HOW TO AVOID THESE 5 MISTAKES WHEN SELLING YOUR BUSINESS

 

 

 

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I know you have invested your time and money in your business over the years.

You are thinking of selling your business and you want to maximize your exit.

But be careful…there are pitfalls and major obstacles you must overcome in order to achieve your objective of selling to premium priced buyers.

However you can blow every penny you have rightfully earned after all your years of hard labour by failing to sell your business at the price you deserve.

Sadly, most businesses never get the generous payouts but these 5 mistakes can be avoided:

1.    MISTAKE 1 – OVER VALUING YOUR BUSINESS

Often business owners believe their businesses are worth more than the market is prepared to pay.

It’s natural. They have made sacrifices. They have invested ‘blood, sweat and tears’ and now is the time to maximize their exit.

However the business owner must assess the value of his business not through emotion but clear criteria:

  1. Does the business have a diverse and broad range of clients or is it too reliant on one or two clients?
  2. Does the business have a strong and balanced senior management team or is it too dependent on one or two key employees including the owner?
  3. Is the business operating in a growing or declining market?

By answering these 3 questions, the business owner can avoid making the mistake of over valuing his business.

2.    MISTAKE 2 – OPAQUE OWNERSHIP

What does your ownership structure look like?

Is it clear and transparent or fuzzy and opaque?

Business owners want transparency so to ensure you maximize your value and avoid confusion, have a clear ownership structure.

3.    MISTAKE 3 – CONFUSED CORPORATE STRUCTURE

Does your business have a corporate structure? I hope so…

There is a second hurdle to overcome.

Does it list the key roles and responsibilities? Also, how they relate to each team member’s job title and who they report to?

Prospective purchasers require that the corporate structure can be clearly documented in an organizational chart.

4.    MISTAKE 4 – OLD FINANCIAL RECORDS

Full and upto date financial records must be available.

It’s no use just providing historic information….this will diminish value and will not be acceptable to any purchaser.

 5.    MISTAKE 5 – POOR PAPERWORK

Many claims about the business strengths will be made at the outset of the sale but EVERYTHING must be documented and proven.

This will include the following:

  1. Customer and supplier contracts.
  2. Employment contracts of all employees.
  3. Intellectual Property [IP] agreements.

The list is not exhaustive but provides some guidance.

In addition, all records must be kept upto date as prospective purchasers will scrutinize the records in the due diligence process.

 

Remember…..the biggest mistake when selling your business is LACK OF PREPARATION.

The last 4 mistakes listed above – opaque ownership, confused corporate structure, old financial records and poor paperwork – are all solvable with preparation.

To maximize your exit, you need to start preparing NOW….even if your actual exit from your business is years away.

Go to http://www.maximizeyourexit.com/sell-smat-net-what-youre-worth to discover how you can maximize your exit and achieve financial freedom for all your hard work over the years.

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