The 5 Biggest Myths About Selling a Business
Selling a business is unlike anything you’ve ever done. The skills and expertise you have developed as a business owner don’t necessarily translate into a successful sale. Sellers routinely enter the marketplace certain that their listing will instantly stimulate a vicious bidding war between well-financed buyers…only to be disappointed when their expectations aren't realized.
Often, this isn't because of a fundamental problem with their companies. Rather, it's because they didn't understand the sale process and the realities of the business-for-sale marketplace.
Common Myths About Selling a Business
Like the marketplace for your company’s products and services, the business-for-sale marketplace is generally predictable. There are no guarantees, but the more you know about how the marketplace works and the typical experiences of other sellers in your industry, the easier it will be to set the correct expectations and have a successful sale experience.
With that in mind, here are several common myths that need to be dispelled as you approach your exit from the business:
1. The company is ready to sell.
If you haven't invested significant time and energy preparing your business for the marketplace, you have a lot of work to do before your company is ready to be listed. Successful business owners often spend months or even years positioning their companies, compiling financial records, and performing other tasks that directly affect salability.
2. My business will sell in a few weeks.
Some businesses are listed and sold within a matter of days--but those cases are few and far between. It's more likely that it will take a period of months to locate the right buyer for your company. A common rule of thumb is that it takes six months to 10 months to sell a small business. This may seem like a long time, but the simple truth is that it takes time to find the right buyer who will pay you an appropriate market price and to whom you will be comfortable handing over the reins.
3. I’ll receive the asking price for my company.
Asking price and sale price are two very different figures. When sellers and brokers determine an asking price for a business, they understand that the negotiation process will ultimately result in a sale price that is lower than the asking price. How much lower? According to the BizBuySell.com data, sellers are receiving about 90 percent of the asking price for their companies, and it's not unusual for that spread to be even greater.
4. The buyer's financing is not my problem.
In an ideal world, this one would be true. But in fact, the buyer's financing is your problem, because you have a real dollar motivation for helping the buyer access the necessary capital to purchase your company. To facilitate the financing process, give a lender confidence by demonstrating that the business can continue to track along its projected growth curve under new ownership. Often, you may also need to finance a portion of the sale yourself to close the deal.
5. Sale prices will be higher next year.
Timing is an important part of a successful business sale. Although it's possible to manage certain variables, such as recurring income streams and work-force stability, avoid trying to predict if and when your sale price will be higher. Instead, watch the marketplace, solicit advice from professionals, such as a business broker, and make decisions based on solid information.
Selling a business may not be easy. However, with the right expectations, the right preparation, and the right assistance, you can do it…and do it well!