Selling your business can be very tough.
There are questions to be answered, documentation that needs to be provided, brokers and attorneys involved – it can become very complicated very fast. In addition, all of your hard work is about to be exchanged for a substantial amount of someone else’s money, so emotions are likely to run high.
If you have never sold a business before, knowing what you’re in for can be very helpful in preparing yourself for this very stressful time. This is part 3 of a series of articles that will address the elements of selling a business you may not have considered, but will shortly be confronted with. Part 3? Expect some push-back…
What do we mean by this? When you are attempting to sell your business, you will find that not everyone involved with your business will be happy about the impending sale, and some may even try to sabotage your sales efforts in an attempt to keep the sale from happening.
Here’s an example of what we see on a fairly regular basis. You meet with your business broker and come up with a listing price for your business, but then when you talk to your regular business accountant – a guy you’ve known, worked with and trusted for many years – he balks at the price, telling you the price is ridiculously low and that this new broker has no idea what he’s doing. You panic and insist that the broker raise your price. Your accountant must be telling the truth, right? Only one outcome will come from this situation. Your business, which now has a crazy initial listing price, will drive buyers elsewhere and you will be stuck in listing purgatory indefinitely.
Was your accountant wrong about what your business is worth? Yes, because a listing price should not be just a multiple of your bottom line. When you list a business, the point of the exercise is to sell that business. A good broker will use the sold price of comparable businesses, market trends, add-backs, etc. to determine a price that will actually get buyers coming in the door.
Why would your accountant give you a bad valuation? The answer here is simple, he doesn’t want to lose you as a client. In many small accounting businesses, the loss of a major client will mean a big hit to the bottom line. When a business goes up for sale, those professionals who earn a living serving your business will worry (and rightfully so) that the new owner will bring their own CPA, attorney, etc. to the business.
Should you ignore their advice? No, as they are professionals you know and trust. What you should do is take their advice with a grain of salt. Take the advice of anyone (including your broker) this way, as in any business transaction there are many people who have a lot to lose or gain if the business changes hands. Expect push-back from your CPA, your attorney, your family and others so you will be better prepared to determine for yourself what is best for you and the sale of your business.
Are you thinking of selling your business, but are confused by all of the conflicting advice you’ve received? Please feel free to leave us a question or comment here, and we will be happy to address any concerns you may have.
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