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Avoid these top misconceptions
SOURCE: Green Bay Press Gazette, February 10, 2008
This is the time of year when many people decide to sell their businesses. The end of year numbers are in and people are still focused and ambitious for the New Year.
Selling a business is a complicated process, one that most entrepreneurs only go through once. It’s easy to have misconceptions about the best way to proceed.
In this and the next few columns, I’ll address some of the tops myths that can impact a business sale.
Myth #1: I Can Sell It Myself
Many owners figure they can sell their business without professional help, and I certainly understand why. An entrepreneur is often the key salesperson for his/her company and has successfully sold a product or service for years.
But selling a business is not like selling a product or service.
By selling yourself, you eliminate confidentiality. Leak word of a sale, and you risk losing clients, employees and favorable credit terms.
Consider the time you will need to orchestrate, let alone research, the sales process. Do you have time to run your business and compile marketing materials, advertise, screen buyers, give tours, and facilitate due diligence?
This is the time to increase focus and give your sales one final boost, not take on challenging new responsibilities.
Myth #2: It Can’t Hurt to Test the Waters
Some owners figure they’ll feel out the market. If a good offer comes in, they’ll sell. If not, they won’t.
This is dangerous, costly activity. You want to get the best price the market can bear, and that takes the right team of advisors. These specialists aren’t cheap, but they all bring more value than their cost.
While a business intermediary takes most its fee on commission, these firms do charge up front costs. Most other advisors are paid on an hourly basis. You have to be prepared for those costs, because there are no guarantees of a successful sale—no matter how good your team.
Myth #3: I’ll Sell When I’m Ready
Don’t get me wrong. We take great pains to make sure our clients are mentally and emotionally prepared to sell. But personal readiness isn’t the only concern. Economic factors can significantly impact the sale.
For instance, many analysts predict certain politicians will raise the capital gains tax from 15 percent to 25 or 30 percent, if elected. These changes could take place as early as 2009 and have a substantial impact on your financial return.
Sale prices can be affected by industry consolidation, interest rates, unemployment, and many other economic measures.
Talk with a professional and aim to sell when your personal goals and market conditions align.
Be informed and prepared. You only get one shot at this, and you don’t want to leave money on the table.
I hope you’ll look for my next column on business sale myths so that you can be as prepared and as informed as possible when it’s the right time for you to sell.
Scott Bushkie is President of Cornerstone Business Services, a lower-middle-market M&A firm with offices throughout the upper Midwest. Reach him by telephone at (920) 436-9890 or by e-mail at sbushkie@cornerstone-business.com.
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