Common mistakes when selling a business
Are you currently thinking about selling your business? Many business owners have put their blood, sweat and tears into the creation and management of their business. And for this reason it is important that you ensure you do all that is possible to maximise your return from the sale of your business.
In order to maximise your return it is crucial that you avoid committing the following mistakes:
Selling your business for the wrong price
Finding a balance is crucial. Setting the price too high or low can be very detrimental. Setting your price too low will not only mean that you will lose money, but could also leave you subject to a negotiation in which you could lose even more. Setting the price too high may leave many buyers uninterested and the longer your business remains on the market the more difficult it is to sell.
It is recommended that you obtain a proper valuation of your business to have an indication of what price you should set to sell your business. We can help you with this.
Selling the business yourself
Selling a business can often be very complex and time consuming. It is often recommended to hire a third party to take care of the sale of a business because they are not emotionally attached and have the requisite experience in dealing with such matters.
Having inadequate Financial Records
Generally, private businesses are set up to minimise tax, not to show maximum profits. This may result in a low valuation. A way in which to counter this is by keeping sufficient and accurate financial records so that earnings and cash flow can easily be ascertained. A business’s failure to keep adequate and accurate financial records can be very detrimental to their sale price or even their ability to be sold.
Going too hard in negotiation
Of course you should not be a push over when it comes to the negotiation stage. However, going too hard in negotiation stage can be detrimental to the success of sale. As mentioned above an experienced third party, such as The Quinn Group, can be of use in the negotiation phase of the transaction.
Demanding cash settlements and no handover period
Buyers can become suspicious of sellers who are demanding immediate cash at settlement and no handover period. These may be indicators of a seller that is desperate or lacks transparency.
Not asking the buyers the right questions
A way that you can separate serious buyers from tyre kickers and time wasters is by simply asking the right questions. Generally, the two main questions you should ask are “why do you want to buy the business?” and “how are you going to fund the purchase of the business?”
Not being prepared
Many businesses enter the market without any knowledge of the sale process and what is necessary to maximise their return. It is best that before you enter the market you inform yourself about the sales process and seek professional advice from us.
Not getting the timing right
Usually the best time to sell is probably when you do not want to, such as when the business profits and turnover are close to or at their highest. It may be difficult to achieve the highest return on your sale if your business is currently in decline. Waiting for the right time to sell is not a good option. If your business is not ready to sell, then it is time to get active and make changes to improve your business’s performance. This may involve cutting costs, hiring better staff etc. This will help you get your business ready for a sale.
If you require any further information or assistance selling your business, please do not hesitate to contact us at The Quinn Group on (02) 9223 9166 or submit an online enquiry form today.