What are the common pitfalls when selling a business?
The best way to avoid any pitfalls at all is to go to an experienced broker. There will be a charge, obviously, but making a mistake when selling something of such high value could be disastrous and having the best advice at hand is always the way to go and could save you a fortune in the long-term.
But even so, when selling a business you need to be aware that it’s not always plain sailing and very often you can find yourself selling a business for much less that you wanted. This can be very annoying, especially when you’ve built up your business over many years and you’re hoping to be able to do something with the proceeds. This happens to many people and should be avoided at all cost. So what are the main pitfalls and how can you avoid them when selling a business?
In this particular blog we’ll talk about pricing and getting the best price for your business.
One of the main issues here is that some people, when selling a business and want a quick exit, will go for an early offer from somewhere local. This may help you if you’re not too bothered about how much you’ll walk away with, but in general it’s often best to wait to get a number of bids in. Also, look for interest further afield. Regardless of what you think your business is worth, someone else may actually see that it’s worth a lot more to them.
For example, let’s say you make a blue widget that helps radio reception for digital radios. You have the design patents, the manufacturing and the distribution all set up for the UK. A local company selling the radios themselves may feel it’s worth buying you as a value-add to their business and value your business accordingly. This might not be much as they have already reached a high level of sales and probably see sales eventually dropping off.
However, another company further afield doesn’t have radios, but it does have a major distribution channel in the USA. They see the chance of selling your product to many millions of people and so the value suddenly becomes a lot higher. Of course, they’re not going to wade in with a massive price offer, but you need to see what they’re going to do with your business, what their plans are for the future and try to work out what the forward value is therefore going to be. This will give you some idea of how much your business is worth.
So, the first rule of selling a business is “don’t rush”. Take your time, get the best offer and even though any buyer will be doing due diligence on you, make sure you do the same to them.