Are you thinking about selling your business this year? If so, the process can seem a little bit daunting and overwhelming. There are many different aspects that need to be considered, and, of course, you want to make sure that the deal is right for you. Keeping that in mind, in this post we are going to take a look at some of the most common mistakes people make when selling a business so that you can avoid them.
- Being overconfident – There is nothing wrong with having a positive attitude and believing that you are going to sell your company at a decent price. However, it is vital to ensure that your expectations are realistic. If you are overconfident, you are only going to end up disappointed in the end. You need to ensure your business is priced accurately so you don’t put potential buyers off.
- Failing to prepare adequately – Another error many business owners make is failing to put in the necessary amount of preparation. Think about it; when attempting to sell your home, you do everything in your power to make sure it looks nice and appeals to those who view it. The same thing needs to be done when trying to sell your business. There are numerous factors that can impact salability and the price of your business, such as staffing issues, lease problems, sustainable profitability, and financial documentation. In terms of your actual office, you need to ensure it is well maintained. Whether this means hiring a plumber to fix a leaking pipe or using a bird control service in to deal with this problem, do it before you sell your business. So, make sure you deal with this first before jumping straight in.
- Breaching confidentiality – This is one of the most costly mistakes you can make. You need to maintain the highest levels of confidentiality throughout. If you fail to do this, and word gets out, your reputation will be in tatters. This will make it incredibly difficult to sell your business because people will be wary about negotiating with you for fear that you could end up letting their sensitive information slip.
- Pricing issues – This is something a lot of sellers without experience fall victim too. Many business owners tend to have a set price in mind before the valuation process even begins. How are you supposed to defend your price if you have not put in any prior research or thought of a well planned out valuation process?
- Failing to hire a broker – A lot of people are tempted to try and sell their business on their own, as they see a broker as an unnecessary expense. However, experience pays. If you have never sold a business before, you are assured to find the process challenging and you may end up losing money as a result. Instead, a broker can help you to find a buyer and ensure you extract maximum value from the sale.
Most people would agree that it is better to use the services of business brokers when you are attempting to buy or sell a business as opposed to going at it alone. By hiring a broker, you can be confident that the right amount of attention will be dedicated to the sale while you will also have someone to assist you with negotiations and ensure you get the evaluation right.
However, you are only going to experience all of these benefits if you choose a broker with a great amount of care and consideration. Therefore, read on to discover some of the key questions you should ask before hiring a broker.
1. How much experience do you have? There is only one place to begin and this is with experience. When it comes to experience, a lot of people simply look at the number of years the brokers have been in the industry, and that is that. However, there is a lot more to this than meets the eye. While a good number of years in the sector is important and impressive, you need to focus your efforts on relevant experience. You need to be sure that the broker has experience in selling the same sort of business as yours.
2. How many businesses have you sold like mine? This moves onto the next part perfectly; you should discover how many companies the broker has sold that are like yours. Experience in dealing with similar businesses is one thing, but facts and figures are always valuable. When we say ‘businesses like yours’ it is important that you do not simply view this as business type. Take restaurants as a prime example, there is a huge difference between a large fine dining restaurant and a small budget breakfast spot.
3. Do you assist with preparing the sales contracts? It is vital to thoroughly understand what you are getting for your money. An experienced broker should have the capacity to help you when it comes to drafting legal agreements and any other documents that are required. They should also have knowledge when it comes to the various ways you can structure deals. Your broker should be able to help you structure the transaction and they should put together the initial paperwork; you don’t want to be spending more money on this.
4. How many listings do you have at present? It is also advisable to discover how many listings the broker has at the moment. This will help you to decipher how much time they are able to dedicate to selling your business, as it will give you a good indication of the time they have available. Of course, a high level of listings does suggest that the broker is in high demand, but you need someone that has the time available to truly assist you.
5. How do you value businesses? Last but not least, it is a good idea to ask the broker how they value businesses. From their response, you should be able to determine their level of experience. If you encounter a response like ‘net income multiplied by two’ or any other cookie cutter reply, you know to look elsewhere.
If you ask the questions that have been mentioned above, you should have no trouble finding the best business brokers for you. Don’t overlook the importance of this. After all, this individual is virtually going to have your sale in their hands, and thus you need to be confident that you can trust them and that they are going to do right by you. To help you further on this quest, we are now going to take a look at some of the most common errors you must avoid when hiring a broker.
- Failing to read customer reviews – Client reviews can be very insightful. You are always advised to spend at least ten minutes searching on the web to see what previous clients have to say about the service they experienced. If there are any red flags, you will pick up on them straight away, and you will know to look elsewhere. Remember, you need to consider the reviews as a whole – don’t let one comment form your judgment. Even the best professionals get a negative review from time to time.
- Going for the cheapest broker you can find – This is one of the most common errors people make. They simply do a quick search on Google, looking for the cheapest brokers in your area, and they will select the one charging the lowest fees. However, if you do this, there is a very high chance that you are going to suffer at the hands of a lack of quality. You need to ask yourself why this broker’s rates are cheaper than everyone else’s. Quality is the most important factor, and a premium quality broker can save you a lot of money in the long run.
- Failing to conduct enough research – You need to make sure the broker in question is the right one for you, and this involves doing a considerable amount of research. You should find out about their experience; not only the years that they have been involved in the business, but also whether they have sold any companies similar to yours. You should also make sure that they are qualified and certified.
- Not getting the full picture about fees – Most brokers work on commission, and thus you can expect to pay a percentage of the sale price. However, there are a lot of brokers that charge for different parts of the service separately. You need to ensure you are fully aware of any other potential costs that could occur. The last thing you want to do is get stung by hidden fees.
- Expecting to take a backseat – Last but not least, a lot of people think they can simply leave their broker to get on with buying or selling a business while they go back to focusing on other things. Nevertheless, communication is a must and you need to work alongside the broker to get the best deal for you.
So there you have it; the five mistakes made when hiring a broker. If you can avoid the errors that have been mentioned, you have a pretty good chance of finding the ideal broker to assist you with buying or selling a business.
*This is a contributed post