If you are interested in selling your business, there are some basic mistakes business sellers make that can absolutely be avoided if you know what they are. Business transactions are inherently complex, so knowing what the most common pitfalls are can help to streamline the process by avoiding them.

Big Mistake #4: You are letting buyers get to due diligence without knowing if they are qualified to actually buy the business.

If you are trying to sell your business on your own, this is a situation that you should cause you some concern.

Why? By going it alone, you will be exposed to buyers who may not be able to pay, buyers who are just kicking tires and buyers who assume they will be able to get third-party financing when they can’t. Every seller is going to come across buyers like this, but if you don’t find out ahead of time you could get stuck with your business off the market in due diligence for no reason.

What is due diligence? Due diligence happens when a seller gets a serious offer from a buyer and accepts that offer. What happens next is the business gets temporarily taken off the market so the buyer can conduct a thorough investigation of the business. If, after the due diligence period, the buyer wants to proceed with the sale, the business transaction moves to closing. What can happen in these situations when a buyer has not been qualified is the business gets pulled from the market for several weeks for due diligence only to have closing not happen for lack of funds.

How can you avoid this situation? Use a professional business broker. They are able to determine if a buyer is a truly serious buyer with access to the adequate funds to purchase your business. They will weed out buyers who don’t have the funds or are hopeful for a third party loan from a bank that probably won’t happen in this economic climate.

Do you have questions about how to find buyers with enough capital? Are you wondering if you need a business broker or if you will be able to go it alone? Please leave a question or comment here and we will be happy to help you with your business sale.

Want to read Mistake #1: The Cold-Feet Seller? Click here.

Want to read Mistake #2: The Box-O-Paper Financials? Click here.

Want to read Mistake #3: All-Cash Greed? Click here.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

If you are interested in selling your business, there are some basic mistakes business sellers make that can absolutely be avoided if you know what they are. Business transactions are inherently complex, so knowing what the most common pitfalls are can help to streamline the process by avoiding them.

Big Mistake #3: You refuse to accept an offer that is not all cash.

Your business means a lot to you, and the value you place on it may not be objective because you add to the value all of the time, energy and money you have put into it over the years. Even if you are able to be objective and take the advice of your business broker when pricing your business, you may run into problems when you decide what type of payment you are willing to accept.

What would be ideal? An all cash, full price offer is always ideal, but in the reality of the business market this rarely happens. There are many sellers who enter the market demanding all cash, but this is a huge mistake.

Why? Great buyers are few and far between, and there are hardly any buyers in the market who can come up with the capital to make all cash offers. Buying a business is an expensive proposition, and most small business owners and prospective small business owners don’t have that kind of cash available.

What can happen if a seller demands all cash? The short answer is your business won’t sell. Sure, there have been cases where a seller wanted all cash and all cash is what they got, but this is an incredibly rare scenario. The reality is your business will remain listed indefinitely and you will miss many great potential buyers.

How can a buyer who can’t raise the capital to make an all cash offer be a great buyer? A great buyer should not be defined by capital alone, they are defined by their ability to pay.

What do we mean by that? The most common situation in today’s business market is for a seller to offer seller financing. This is means a buyer brings a substantial down payment, and then an agreement is made for the buyer to pay for the remainder of the business over time directly to the seller. Offering seller financing can be a great option to offer when you sell your business.

Why? Seller financing opens your business to a much larger pool of buyers and it shows that you have faith in the future of the business, so it is an option that is good on two levels. You will have  a much better chance of selling if more buyers are able to make offers, that goes without saying. Also, buyers are always a bit suspicious of anyone who is willing to sell a perfectly good business. By offering seller financing you are letting buyers know that you have faith in the future of the business because if the business fails, you don’t get your money.

The moral of the story is be flexible. You may get an all cash offer after all, but chances are by offering seller financing you will find a great buyer and still get the price you want from your business.

Do you have questions about what types of options you should offer to buyers? Are you still determined to accept only an all cash offer? Please leave us a comment or question here, and we will be happy to assist you with questions about your business sale.

Want to read Mistake #1: The Cold-Feet Seller? Click here.

Want to read Mistake #2: The Box-O-Paper Financials? Click here.

Want to read Mistake #4: Letting Unqualified Buyers in the Door? Click here.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

If you are interested in selling your business, there are some basic mistakes business sellers make that can absolutely be avoided if you know what they are. Business transactions are inherently complex, so knowing what the most common pitfalls are can help to streamline the process by avoiding them.

Big Mistake #2: Your books and financial records are an absolute mess.

Small business owners sometimes love being their own boss because it means no oversight from management where paperwork is concerned. This might be nice for your stress level, and your system of shoving any business-related material into an ever-growing stack of file boxes in the back room might work for you, but it will become an absolute nightmare when the time comes to sell your business.

Why? No buyer is going to give you a penny for your business if you can’t prove that the business is worth what you are asking. There are a number of ways to determine or evaluate the value of a business, but the most straightforward way is to use current and past financial statements. Any prospective buyer is going to want to see at least the last three years of tax returns and your current P&L’s.

What you will need to do before you list your business is get your financial ducks in a row. You need to find and make legible all of your financial records, make copies of your tax returns, and (if your records really are just a stack of miscellaneous boxes) maybe even hire a business transaction CPA to get the books in order. This may seem like a monumental task, but it will pay off in the end as there will be no ambiguity about what your numbers really are, they will be right there for buyers to see in black and white. It also removes the risk of creating mistrust between you and a serious buyer if what you said the numbers would be and what they figured out the numbers are after slogging through your financials themselves don’t add up.

