Do not make these seller mistakes
To help you get it right the first time, here we present the 10 most common mistakes we see sellers consistently make. This is an important section and one you should scrutinize thoroughly before proceeding with the sale of your business. The good new is that this is precisely what ABMI is all about: helping you succeed by avoiding the mistakes below.
We have been there, done that with clients, and we will help you avoid the countdown of seller mistakes.
10. Wrong price
What you or your bank thinks your business is worth carries little weight with the buyer because neither of you is perceived as an objective party. Attaching a price to your business that is not based on its true assessed value and current market conditions virtually guarantees a no sale result.
ABMI can help here. Our experts will help you arrive at a selling price that both attracts buyers and yields the highest return to you.
9. No preparation
If you’re not prepared to sell your business, you most certainly won’t. You need to bite the bullet and accept that selling your business is going to take some work on your part. ABMI can reduce that load to a great degree, but we will depend on you to do your part: provide required documentation and business records, execute documents in a timely fashion, have a well-thought out answer as to why you are selling in the first place. Poor preparation and information will certainly add weeks, if not months, to the time it takes to sell your business.
8. Inadequate financial records & information
Here’s an interesting irony: Private businesses typically are set up to maximize profits, but for tax purposes, that’s precisely what you don’t want because profit = taxes paid. Yet—and here’s the irony—profit is almost always the sole focus of a potential buyer. The first question is always, how profitable is this business? In terms of selling, all the owner’s efforts to reduce the tax burden by showing minimum profit can come to naught when nobody buys.
Good recordkeeping can save the day here. If you’ve been showing low profitability but have solid results, be able to demonstrate why. For example, investing in infrastructure improvements can reduce your profit profile, but actually increase your potential valuation. Being able to demonstrate the cost of these improvements can go a long way toward allaying concern about your “low profit.”
Information accuracy and availability can be another deal-killer. Not many potential buyers are brave enough to take over a company whose “paperwork” is a complete mess because of the obvious cost involved in making things right.
7. Being unclear as to your reason for selling
It’s just like buying a car: The first thing you wonder about is this: “If this car is so great, why are you selling it?” That’s a reasonable question whether you’re buying a car or house or business, and having a good answer is essential to a quick and profitable sale of your business. ABMI will help you ensure your answer is the right answer.
6. Non-qualified prospects
It does no good to present your business to those who don’t have the wherewithal to buy it in the first place. That just costs you time and money. Whether you or a broker of your choice is selling your business, make sure to ask for financial information or do a background check on “interested parties.”
This is another area where ABMI can significantly contribute to the sale of your business. We maintain a list of more than 9,000 pre-qualified entities interested in acquiring businesses. This means ABMI can put your business in front of targeted buyers almost immediately.
5. Courting the wrong buyer
Not every buyer is interested solely in your business’ bottom line. Some buyers make their moves for strategic reasons within their industry, or to secure lucrative, preexisting contracts, etc. Lots of reasons beyond profit. Perhaps your business is particularly suited—or ill-suited—to these types of investors. ABMI can help you determine what’s up so you avoid “barking up the wrong tree.
4. Demanding an all cash deal
Yes, this happens. Insisting on receiving, essentially, “money in a suitcase” immediately raises red flags. Why the secrecy? What’s being hidden? What’s the legality? Red flags are the last thing you want when you’re trying to convince a potential buyer to sign a deal.
To get the highest possible price for your business, most sellers “carry” (lend) to the buyer at least 10% of the purchase price.
3. Trying to sell the business yourself
When your transmission starts acting up, do you put on work pants and fix it yourself? Of course not. You call a transmission expert. And if you do that for an investment in a car, why would you not do that in the far greater investment: your business?
Sellers who try to sell the business themselves typically spend a huge amount of time interacting with buyers, sharing information with unqualified or even devious buyers, and exposing their customers and employees to the sale of the business.
Many rules, regulations and legal procedures govern the sale or transfer of ownership of a business. Sellers who miss these key elements are exposing themselves to issues down the road.
Selling a business is a complex and time-consuming process (and so is fixing a transmission). Taking on this challenge yourself will be just that: a challenge. What’s more, a potential buyer will you have at an immediate disadvantage when they perceive that you have declined to seek the help of a professional business broker. They’ll assume their expertise will easily prevail over yours. They’ll likely be more aggressive as a result, requiring that you be more aggressive in return.
ABMI makes this problem virtually disappear. Our experts are aggressive on your behalf. They serve as your experienced, knowledgeable advocates through the entire process of selling your business. And they will do so while also staying on the best of terms with the buyer. After all, there may be a transition period post-sale during which you’ll need to work with the new owner.
Many a deal has turned sour because one side feels cheated or taken advantage of during the sales process. A skilled broker and negotiator will work toward an outcome that everyone feels good about, one the actually builds a relationship between the parties.
Many times a buyer will need to have a strong, working relationship with the previous seller during the transition process. Getting started on the right foot, then, is very important.
1. Picking the wrong time to sell
The best time to sell your business is when the business is doing well: you’re not in critical need of cash and the business is actively turning a profit. If profits are currently down but you expect them to increase in the near future, it may be better to wait to sell until that more profitable time.
ABMI can help you pick the right time to sell by assessing the current market for your business in light of its current profitability.