The very characteristics which make owners successful when starting and growing their businesses- healthy self-confidence, a strong will, and keeping their own counsel, can cause troubles when selling.
History proves these otherwise healthy personality traits often lead owners to make an array of costly mistakes when it comes time to sell. Here are a few…
Not Knowing the Business’ Value
Owners typically don’t know how to value their businesses. A key element of value is found in the intangibles. Owners rarely know what these are, let alone their worth.
A big fear is the wrong ears will hear the business is for sale, then used against them in the future. Without knowing how to protect the confidentiality, questions will be:
- Who do I tell?
- How do I qualify buyers?
- What information should I give them?
- How can I stop them from talking about my business?
- What if my employees or competitors find out?
Negotiating with Only One Buyer
Owner’s instincts are to find one potential buyer, then proceed. An Advisor confidentially markets your business finding multiple buyers. History indicates these transactions average between 15%-25% higher.
Attempting to Sell to the Wrong People
Often owners feel competitors are the best buyers. However, they are clearly the highest risk for confidentiality as well. Yes, they occasionally (but rarely) make the best buyers. Why? They typically make ‘low-ball’ offers as they don’t like to pay for synergy or market share they could add to their own business.
Negotiating the Deal Themselves
Because most owners negotiate (in some fashion) every day, many believe these skill-sets are applicable to negotiating their own sale. However, without guidance and options they’ll struggle. Why? It’s a fact, when the stakes are high, intense emotions lead to unfounded and irrational decision making.
Dabbling in the Market
With pictures of freedom and wealth dancing in their heads, owners are typically flattered when approached to sell. Some get curious, asking “What if?” This leads to dabbling. Going there ill-prepared just to ‘see what happens’ is dangerous. Go there with answers, a plan and a goal.
Not Using Professionals (WAIT! It’s not what you think!)
Do owners need a broker? No, not necessarily. Do they need some answers and guidance? Yes, absolutely. Professionals…
1. Know what your business is worth, and why?
2. Can bring multiple financially qualified buyers to the table.
3. Will assure confidentiality in approaching buyers.
4. Will ensure the seller communicates with their Transition Team consisting of a CPA, transaction attorney, wealth preservation specialist, estate planner, etc.
5. Know the precise steps and processes, moving the process along faster, solving problems and transactional needs along the way.
6. Will ensure your best retirement.
Answers and guidance… the right professionals should cost you nothing.