We find that there are many common mistakes when selling a business. Selling a business is not like a standard product or service. It is a process that takes significant time. You need to accept that a business sale is only going to happen if you show patience and compromise.
The ability to reflect on the wider situation can be of huge benefit when selling. A compromise here or there rarely impacts on the bigger picture, after all. Since a high proportion of businesses fail to sell in the UK, company owners are clearly going about things wrongly. Make sure you don’t fall into the same category by paying close attention to the following commonly encountered pitfalls. These are the ones that will ruin your chances of selling your enterprise and you should make sure that you don’t do them, no matter how tempting they might be.
Contracts and sales terms may be an area of expertise you have already, but it is rare for business people to be well-versed in all aspects of commercial law. Therefore, it is imperative that you get an expert opinion on any sale proposition that comes about. This means finding a legal brain experienced in such matters, not your usual solicitor.
Selling without the assistance of a professional sale advisor is also highly inadvisable. Firstly, sales professionals already have the necessary know-how when it comes to drawing up sales terms, helping to minimise legal fees down the line. Perhaps more crucially, however, is the well-known fact that running a business while attempting to bring it successfully to market is a time-consuming process.
Do it yourself and your focus is on neither job to the extent it should be. Either your business’ performance suffers because you are actively engaged with selling it – in which case, its sale price can tumble – or you spend too much time on the day-to-day running of the firm without paying sufficient attention to the needs of potential buyers.
Let’s put it this way: trying to sell a going concern without a sale advisor is a bit like running a marathon whilst trying to cross stitch. In other words, even the best multitasker can become unstuck. The amount of time and attention to detail required by a well-run business sale process accumulates into many hundreds of hours. Sales can last for up to a year before their conclusion.
This means that you need stamina as well as get-up-and-go. In the final analysis, business owners need a sale advisor who can focus their attention on the sale process while they devote their energies into growing the business. Of course, these means making it as attractive as possible to would-be buyers.
The likelihood is that a strong business will sell when advertised at a reasonable market rate. Unfortunately, many business owners overvalue their business because they see its value as it appears to them, but not to others.
You should seek independent advice when valuing, and take into account all of your negatives as well as the positives. Remember that your knowledge may be one of those assets which impact on the valuation.
No buyer will pay over the odds for your company. An inflated price expectation will often lead to a very low level of interest. Potential buyers may just pass over the opportunity without even bothering to examine the positives.
Trying to pull the wool over any potential buyers eyes is a definite no go area. If you think that that there are issues within the business that you can hide from a potential buyer, then think again. Processes, contractual issues, customer disputes and employee difficulties will all face thorough inspection by buyers as a matter of course.
Their due diligence process will examine every detail of the business and its operations. If you are not upfront about problems and try to hoodwink buyers, then trust will evaporate. Should business-critical issues come up at a late stage, then it could potentially derail an otherwise good deal for both parties.
When a buyer proposes a deal, some business sellers make the mistake of assuming that there is no give and take. You can always reflect on an offer made and make a counter one. However, this does mean preparing yourself for the other party potentially walking away, of course.
Remember that a buyer doesn’t need to buy your business as though it is a necessity for their future plans. Therefore, you shouldn’t assume that you can operate without give and take.
Commercial negotiation is very much about reaching accord through compromises. This means adjusting sales terms and pricing to make the best possible fit for both buyer and seller. By assuming that you can push hard with negotiations while offering little in return, you run the risk of the entire sale process falling through.
Businesses that operate without a healthy balance sheet are only really of interest to buyers because of their assets. However, even companies that are in a healthy financial position can fail to sell if the owner pulls cash and other liquid assets out of the business during the negotiation stage. Remember that the cash your firm typically has in the bank forms a part of its valuation.
If you withdraw substantial amounts of cash from the business’ coffers before completing, don’t expect the same price. Some buyers would see this sort of action as unprofessional and decide to pull out of negotiations as a result. It is, therefore, definitely not advised.
Avoiding these common mistakes when selling a business will help increase your chances of selling. To get advice on how to best navigate your business sale, get independent advice. To receive advice on your best route to sale for your business then contact our experienced team on 0333 050 8225.
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In the early stages of such an important undertaking, it can be a bit of a moral maze: who do you trust?
Firm Gains gave me confidence with detailed advice and support. I would recommend their services to other entrepreneurs seeking to buy a business.Mr T Washington , Founder
I found it much easier to get my head around a business sale this way than talking to my accountant. You speak a language I understand!
Even though the whole process of selling seems daunting, I’ve got more confidence that I’m heading in the right direction.Mrs T Boothe , Founder
Thank you for your email and the excellent advice provided earlier this week. It was immensely helpful and has helped me to plan my future direction for the practice.
I would have no problem whatsoever in recommending your services in the future.Mr & Mrs Halldron , Co-Owners
Firm Gains were recommended to me and I was not disappointed. They were efficient, helpful and effective responding quickly to my request with all the facts that were needed to ensure a stress-free dialogue with our buyer.
What really helped was the advice over and above the valuation, which was immensely valuable and gave me the confidence to proceed. I would not hesitate in recommending them.Mr C Waite , Founder
We found the advice invaluable, which was clear and concise and felt your firm had a good handle on market trends and business sectors.
With also the backup of the secondary services, there was a feeling you had all bases covered if we wanted to proceed with our exit via Management Buy Out (‘MBO’).Mr D Wills , Director
Thank you for your advice. I was just about to sign up to the wrong kind of business agent for a company of our size, but read your post just in time.
I found a more serious partner, with experience in our industry and we’re already using the same language.Mr F Summerscale , Managing Director
We have been greatly impressed by the clear and impartial advice given to us by Firm Gains. After just an initial phone call we felt much better informed, with a new awareness of the many options available to us.
Firm gains understood our situation quickly and clearly and were anything but ‘pushy’. Refreshing compared to what we’d experienced before.Mr C Hutcheson , Managing Director