Business owners make the decision to sell their company based on their health, age, or enjoyment of the business. An owner can decide to retire from the company and still start a new venture. The most pressing question is, “What do they want to do with the company?”
If they want to shut down the company, they can sell business assets and retain ownership of the company’s name. Owners have the option to sell the business name and all assets connected to it. When selling a business for the first time, there are 10 lessons the owners learn to avoid mistakes in the future.
1. Unrealistic Valuations for the Property
Business owners should never attempt to evaluate their business or assets on their own. This leads to unrealistic valuations that could be disappointing and set the owner up for failure. It isn’t always possible to get what they paid to acquire an asset, and the market value of each asset overrides what the owner believes the assets are worth.
A broker can review the business, its financial records, and assets to arrive at a more effective and realistic price. While the price may disappoint the owner, it’s current with the market and helps the owner decide when to sell their business and when to hold off and wait for better market conditions. Business owners who want to sell their company are encouraged to start by getting help from cgkbusinesssales.com now.
2. Missing the Best Exit Window
An owner that wants to sell their business needs an exit strategy and to define when to exit the company. If they are shutting down the business, the owner must fulfill all contractual obligations, tax payments, and settle their debts.
If the business remains open, they need to set up a sale that allows the new owner to take over and operate the business under the existing business name. If a business stays open, the owner may consider an acquisition/merger or a management buyout. When making this decision, the owner must consider how each option affects the company, its products or services, and its workers.
3. Failing to Get Help When It’s Needed
Business owners should never take on the task of selling their business on their own. There is too much room for errors and serious mistakes that could prove costly. A broker understands the entire process and answers questions as needed. They can identify issues earlier and help the owner navigate the process more effectively. The mismanagement of a business sale could tank the company and cause workers to leave prematurely.
4. Itemizing Business Assets in the Contract
An itemized list of all business assets makes it easier to show what the buyer receives with the business. When selling a company, the new owner is entitled to all business assets once the purchase is closed.
If the owner doesn’t want to sell certain assets, they must have the assets transferred out of the business. All assets and holdings in the company name belong to the new owner at the date of purchase, and the business seller must present these assets to the new owner during the sale process.
5. Identifying and Prioritizing Buyers
Business owners may not understand how to identify and prioritize buyers. A broker can help them find potential buyers that will pay the listing price. With a broker, the buyers receive the attention they want and are more likely to complete the sale. If a buyer feels slighted or ignored, they are more likely to choose another opportunity.
6. Understand a Letter of Intent
A letter of intent means that the buyer has the intention of buying the business, but there is usually only a 50% chance that they will complete the process. The letter doesn’t guarantee the sale will go through or that the buyer is contractually obligated to buy the company. If the broker secures a sales contract, the buyer is legally bound to the sale, or they could face penalties. A broker can explain what to do if a buyer backs out after signing a sales contract.
7. A Failure to Protect Existing Workers
When completing a business acquisition, the business owner can add clauses in the sales contract to protect workers. They cannot guarantee that all workers remain with the company, and the seller doesn’t dictate what the grounds for terminating employment are. Most investors will not purchase a company with too many restrictions in the contract regarding employees.
8. Defining Legalities When Retaining or Transferring Patents
Many businesses produce their own products, and they will have patents for their products. During a business sale, all products that become the property of the new owner must have a patent transferred to the new owner. If the business owner wants to separate the products from the company and start a new venture, they must define what product patents are the property of the company and what patents are owned separately by the seller.
9. Maintaining a Profitable Company
Business owners are less likely to sell their company if it is not profitable. They cannot just set down the company stopping profits and expect the company will sell at a higher price. The owner must ensure that the company is continuing to generate profits even at the end of the sale.
10. Expectations That Were Too High
If the owner’s expectations are too high, they are likely to be disappointed. A business sale is not a fast process, and it requires a lot of work. Business owners that want to sell their business quickly must plan ahead and get prepared at least a year or two before they place their business on the market.
Business owners work with brokers to sell their companies, and a broker helps them with the entire process. The choice to hire a broker eliminates problem areas and ensures that the business sale doesn’t have serious delays. The owner will want to get as much of a return from their investment as possible. By hiring a broker, they can avoid life lessons and get what they want from the sale.