Selling a business isn’t the same as selling a house. This process typically takes months; it involves close correspondence with the buyer, business broker, and seller throughout.
Acquiring a business is a huge responsibility for the buyer—they’ll require guidance from the person who knows it best. For that reason, it’s important to cultivate a professional, communicative, and respectful relationship with potential buyers.
If you’re thinking about selling your business, watch out for these critical errors, which could end up costing you a sale:
Selling After the Revenue Drops
If your sales dip before you list your business, you may want to reconsider. The single biggest determinant of your sale price is the current revenue trend. Buyers will look at the historic and forecasted growth of the market. Listing the business with a high asking price when the revenue is on a downward trend won’t pan out.
Even if your revenue is currently on an upswing, keep in mind that a business takes months to sell. Don’t be concerned about minor revenue increases and declines, but a significant drop won’t go unnoticed by buyers.
Setting the Asking Price Too High
The asking price plays a critical role in whether your sale is a success.
A business won’t sell if it’s listed too high. You simply won’t find a buyer who’s willing to overpay. Even if you do, banks will not fund deals if the price is too high, regardless of whether the buyer and seller agree on the price.
As such, you need an accurate and thorough valuation of your business before it’s listed. Buyers don’t want to revisit businesses for sale after a price reduction; they might think that the business owner will be upset if they have to sell it for below the asking price. If the buyer suspects the seller feels “lowballed”, they won’t want to acquire that business.
Listing Your Business After Key Employees Leave
After the asking price, key employee and management continuity is important to buyers. When selling a business, one of the things being bought is the team that works there—if the team is crumbling, nobody will want to buy the business.
When you sell your business after the loss of a key employee, it can cause serious concern for buyers—it means they must learn the business and train an employee at the same time.
If a key employee quits during the sale process, the closing typically gets delayed until the seller trains the replacement employee.
Being Overly-Aggressive During Negotiations
Unlike when you buy a house (where the buyer doesn’t necessarily care what the seller thinks after the sale), a business buyer will need the seller to be in contact for the first few months after the closing. They may need the previous owner to stay on and train them for a number of months. As such, it’s important to build a relationship that’s cooperative, not aggressive.
Selling After a Key Customer is Lost
Trying to sell after the loss of a key customer (one that’s greater than 10% of annual revenue) is a big, red flag for buyers. It signifies a significant dip in revenue and could raise concerns that other key customers will leave. If you’ve recently lost a major client, it may be worth waiting until you acquire a new one before listing your business, or alternately you will have to factor in receiving lower offers because of this unfortunate news.
One of the best ways to avoid these common pitfalls is to work with a business broker in Vancouver. Jason Brice can help you navigate the intricacies involved with selling a business. With his services, you can make the sale of your business a smoother and more successful process.