Selling a business is a big decision for any business owner. However, lack of information and lack of experience makes many business owners not get value for their company. It takes time and a lot of effort to grow a business to a point of sale, business owners should maximize the value of the business. However, some businesses find it difficult to get a buyer and close deals because of some mistakes they make during the process. Business owners should prepare well and sort for experts and professional help to avoid costly mistakes. Below we will discuss 7 Common Mistakes by Business Owners seeking Sale/Investment
Not aware of your business value
Many business owners do not have a clear exit plan. They plan for the start up and subsequent growth but fail to plan for exit. The exit is an important part of the business plan and should be planned for. Therefore, when they decide to sell they have no value for the business. It very important to know the business value, hence you sell the business at a fair value and make a profit from your sale. With the right value, a business owner will give a good case for their business.
Wrong sale timing
Many business owners wait for so long to sell. This is mainly because they do not have an exit strategy and they have used a lot of time in developing the business. When time is stretched, the sale occurs at the wrong time hence the business sale value is not maximized. A professional exit plan will help improve on the timing. The business should be sold before it experiences burn out or low profits and unforeseen business cycles.
Having one buyer to negotiate with
Some business owners feel comfortable dealing with only one customer. Some buyers approach business owners intending to buy/invest in the company as they are in search mode. The owners should actively look for other buyers and expand their options rather than stick with one. The more the buyers one negotiates with the high eth price will be. When negotiating business owners should consider all the factors, the buyer, type of transaction, type of business, mode of payment, Business owner obligation after the sale and others. The mistake should be avoided, as it’s costly.
Some business owners have inadequate documentation, which affects sales/investment prospects. A business owner should prepare all financial documentation i.e balance sheet, tax returns, profit and loss statements and cash flow statement all analyzed for the past 3 years. Having inadequate documentation is a sign of a business that is not serious. Buyers want to have well-analyzed financials. In the event of a sale, you should have the business valued to determine its value.
Offering very little information about your business
When presenting proposals some business owners give scanty information about their businesses. An investor takes a few minutes to make a decision. So the business owners should ensure their presentations are simple precise and cover all the necessary information about the business. Be cautious about offering a lot of information some that are not necessary, unless when necessarily asked to. To cover everything, answer five fundamental questions in the profile your submit
What does your business deal with?
How much are you looking for?
Do you need the money?
How much are you already making?
What does the buyer get?
The questions will help you offer a comprehensive teaser of your presentation.
Selling in a rush
The sales process is long and it would take time. Some business owners make a mistake of rushing the process. The sales process is systematic and it has steps to be followed. The process can take 5 to 8 months to complete. It’s advised for the business owner to use professionals at every step of the process to manage the process effectively. Every step has its importance in the sale and one-step affects the other. A rush would lead to losing deals.
Unrealistic future growth projections.
Growth projections are offered to the buyer during the presentation. The showcase to the buyer what to expect from the business in terms of numbers. Some business owners make unrealistic projections. it is good to be ambitious as a business person but at the same time, one needs to be realistic and in touch with the business and the market at large. Buyers see through the unrealistic projections and refrain from committing to the sale or investment.
Business owners should watch out to ensure they avoid the 7 Common Mistakes by Business Owners seeking Sale/Investment