Seven Reasons To Wait Before Selling Your Company

For many modern entrepreneurs, the end goal of starting a successful company is to sell it – once it has reached a certain level of profitability. For those who started a company for other reasons, selling may be for a myriad of other reasons.

Regardless of the motivation, making the choice to sell your business is a massive decision that should be thought over significantly, not only because it will require you to make big changes in your life but also because the process of selling the company is much more complicated than most people initially realize. In fact, 80% of businesses listed for sale will never be bought and 90% of buyers will never find a suitable company to buy.

Although there are several reasons for these disheartening statistics, often times either the seller or buyer is unprepared for what selling or acquiring a company actually entails. What might prevent you from selling your business before you have even gotten started?

1. Why are you selling?

It is important to understand your motivations for the sale for your own well being and to convince your buyers that you are not selling to escape a failing company.

Before talking to with a potential buyer, make sure you understand your reason for selling and are prepared to give your buyers a truthful answer when asked.

2. How will the buyer value your company?

You should make sure to get an outside valuation of your company before speaking with a buyer for an objective opinion on its value. That being said, make sure you have not been throwing in a lot of personal tax write-offs in the last couple years, as these will make your company seem less serious and profitable to the buyer.

3. Do you have a strong and independent management team?

Although many business owners pride themselves on being the heart and soul of their company, buyers are understandably concerned when they see a company that is essentially a one-person show. Make sure you have a clear management structure that can be replicated with or without you, ideally with an existent staff who can run the company without you or the new buyer’s oversight.

4. Is all your legal and tax documentation in order?

The last thing a potential buyer wants to see is a confusing mess of tax records and legal forms. Organize your documents so that they can be easily understood and fact-checked.

This will lend credibility to yourself and your company in addition to speeding along the sales process.

5. Is it the right time market-wise?

You should investigate the market for companies of your size in your industry and in your region before listing your company for sale. If the market is not right at the moment, you could lose thousands of dollars by pulling the trigger. A business broker is very helpful here, often being privy to information that you may not be able to find yourself.

6. Are there any glaring weaknesses to be dealt with?

If your company has a specific set of weaknesses, there is no use in trying to hide them from a potential buyer. They will most likely discover them in the buying process at one point or another and will be severely put off by the simple fact that you tried to hide important information from them. Be upfront about whatever weaknesses you are aware of in your company so as to establish trust in your dealings and avoid problems later on.

7. Have you been or are you currently facing legal troubles?

Unfortunately, trying to sell your business quick due to being sued or other legal woes will not solve your legal woes. In most cases, you cannot legally sell your business if there is an ongoing case. If there has been a case in the past that is closed, you should let any potentials buyers know about the situation upfront to avoid trust issues later on.

Think about these seven issues before moving forward with the sale of your company so that you can be sure it is the right move for you and your company.