By The Liberty Group of Nevada
When a business owner decides to sell their business, it is important to plan for a smooth process and transaction. From finding the ideal buyer to understanding the true value of the business, there are a variety of challenges owners can face and common mistakes that can happen during an ownership transfer. Preparing properly when selling a business can assist in preventing these common missteps.
Mistake #1: Not Having an Exit Strategy in Advance
A major mistake that many business owners make is not preparing an exit strategy in advance of their decision to sell the business. Typically, owners think about planning the transfer of ownership after they have made the decision to sell. However, it is important to start the exit planning process in advance. In doing so, owners will be given more time to consider a variety of factors including succession of management, knowing the true value of the organization, developing a pre-qualification process for prospective buyers, and how this transaction will affect the owner’s personal finances.
Mistake #2: Selling a Business When Not Profitable
When a business is struggling, owners may begin to consider selling their organization. However, this is not the ideal time because if a business is not profitable, the pool of potential buyers will be small. If a business is in trouble, it can appear less valuable to buyers and make finding one an even more daunting prospect to achieve.
When selling a business, it is vital to have the business appear in the best shape possible. This can be done through a variety of ways. Increasing the profit of the company, increasing and diversifying the customer base, illustrating a consistent source of income, and developing long-standing contracts that will guarantee work for the company in the future are all great ways to improve the value of the business. This in turn will allow a stronger selling price and attract the attention of more potential buyers.
Mistake #3: Not Getting The Business’s Affairs in Order
When many people decide to sell their business, they go into the transfer process believing that it is time to wind down their activities and begin thinking about their next adventure. This is should not be the case. Most purchase agreements contain a clause regarding continuation of business using the best efforts of the business owner. In other words you need to keep selling and moving the business forward throughout the business transfer process.
In addition to continuing your normal business operations, several additional things that must be addressed before business owners can move on. Getting the business prepared to transfer often requires reorganizing the financial statements preparing a of contracts for the ownership shift. Contracts between the business and clients, franchise agreement, vendor and supplier agreements and leases are critical to continuing operations. Failure to ensure that these relationships are prepared to be transferred has caused more than one business acquisition to fail.
Selling a business can be a long and complex process, but with proper planning and guidance, it can be not only profitable but incredibly rewarding. The benefits of a successful transition cannot be overstated. The Liberty Group of Nevada is well-aware of the laborious and often challenging process of selling a business and is equipped to assist owners in navigating through each step of the transaction. We provide high-quality service and guidance through the entire process to make the selling of your business as simple, profitable, and painless as possible. If you have any questions or would like more information, please contact us today, www.thelibertygroupofnevada.com/contact-us/.
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Lauckner, S. (2020, November 18). Selling a Small Business: The 8-STEP GUIDE. Retrieved February 10, 2021, from https://www.fundera.com/blog/selling-a-small-business
Yuille, B. (2020, February 27). 7 Steps to Selling Your Small Business. Retrieved February 10, 2021, from https://www.investopedia.com/articles/pf/08/sell-small-business.asp