14.5 C
London
Saturday, September 24, 2022

Are you thinking of selling your business? Three common pitfalls to avoid

Must read

Release date announced! Another banger is coming

Sky1's Babylon Berlin is a neo nori German crime drama series. Volker Kutscher's Berlin crime series Gereon Rath. The show revolves around...

Texas police investigate use of force after video circulates of a cop hitting a student against a lunch cart

Police in Irving, Texas, are investigating a cop's use of force after a video showing the cop throwing a student into a lunch cart...

Netflix Edition of Night School’s ‘Oxenfree’ Now Available to Play on iOS and Android • londonbusinessblog.com

Netflix is ​​adding Oxenfree, the popular supernatural mystery thriller game created by Night School Studio, to its game offering. Oxenfree: Netflix Edition is...

How Change Co-Founders Brainstormed About Entrepreneurship • londonbusinessblog.com

Welcome back to Found, the podcast where we get the stories behind the startups. After graduation, co-founders Amar Shah and Sonia Nigam were bored with...
Shreya Christinahttps://londonbusinessblog.com
Shreya has been with londonbusinessblog.com for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider londonbusinessblog.com team, Shreya seeks to understand an audience before creating memorable, persuasive copy.

Jeff is the lead broker at Merger business brokers. Jeff has owned and operated many businesses in his more than 30-year career as an entrepreneur.

While the small business world has not fully recovered economically from the effects of the pandemic, BizBuySell’s Recent Insights Report for 2021 should provide some optimism for small business owners.

Small business transactions picked up again after a slow start in 2021 28% clip in the fourth quarter, bringing totals within 11% of the pre-pandemic numbers for 2019. And transaction volume wasn’t the only area to see improvements. The median selling price of small businesses rose 16% as a result of low interest rates and “intensive demand” for high-performing companies.

The reasons for the bounceback in transactions range from burnout to opportunity for financial gain. Owners have been battling the effects of the pandemic for about two years now, and many are deciding it’s time to sell. The main reasons for quitting remain general burnout and retirement. In fact, 43% of respondents specifically cited “pandemic fatigue” as a “moderate to extremely motivating” factor in driving consideration to sell. With many companies seeing an immediate drop in sales, experiencing staff shortages, and dealing with supply shortages, the pull to leave is understandable.

All of this leads to the idea that if you experience similar feelings — opportunity, burnout, etc. — you no longer have to feel like you’re underselling your business when now seems like the right time to stop. But if this is your first time going through this process, you probably aren’t 100% sure where to start. As a business broker, I’ve seen many owners benefit from partnering with a broker early in the process to handle things like pricing/valuation, marketing, and negotiations. However, that doesn’t mean there aren’t steps you can take on your own to prepare to sell your business. Here are three pitfalls to avoid:

Overlooking the Importance of Confidentiality

From my perspective, there are three groups that you don’t want to know your business is up for: your employees, customers, and competitors. But honestly, there’s really never a point where you want the general public to know that the business is for sale, no matter who you are.

When people hear that a business is for sale or are looking for a buyer, I’ve found that the vast majority of people will assume it’s for negative reasons. More clearly, for many people, a business for sale often equates to a struggling business. And I’ve found that competitors are more than happy to sing that story from the rooftops to anyone who will listen. As a result, your business may see a drop in sales while you’re in the process of finding a buyer, and your overall valuation may be negatively impacted. Not to mention that if creditors find out your business is up for sale, they can call your outstanding loans.

Instead of just going out and talking to people about selling your business, do your homework and market research and look at past sales from similar businesses. This is something you can work with yourself. From there, consider partnering with a broker who can help you sell your business to qualified buyers without revealing the seller’s true identity. (Full disclosure: I offer these types of services, as do others.)

Failing to get your finances in order

Tax returns, profit and loss statements, payroll, profitability: these are all things you need to clean up and get in order before someone can properly assess your business. Remember, you want to be able to make an honest estimate of what your business is worth. You should not be looking to get the highest possible rating.

That may sound counterintuitive, but if that number is too expensive, your business could remain in the market and go unsold for a long period of time. The economy fluctuates, valuations shift, and you could end up getting a less than great price for what you’ve built.

Getting your books and finances clean and accurate from the start will help you get the most realistic valuation and actually sell the business, rather than fighting an overpriced estimate of its value.

Waiting for the perfect opportunity

When is the right time to research a company’s sales? I would say there is never a bad time to do that. You never know what the right time is unless you know the possibilities. When the economy, purchasing power, and product/market demand for your widget all align, it might be a wise time to sell. However, most potential sellers only look to an appraisal when other extenuating circumstances, such as finances, family, health, or burnout, make them consider selling. It often has little to do with the entrepreneurs knowing the market is right and more to do with their personal lives.

Consider getting a valuation of your business. Even if you are just curious and have no intention of selling, it is always good to know where your company stands and what the possibilities are. Perhaps you can then decide when, or if, there is a time to sell that is right for you.

Ultimately, selling your business should be examined when the timing is right, when it makes sense for your personal goals, and when it can result in generating enough value for you to achieve those goals. It doesn’t hurt to find out what the options are.


londonbusinessblog.com Business Council is the leading growth and networking organization for entrepreneurs and leaders. Am I eligible?


More articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest article

Release date announced! Another banger is coming

Sky1's Babylon Berlin is a neo nori German crime drama series. Volker Kutscher's Berlin crime series Gereon Rath. The show revolves around...

Texas police investigate use of force after video circulates of a cop hitting a student against a lunch cart

Police in Irving, Texas, are investigating a cop's use of force after a video showing the cop throwing a student into a lunch cart...

Netflix Edition of Night School’s ‘Oxenfree’ Now Available to Play on iOS and Android • londonbusinessblog.com

Netflix is ​​adding Oxenfree, the popular supernatural mystery thriller game created by Night School Studio, to its game offering. Oxenfree: Netflix Edition is...

How Change Co-Founders Brainstormed About Entrepreneurship • londonbusinessblog.com

Welcome back to Found, the podcast where we get the stories behind the startups. After graduation, co-founders Amar Shah and Sonia Nigam were bored with...