Business Seller Mistakes
Selling a business is a fairly complex transaction that requires thorough preparation and knowledge. Since most business owners are less experienced when it comes to selling a business, they are prone to make mistakes. Some of the more common business seller mistakes we're encountered includes:
Not understanding the process
Selling a business is a process that takes time. Unprepared or rushed sales will usually receive lower valuations, not to mention expose the seller and the buyer of future litigation.
Setting the price to high
Often, the business owner establishes an expected price that is too high. Research has indicated that more than 70% of all listed businesses for sale never sell. The reason is usually an unreasonable price expectation or poor business presentation.
Unable to defend your price
If your requested price is fair, be ready to defend and substantiate your reasoning. Have backup and supporting materials readily available.
Failure to select the best buyer
Only spend your time with qualified buyers. Identify quality buyers up front and actively market to this group. Unqualified buyers will only waist your time and efforts, not to mention your money.
Once the word hits the street that your business is for sale, your vendors might hold back deliveries, your customers might head for your competitors, and your employees begin to look for other opportunities. Keeping the sale of your business confidential is absolutely crucial for a successful business transition and to maximize the attractiveness (and hence value) of your company.
Reducing cost by not seeking professional advice
You should have attorneys, accountants, and professional investment bankers assisting you with your sale. Sure, doing it yourself will reduce professional fees, but can become a very expensive proposition in the end. A reduced sale price, future litigation expenses, buyer insolvencies, personal tax consequences, and unrealized earn-outs are all side effects of an inadequate seller due diligence.
Not understanding the deal structure
What are the seller's tax consequences? What non-compete restrictions might be placed on the seller, and what are the earn-out risks and restrictions. A agreed upon price for your business might say little about your ability to obtain cash. Make sure you fully understand the deal structure before you inc the asset or equity purchasing agreement.
If you have any questions on the above material or want to know how KDS Capital can help you in your venture, feel free to call us at 602-490-0723 or toll free 800-880-0717.