Most likely the biggest financial transaction you’ll ever be involved with, selling a business the right way is crucial to your future financial health and the continuation of a business that you’d like to see succeed.
Selling your business is literally, a Big Deal. Here are some mistakes to avoid when selling yours.
1. Identifying the best buyer early and negotiating only with that entity
Wow, that was easy. You’ve already found a buyer and now you just need to negotiate on price. You’ve told all the other potential buyers the business is sold. So many things can happen to derail a deal — problems with financing, inability to come to terms on the value of your company, negotiations that lead nowhere. Sometimes the buyer changes his mind and walks away from the deal.
A friend of mine has a big rock in his office with block letters on it that read, “Nothing is set in stone.” Remember that when negotiating the sale of your business and keep your options open when identifying and negotiating with buyers.
2. Considering only the dollar amount when looking at offers
If this is a business you started, or a family business you took over, chances are you care a lot about its ability to thrive. And its reputation. As Warren Buffet said, “It takes 20 years to build a reputation and only five minutes to ruin it. If you think about that, you will do things differently.”
If you care about continuing the reputation you’ve built up for your company, take a deep dive into the culture and reputation of the companies looking to buy yours.
3. Handling the sale yourself
The saying goes that a man who is his own lawyer has a fool for a client. I would venture to say the same thing about someone trying to sell his business on his own. You need to hire business professionals, which may include tax lawyers, business advisors and a business broker. Some people try to save money, figuring they can handle the whole thing on their own. Respect your business and your time enough to hire someone to get the best possible deal for you.
4. Setting a price based on what you think your company is worth
Although you should be aware of a general market value of your business, to get its true worth you need to go through a thorough valuation process. Hey, maybe you’ll be pleasantly surprised and find out it’s worth more than you thought.
5. Not seeing your business realistically
In a recent Dove ad, women described themselves to a forensic artist who then produced sketches from their description. The resulting sketches bore little resemblance to what the women really looked like, and were actually much less attractive. (The video has been watched 55 million times on YouTube!)
Yes, that’s on a different topic about women and their self-images. But it’s a good illustration that we don’t always see ourselves realistically. And we don’t always see our businesses for what they are either. Dealing with daily crises and all the things that go wrong, we may sometimes overlook all the positive aspects of our business. Or on the opposite spectrum, we may be in denial about the underlying problems that will affect its value.
Jim Collins, author of “Good to Great” said, “The challenge is not just to build a company that can endure; but to build one that is worthy of enduring.”
Make sure your business endures long after you’ve moved on.