite them into your vision. If you are exiting the company, have a clear succession plan.
Lacking a qualified valuation
Quoting a price is one thing, justifying it is an entirely new thing. To look professional, you had better be ready to show valuations from independent appraisers. If you want to sell a business in Florida, hire a business valuation Florida expert. A good Florida business broker or a selling company can help you get a reputable valuation firm. It is a common mistake for business owners to exaggerate their values. It is also a possibility that you underestimate your business. A professional valuation firm will help you overcome both possibilities.
Environmental and zoning issues
A business that is on top of business functions and paperwork rarely faces these problems. New zoning issues can emerge in the year. Environmental issues with EPA can arise. It is up to you to deal with them before they scuttle your deal. If you are a serial founder who builds and sell a business, you probably know how important it is to keep tabs with any major legislative moves. Don’t be caught off-guard.
Commercial real estate
Not everyone who wants to buy your business wants the attached real estate. Some just want the business name and whatever advantages that comes with it. Real estate can embellish the price of a company. Many buyers are in the shop for a functional business that has the potential to turn profits. If possible, strike a balance between your business and the real estate. If the buyer is not interested in real estate—most of them are not—you can try temporary measures such as a lease.
Business structure and legal position
Do you have a pending litigation battle? Do you have a C corporation structure? What is your legal liability status? Litigation, a lacking pass-through structure, and liability are some of the issues that can collapse an imminent deal. Work on these and other things that might give potential buyers a bad feeling about the business.
Before deciding to sell a business, prepare your business for it. I am a business broker West Palm Beach. If you want to sell a business in Palm Beach, I can help you sell your company. Remember, first impressions still matter when it comes to selling company. Make your business workplace orderly and clean.