Selling a business is a big decision for any entrepreneur. However, a lack of information and experience prevents many business owners from valuing their companies. It takes time and effort to grow a business to the point of sale; business owners must maximize their company’s value. However, some businesses find it difficult to find a buyer and close deals due to mistakes they make during the process. Business owners should prepare well and seek help from experts and professionals to avoid costly mistakes. Below, we’ll discuss 7 common mistakes made by business owners seeking a sale/investment.
Not aware of the commercial value you have
Many business owners don’t have a clear exit plan. They plan for the start-up and subsequent growth, but they don’t plan for the exit. Exit is an important part of the business plan and should be planned. Therefore, when they decide to sell, they don’t have a value for the business. It’s crucial to know the business’s value so you can sell it for a fair price and make a profit. With the right value, the business owner will make a strong case for their business.
Incorrect selling time
Many business owners wait too long to sell. This is mainly because they lack an exit strategy and have spent too much time developing the business. When the time is stretched, the sale occurs at the wrong time, and therefore the company’s sale value is not maximized. A professional exit plan will help improve the timing. The company should be sold before it runs out of steam, experiences low profits, and unexpected business cycles.
Have a buyer to negotiate with
Some business owners feel comfortable dealing with just one client. Some buyers approach business owners with the intention of buying/investing in the business because they are in search mode. Business owners should actively seek out other buyers and expand their options rather than limiting themselves to just one. The more buyers you negotiate with, the higher the price will be. When negotiating, business owners should consider all factors: the buyer, the type of transaction, the type of business, the payment method, the business owner’s obligations after the sale, and more. This mistake should be avoided as it is costly.
Inadequate documentation
Some business owners have inadequate documentation, which affects sales/investment prospects. A business owner should prepare all financial documentation, including a balance sheet, tax returns, profit and loss statements, and cash flow statements, all reviewed for the past three years. Inadequate documentation is a sign that the company is not serious. Buyers want to have well-reviewed financials. In the event of a sale, you must evaluate the company to determine its value.
Providing too little information about your company
When presenting proposals, some business owners provide scant information about their businesses. It takes an investor a few minutes to make a decision. Therefore, business owners should ensure their presentations are simple and precise, covering all necessary information about the business. Be careful not to provide too much unnecessary information unless you’re asked to do so. To cover everything, answer five key questions in the profile you submit.
What does your company deal with?
How much are you looking for?
Do you need the money?
How much are you already earning?
What does the buyer get?
Questions will help you provide a comprehensive preview of your presentation.
Selling in a hurry
The sales process is long and time-consuming. Some business owners make the mistake of rushing the process. The sales process is systematic and has steps to follow. The process can take 5 to 8 months to complete. It’s advisable for business owners to employ professionals at every stage of the process to manage it efficiently. Each stage is important in the sale, and one stage influences the other. If you rush, you’ll lose business.
Unrealistic future growth projections.
Growth projections are offered to the buyer during the presentation. They show the buyer what to expect from the company in terms of numbers. Some business owners make unrealistic projections. It’s good to be ambitious as an entrepreneur, but at the same time, you need to be realistic and in touch with the company and the market in general. Buyers notice unrealistic projections and don’t commit to the sale or investment.
Business owners should be vigilant to ensure they avoid the 7 common mistakes business owners make when looking to sell/invest.
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