Selling A Business - 14 Action Steps To Help You Sell Faster & For More Money
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Want to sell your business? What a stupid question of course you do. Every business owner dreams of the day they can cash out. Unfortunately, one survey after another has shown that most small businesses put up for sale never get sold. To give you an idea of the odds, most business brokers operate on the assumption that they will need to list 5-6 businesses for sale in order to earn one commission. There is an entire industry of attorneys, CPAs, brokers and M&A advisors who help owners sell their businesses. Most make a very nice living despite their industrys low success rate. Perhaps you have a great attorney, a brilliant accountant and the best consultants in town helping you. You may even have a broker who is great at his job. But none of these people have as much at stake as you do. They all have many clients from whom they will collect fees and commissions. Your team of professionals will be just fine whether you sell your business or not. Since you have the most at stake you cant let yourself become too dependent on these advisors. With these facts in mind, here are 14 proactive steps you can take to maximize your chances of success.
Selling A Business - 14 Action Steps To Help You Sell Faster & For More Money
- 3. The most qualified, desirable buyers have the most options. A buyer who is qualified to buy your business is qualified to buy lots of other similarly priced businesses too you can be sure that they will consider many other businesses beside yours.
- 4. And one option they always have available is the option to do nothing. In fact that is what most prospects wind up doing nothing. 9 out of every 10 people who respond to a business for sale ad or contact a broker never actually buy a business. And that leads us to Action #2
- 6. Dont wait for the buyer to follow up with you or initiate the next step in the process. Dont assume they are only focused on your business. Whenever you speak with a prospect always let them know what they next step is in the process and try to set up a time to take that next step.
- 8. Having one buyer is the same as having no buyers. Even if you do everything right, your favorite prospect may choose to buy someone elses business instead of yours. You can never let your success depend on the decision of one person. They may behave irrationally or illogically. Or through no fault of your own, they may choose to buyer someone elses business.
- 9. So always be on the lookout for additional potential buyers. You never know which one will turn out to be your eventual buyer.
- 11. Owners often feel an obligation to tell their employees of their intention to sell. You should resist that urge. It can take a long time to sell your business. Maybe 6 months to a year. That is a lot of time for things to go wrong.
- 12. Not only will your employees become distracted and possibly start searching for a new job, but news of your sale could make suppliers less likely to extend terms and customers less likely to enter into new agreements. And then there are all the ways your competition may use the news of your sale against you.
- 14. A buyer will only give you money for one reason they want to enjoy the benefits of the future profits of the company. And when it comes to smaller, owner-operated businesses the buyer will run the business much like the seller has. Therefore you must price the business based on proven earnings (profits).
- 16. You should develop a price range not an exact price. Then start the negotiations at the very top of that price range. There is nothing magical about your business valuation calculations. There is no dollar figure that represents the true value of your company. In fact, you shouldnt even be interested in the theoretical value of your business. You want to find out what is the highest price a real human being will pay for your business.
- 17. The business valuation process is just the beginning of the pricing process: Your business is worth nothing separate from what a real buyer with real money will pay you. So get the businesses in front of those buyers as soon as possible to see what the market thinks of your business. The eventual price you get will be based on the best agreement you can strike from among the many(or few) prospects you find.
- 19. You cant sell the business through an ad so dont even try. And dont use patently absurd hype like THIS BUSINESS IS A GOLD MINE!!!! You dont believe that and neither will a prospect.
- 21. You have already stated your asking price in your advertising and marketing materials. If a buyer asks you what you really want for the business and you quote a price lower than what you advertised, then you are negotiating against yourself. They buyer already knows what your asking price is. If they want to make a counter-offer, let them. Then ask them to justify it.
- 23. Sometimes owners fail to reach an agreement with a buyer because they really dont want to sell. It is not unheard of for a seller to have a change of heart halfway through the process. The decision to sell was made at a momentary low point. It was based on emotion. If that is the case there is no shame in taking the business off the market. But you dont want to be the kind a seller who works hard with one buyer after another and then always sabotages the deal in the end because you are not ready to part ways with your baby.
- 24. The other reason why it is important to know the answer to this question is that the buyer will always ask. Justifiably or not, buyers are suspicious. They may never say anything, but they are wondering if this business is so successful why would anybody sell it? Of course there are many good reasons to sell a successful business: retirement, burn out, the chance to pursue other opportunities or dreams. The point is that this is an important question in the buyers mind. So have a well thought-out answer prepared.
- 26. I know you probably dont want to. But if you want to sell sooner rather than later and put more money in your pocket you really need to. According to BizBuySell.com over 80% of small business sales include some form of seller-financing. And according to Tom West at Business Broker Press, businesses that sale for all cash bring in an average of only 69% of the original asking price.
- 27. Realize that the negotiations should be more about terms than price. Once you have decided to offer your buyer some financing the discussion will change. The buyers decision will come down to whether or not they can afford the monthly loan payments. That is a good thing because it gets the focus off the price. You can always lower the payment by extending the terms by 3 or 6 months. Or by lowering the interest rate half a point. Meanwhile the price stays the same.
- 29. Your offer to stick around for a specified period of time for some on-the-job training will make your business much more attractive to buyers. Most buyers view training as being very valuable. Just look at how much money people spend on franchises in large part because of the training that comes with it.
- 30. Also, most small business buyers are first time owners so training is even more important to them. And buyers are more likely to trust a seller who is willing to provide training after the sale a seller with something to hide will be out the door ASAP.
- 32. A reasonable buyer knows that risk is part of the equation when going into business. So they will always look at businesses that are for sale with the idea of minimizing their risk. Not eliminating it entirely, just minimizing it. While you want to present your business in a best-case- scenario light the buyer will always have the worst-case- scenario in the back of their minds. If you have legal issues or contingent liabilities hanging over your head you may be better off taking your business off the market while you work those things out.
- 33. Another signal of risk is when a business has just completed an unusually good year. If you have been bumping along at the same profit levels for the last 5 or 6 years and then suddenly last years profits jumped 50% .. well, a buyer isnt going to trust that sort of performance. They will assume it was due to some temporary fix that cant be duplicated. Remember in Action #1 when we said the best prospects have the most options and they always have the option to do nothing? If your business seems risky to the buyer then nothing is exactly what they will do.
- 35. Sometimes a lawyer wants to WIN. If there is some legal issue with the deal then by all means, follow your lawyers advice. But you dont want your lawyer trying to renegotiate the price and terms youve already worked out with the buyer. Let your lawyer know it is your business and this is the deal you want. And it is his job to help make it happen.
- 37. Your business is worth an amount equal to the best deal you can negotiate among the qualified buyers you have found - nothing else matters. Remember: Most small businesses never sell for any price. If a qualified buyer makes you an offer that is only 90% of what you were hoping for think long and hard before walking away from it.
- 38. Find Qualified Buyers For Your Business @TheBizSeller.com You Receive A Background Statement On Every Buyer (Work only with the people YOU believe are qualified) Guaranteed Confidentiality Exclusively For Sale By Owner You Pay No Commission www.TheBizSeller.com