Making the decision to sell your business isn’t an easy one. Whether it’s a promising startup or a storied family business, it’s the product of your dedication and hard work.
Once you’ve decided to cash out and look for a buyer, you want to make sure the process is as smooth and simple as possible. BusinessesForSale.com is here to help you do just that, as we break down some of the most common obstacles to selling a business, and how you can get around them.
Inaccurate valuation
One of the biggest pitfalls business owners can fall into when selling their business is inaccurate or overvaluation. It’s easy to understand why this happens: if you’ve spent years building your business from the ground up, you’re likely to be a bit biased when it comes to setting an asking price. But it’s crucial that you take an objective and unsentimental view here.
A third-party, accurate valuation which takes in all costs, assets and investments is needed. Factors such as current economic conditions and industry multiples can have an impact on a business’ projected value. For a detailed breakdown of some of the major methods and models that are used to value any business, read this article.
BusinessesForSale.com’s ValueRight tool has been designed for just this purpose. You can receive a detailed SDE valuation for your business in less than 45 minutes with some key financial figures. If you want a quick, accurate snapshot of your business’ value in just five minutes, you can also do this with ValueRight Express. This will arm you with the information you need to set an accurate asking price, and find the right buyer.
Not attracting enough buyers
If you’ve set a reasonable asking price and are still struggling to find a buyer, there are a few things you can do to make your business stand out from the crowd. Every year, BusinessesForSale.com conducts an annual survey of the business buyers who use our website. In the most recent edition of the survey, we asked them what information they would like to see on listings featured on our site. Their answers provide valuable insights for anyone thinking of listing a business online.
One of the biggest recurring trends was financial transparency. Buyers always prefer listings which are up front about providing information such as net worth, EBITDA and profit/loss statements. Sellers who are honest about and willing to share the reasons why the business is being sold are also highly valued. Beyond this, some key information which buyers like to see on listings include the cost and length of any leases associated with the business, and details about staff retention.
The more transparent you can be about your business, the more likely a buyer is to reach out and open communication. If that still isn’t enough, sometimes the simple things can be the most effective. An eye-catching high-resolution photo (or two) goes a long way, as does spotlighting your USPs at the top of your listing. Ensuring you’re in the correct categories can help you be discovered in the widest possible range of searches, too.
Succession and ownership transfer
Handing over ownership of a business is never easy, and issues surrounding succession can be an obstacle to selling. These could be internal disagreements if you’re selling a business you run alongside a business partner or family member, or challenges arising from transitioning ownership to an external buyer.
For detailed advice on the legal and practical considerations of transferring ownership of a business, read this article. It breaks down important documents and concepts you should be aware of, and provides a roadmap to a secure and confident transfer of ownership.
Negotiation and last-minute deal collapse
Many deals will collapse in the later stages, as more information is uncovered by both parties. Negotiation can be particularly tricky, especially if its your first time buying or selling a business. It helps to have as much of an understanding of the market as possible at this point: what are other similar business going for? What unique value adds does yours have?
Don’t be afraid to ask for financial information to prove you’re dealing with a serious buyer, and remember that the negotiation process always involves some degree of back and forth. If you have an accurate valuation, you can go into these conversations with the confidence that the price you’re asking is what your business is truly worth. If you’re able to demonstrate with transparency how you arrived at that valuation to your buyer, there’s a much higher chance they’ll be willing to meet it.
Conclusion
Selling a business isn’t always an easy task, but the process can be made much smoother and more rewarding if you do your research, and operate with transparency throughout. Make your business as attractive to buyers as possible, but be clear about the costs and challenges involved. If you do, you’ll likely find these common obstacles are much easier to get around.