If you are thinking about selling your business, and this is the first time you will be entering the business marketplace, then you probably already know there will be a lot to learn before you get to a closing table. This is part four of a series that will let you in on the practical knowledge you would typically have to get by going through the process and making every mistake possible – only you have the benefit of our experience to help you navigate this complex road. Here are the things only experience can teach you about selling your business.
You Need Reality
When sellers put their businesses on the market, they tend to have a few preconceived notions about how the whole process should go. The problem is, these notions are usually far from reality – so these expectations can really cause problems.
Bidding wars don’t exist.
If you’ve ever bought a house in a hot market, you might be familiar with the concept of a bidding war. If several buyers really want a home, they might try to outbid one another to secure the property. In business sales, this almost never happens, so banish from your mind the idea that a whole hoard of buyers are going to fight over your business – thereby driving up the price to untold millions. For a good business, you might have multiple offers, but this is rarely the case. More commonly, you will get a decent offer, accept it and move to the due diligence phase. While in due diligence with one buyer, you might get a back-up offer from a second buyer, but since you accepted the first offer – no bidding war will happen – you just have another buyer in line if the first deal falls apart.
All-cash buyers are extremely uncommon.
We hear this one all the time. “I’m not accepting a penny less than asking and I only want all-cash buyers.” Wouldn’t it be great if this was a realistic expectation? Sure, but it’s not. Yes, all-cash buyers do exist and some businesses sell for their asking price, but it is far more common that the actual selling price falls somewhere below asking and the seller finances a part of the deal. Going into negotiations with buyers knowing and understanding these two facts will put you in a far better position.
You are not the only person in this transaction.
Yes, we know, your business is your baby – but sellers often forget that they are exchanging that baby for a very substantial amount of someone elses’ money. Emotions are going to run high on both sides of the negotiating table. Remembering this fact will help you understand why the other side balks at your refusal to lower the price or answer more questions. Try to keep in the back of your mind the day you bought (or started) the business and what it was like to write that big check.
Talk to your business broker about what your expectations should be for your transaction, then listen to their answers. Your broker is there to help you on your journey to the closing table, so take their advice and it will serve you far better than sticking with any unrealistic expectations.
Are you a business seller who’s concerned that the price you’d like to ask for might be unrealistic? Do you have questions about how to handle prospective buyers? Ask us! Please feel free to leave us a comment or question here, and we would be happy to help.
Want to read part 1 – You Need Help? Click here.
Want to read part 2 – You Need Time? Click here.
Want to read part 3 – You Need Organization? Click here.
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