The following are common mistakes sellers make:
• They neglect to run their business during the sales process. – The owner of a business with sales under the $20 million range can get so involved in the selling process that they neglect the day-to-day operation of the business.
• They don’t understand the “real” value of their business. – A business may actually command a higher price than the value determined by an appraiser. The business may be worth more than the sum of its parts. A professional intermediary, along with other advisors, can answer the question of real value and help determine a “go-to-market” price.
• They aren’t flexible in structuring the transaction. – In many cases, how the deal is structured is more important than the price or terms.
• They are not looking at the business from a buyer’s perspective. – Buyers may look for different aspects of a business than those the seller looks for. For example: growth potential, management depth, customer base, etc.
• They start with too high a price. – Sellers obviously want to maximize the price they receive for their business, but today’s marketplace is difficult to fool. A good buyer may just elect to pass because of an overly aggressive starting point.
• They are impatient. – Sellers have to understand that it can take 6 to 18 months to find a buyer and proceed through the sales process, which includes due diligence, the legal and accounting issues that must be handled, and ultimately the closing. However, on the flip side, the longer the deal drags, the more likely it is to fall apart. As the saying goes: Time is of the essence!
• They have insufficient or inadequate documentation. – Sellers should have current real estate and equipment appraisals at the ready along with any documentation a buyer might want, such as projections, business forecasts and plans, and environmental studies. Having all the documentation and financial records readily available will not only speed things along, but might also provide for a higher price or, even more important, save the deal.