Momentum - Business to Business Online Magazine MOMENTUM SUMMER 2019 | Page 16

FROM THE BUSINESS COACH MIKE HILDERBRAND, BS, MBA, CBC ActionCOACH of Galveston [email protected] www.galvestonbizcoach.com Five mistakes to avoid when selling your business F or most small business owners, their dream is to one day to be able to sell their business and enjoy the financial rewards that the sale will bring. But for many, their experience will be an inability to sell their business or being forced to accept a below market price. Below are five mistakes not to make when planning to sell your business: 1. Not planning to sell your business If your desire is to sell your business, then you need to set today a clear goal as to what you would like to sell your business for. This will determine the likely future profit levels required by your business to justify your required selling price. Only by having a clear profit target can you develop a plan of action to achieve it. 2. Reacting to an unsolicited purchase offer Ideally you should take your company to the market when it is ready for sale and retain control over the sales process. When you react to an unsolicited offer from a buyer, you inevitably give control of the sale process to the buyer, reducing the strength of your negotiating position. And an unanticipated sale might expose certain weaknesses in your business that you have not had an opportunity to rectify. 3. Having poor or unreliable financial information about your business Prospective buyers require detailed financial information on your business. Not having this increases the perceived risk to the buyer, as he can’t be certain what he is buying. This always leads to one of the following outcomes: a reduced selling price, the buyer walking away, or the seller being required to warrant the future profits of the business, all with the buyer being able to reduce the selling price if these are not achieved. 4. Unrealistic value Many business owners place a value on their business based on what they need to retire on or what they 14 MOMENTUM have invested in the business. Neither of these have any bearing on the value of your business; only the anticipated future cash flows of your business, the risk attached to these cash flows and current market pricing will influence the price. Setting an unrealistic price will mean buyers will walk away, leaving your business on the market for a long time, increasing the pressure to sell and attracting bargain hunters. If you want to sell your business for a certain amount of money, work out what profits and future cash flows you will need to achieve this selling price and then put a plan of action in place to build your business to this level. 5. Not appointing an advisor Too many business owners don’t appoint an advisor skilled in negotiating and selling a business. While the cost of such an advisor may seem expensive, the downside risks of not being advised could in extreme cases result in you losing the entire value of your business. In life we should always learn from our mistakes, but when it comes to selling your business you may not get a second chance, so it’s better to have someone advise you who has seen and made those mistakes before.