This mistake is easily avoided by being prepared ahead of time. Ask your broker for help, for a list of what you’ll need, and for the name of a good business transaction CPA if you’ll need one. A note here, you probably should not use your usual CPA that does your tax returns for this project. Only a CPA familiar with the buying and selling of businesses will be able to properly assemble and evaluate your financials for prospective buyers.

Are you a business seller with less than legible financials who wants to know how to get your books organized? Do you have questions about what kinds of documentation you’ll need to have ready? Please leave us a comment or question here, and we will be happy to help you get your business ready to sell.

Want to read Mistake #1: The Cold-Feet Seller? Click here.

Want to read Mistake #3: All-Cash Greed? Click here.

Want to read Mistake #4: Letting Unqualified Buyers in the Door? Click here.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

If you are interested in selling your business, there are some basic mistakes business sellers make that can absolutely be avoided if you know what they are. Business transactions are inherently complex, so knowing what the most common pitfalls are can help to streamline the process by avoiding them.

Big Mistake #1: You aren’t 100% sure that you actually want to sell.

This one may seem a bit bizarre at first glance, but it is by far the most frequently encountered problem when it comes to deals coming apart on the seller’s side.

It can be frightening as a seller to look towards a closing table and see yourself as basically unemployed at the end. Your business is and has been your baby, and if you are the typical entrepreneur it has been basically your entire life. You really need to be ready before you decide to sell. Some serious introspection is necessary long before your business is listed.

Turning away buyers at the last minute because you have changed your mind can cause major problems with your credibility in the business market, as well as driving away good buyers you may not be able to get back if you change your mind once again and want to sell in the near future. Those good buyers you had a crack at will have bought something else and be long-gone. Ask anyone in the small business market, a good buyer is a precious commodity, not one you want to waste because of cold feet. In the same light, businesses that have come on and gone off the market repeatedly will cause suspicion in the buyer pool because anyone who looks at the business will wonder why you keep pulling it from the market.

Another huge no-no? Don’t test the waters to see what you could get for your business if you really want to sell quite a few years down the road. This causes the same problems we already have discussed, causing mistrust in the buyer pool from doubts about the stability of the business.

The key here? Decide if you really want to sell. Ask yourself (and answer) some hard questions before your business hits the market. Are you ready to do something else with your life? Do you have the financial means to be without a source of income for the period between closing and your next business venture? Are you going to be able to relinquish control of your business to someone who might completely and totally change everything you have built?

Are you considering selling, but have not yet made up your mind? Do you have questions about when the best time to sell would be? Please leave us a comment or question here, and we will be happy to assist you.

Want to read Mistake #2: The Box-O-Paper Financials? Click here.

Want to read Mistake #3: All-Cash Greed? Click here.

Want to read Mistake #4: Letting Unqualified Buyers in the Door? Click here.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com

When your business is on the market one of the most important things is maintaining confidentiality. This is imperative to protect your business from the consequences of the wrong people finding out that the business is for sale.

Who are the wrong people?

Your employees, your competition, and your vendors to name the most important few. If this group finds out you are for sale before you are able to get a buyer and get to the closing table, the results could be disastrous. A mass-exit of staff, issues with vendor contracts, and your competition using your for-sale status against you are all things that are going to hurt your bottom line. This is especially bad at a time when your bottom line might mean the difference of being able to sell and not being able to sell.

How do you prevent a breach in confidentiality?

First, hire a good business broker. A good broker knows how to successfully market your business without disclosing the status to the wrong people. A broker will only disclose the name and location of a business to someone who has signed the appropriate non-disclosure agreements, meaning there will be legal ramifications if they disclose your business to anyone else.

Second, suppress the urge to tell anyone that your business is for sale. It can be hard to stay quiet when such a monumental change is about to happen in your life, but even the smallest disclosure can have big consequences. The only people who should know the business is for sale is you, any other owners, your broker, and the CPA’s and attorneys who are helping you with your transaction. Don’t tell your brother-in-law, your neighbors, or the parents at your child’s soccer game. People love a juicy rumor, and before you know it literally everyone will know you are for sale. Mum’s the word.

Third, give your broker a list of people they should not disclose to – even if those people sign non-disclosure forms. Your broker doesn’t know everyone in your world, so you will need to give them the names of employees, your competition, and your vendors. This will keep your business sale out of the hands of people who are looking for information instead of those who are actually looking to buy.

Last, be cautious with the amount of information that goes into your marketing package. Competitors might watch the business listing sites, and they might be able to figure out it’s your business that is listed if there is any information in your listing specific and unique to what you do. A good broker will be able to help you with this part of the process, letting you know what should go in the initial listing versus what will go into the marketing package someone receives after they have signed the non-disclosure documents.

In order for your business sale to be successful confidentiality must remain in place. Use the services of a business broker and stay quiet.

Are you a business owner who is thinking about selling but you are concerned about keeping confidentiality in place? Please feel free to leave us a comment or question here, and we will be happy to address any concerns you may have.

Michael Monnot

941.518.7138
Mike@InfinityBusinessBrokers.com