You may be great at running your business, but have you got any experience with Selling your Business? So what experience does it takes to sell your business? When it comes to selling it is a whole different ball game. And there are many disadvantages of taking on the selling of the business yourself.
Disadvantages of selling your business without knowledge
- You are unlikely to be in touch with a network of buyers and therefore can end up with little competition. This in turn will mean little negotiating power and a low price.
- A lot of buyers of businesses have a lot of experience and know the ways to get the best bargain for themselves. Without experience it takes to sell your business, you will not know the tactics that can come into play in the negotiations.
- By definition, you are emotive about the sale, especially if you have put a lot of time and effort into running the business. It is important to have a level head in negotiations and to be objective without letting emotions cloud your thinking.
- There is a lot of preparation that can enable your business to get the optimum value. It is good to get advice from the experts about what you can do.
- Negotiating a sale is a lot of work and you have little time to concentrate on running your business at the same time. The business is likely to take a down turn and, again, you will make less money out of the deal.
Let’s look at a scenario where a business owner takes on the selling of the business for themselves:
- The buyer gives a simple, non committal Letter of Intent (LOI) with a low offer.
- The seller asks for more money and the buyer raises the price by a little, until the seller feels they have got a fair value
- The buyer does a thorough due diligence, which requires the seller to spend a lot of time getting together all the paperwork and making reports.
- The seller doesn’t have much time to run the business
- Due diligence uncovers a number of problems, maybe with the bookkeeping, the financial forecast or with some contracts
- The LOI is updated, but this time it has complications, such as delayed payment or clauses that tie payments to performance and other items that put the seller at a disadvantage.
- The seller has now spent a lot of time and energy on the whole process, to say nothing of the thousands of dollars on lawyer fees. In addition the business has taken the toll from the lack of focus of management. This in turn leads to discontent within the business, less productivity and even employees looking to find jobs elsewhere.
- As due diligence continues, the turn down in business shows up and further concessions are required.
- At this point the seller can make one of two choices. The first option is to pull out all together, realizing that there is no way to make a good deal out of the sale. In this case the seller should go back to building up the business, learn from the experience and think about selling later with professional help. Hopefully, not too much damage has been done in the whole process in terms of losing custom, employees and money. More often than not, however, the seller is under so much stress over the whole process and not able to match the expertise of the buyer as they argue their case, that the seller gives in to a deal that is much below the original value of the business.
What did we learn from this?
This scenario highlights the need for professional help when selling your business. It is often possible to get up to 40% higher price and a much less stressful time. This is possible when you have a competent team on your side. They can:
- find a broader market for your sale,
- with more competition and the right buyers,
- help you prepare and optimize the value of your business and
- deal with the negotiations,
so you can continue running your business well throughout the whole process. Your business is worth more because of it and you will get more for it. Good for you and for the buyer.
It is well worth getting professionals in to help you sell your business. They will have all the experience it takes to sell your business. Without them there are many pitfalls and difficulties. Additionally, your business will normally sell at a significantly lower price. You will also save yourself from a very stressful process.