The business owner will only sell their business once. It is the most important transaction of their lives.
The process is complex with legal, tax, valuation and personal planning issues all co-mingled.
If you are a business owner looking to sell a business soon, here are some of the ‘myths’ we often hear that, if believed, can result in a less than optimum outcome.
First Myth: I know what my business is worth, better than anyone else.
Some owners want to be reimbursed for “sweat equity”. Others think their business is worth what they need in retirement. Yet others use “rules of thumb” they heard at an industry conference. Or some other method.
But a third party valuation is a very excellent idea for anyone considering the sale of their business. An independent valuation will take a thorough look at the business and the environment it operates in. It will consider all factors that affect the value. And will do this objectively and without emotion.
Second Myth: Selling a business is like selling a house.
Selling a house can be complicated, but it happens so often that the process is standard. Prepare the house for sale, put it on the market (often through a realtor), receive an offer, sign the paperwork.
Selling a company is much, much more complex. Selling a business requires much more planning. The process can take a year or longer just to get ready. Then it can take 1-2 years, though usually about a year.
There are so many factors involved in selling a business, please see my other posts on this subject.
Even after the business is sold, the seller should expect to remain involved in the business for some time after that.
Plus there is much more at stake in selling a business. It usually is a once in a life event with giant ramifications financially and personally.
Third Myth: I can sell it on my own.
Some owners think they don’t need professional help in selling their business. This is because they are the primary salesperson for their company and have handled everything themselves over the years.
But selling a business is not like selling a product or service. For example, confidentiality. If your clients, customers, employees and vendors hear the business is for sale, great damage can be done.
And there is the time element. Selling a business is a full time job. Can a seller really do everything necessary to market their company and not focus on maintaining and improving sales/profits during the sales period? Business performance may slip without proper attention at the worst possible time.
When you are selling your business, focus on improving the business performance and let an experienced professional handle the sale.
Fourth Myth: Selling when the owner is ready, ignoring the market environment.
Yes, the seller needs to be mentally ready to sell. That is very important.
But to get the maximum price for the business, the timing of the sale is very important. Economic conditions can have a huge impact on the sale.
This doesn’t just apply to the wider economy but specific industry conditions.
The selling prices of companies are affected by many factors. This could include interest rates, labor availability, industry consolidation, geographic issues and so on.
Get your personal, company and the market conditions right to ensure the best possible selling price.
Conclusion: Have a complete sales strategy for your business. Do an independent valuation. Have an exit plan.
