If you are considering listing your business, you may have thoughts about how you think the process is going to go.
The version of your business sale that exists in your mind, however, is likely to be more fantasy than fact. You probably imagine that shortly after listing for what you consider a more than reasonable price multiple offers from motivated sellers will come pouring in – and a fierce bidding war will ensue. Within a month of this imaginary listing scenario you are drinking margaritas on the beach with the proceeds of your highly successful business transaction in hand.
Reality, unfortunately, will be nothing like this fantasy business sale.
If you are considering selling your business, one of the most important things you can do to have a successful transaction is to manage your expectations. Going into the selling process with a realistic attitude will mean that you are able to deal with issues as they arise and will be better equipped to negotiate with buyers. In this first article of our “Why No One Is Buying Your Business” series we will look at the biggest expectation hurdle for sellers – price.
Your business is your baby, and we get that. We’ve owned businesses too. You invest countless hours, what feels like endless streams of money and tons of energy into this enterprise – and then you have to put a number on all of that investment.
Most sellers who set their own price set it way too high. The reality of business sales is you aren’t going to get back every penny and every hour you’ve ever put in. Your business is going to sell for what a buyer is willing to pay for it – and that number will be related to the market, your current cash flow, the value of your inventory, etc.
If you are unfortunate enough to get an inexperienced broker or a broker who wants your listing with no intention of ever trying to sell it, you will likely be allowed to list your business for whatever you want. This is a huge mistake.
A business priced too high will languish on the market, and any buyer who takes a look will wonder about the credibility of a seller who would ask for such an unrealistic number.
Someone who is serious about selling their business will instead look for a broker who will help them put a realistic listing price in place – a price that can be backed up by the market and the numbers in the books. A fair listing price will bring the serious buyers in the door and give you a far better chance at reaching a closing table.
If you are serious about selling or are curious about what you might be able to get for your business, contact us and we can discuss a realistic listing price.
Join us for the second article in this series where we will discuss another big sales hurdle – purchase contract terms.
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