Jeff Slaton - How To Avoid 9 Deadly Mistakes When Selling A Business

July 8, 2009 - PRLog -- How to avoid 9 deadly mistakes when selling a business.

1.   Allowing personal milestones such as age, health or financial conditions to dictate timing

Every successful business owner understands the value of timing.  It can make or break a deal.  Yet they often forget how important timing is when it comes to selling their own business.  When a seller enters the market, could determine how quickly the company sells and at what price.  So if it’s a choice between when the owner is ready or when the market is ready, clearly it’s best to sell when the market is ready.  Holding to a fixed timetable forecloses many opportunities.

2.   Assuming the value of their business is based on its financial past or a single formula

The difference between a company’s financial value and market value is substantial.  This private briefing shows how and why private companies can sell at 700%, 800% even 900% and more above their book value.  Intangible assets make the majority of the market value.

3.   Selling themselves short due to one or two down years

Premium buyers tend to buy the future.  So a year or two of down revenue may have little or no impact on a company’s final selling price.  As one of the world’s most successful businessmen, Warren Buffett, said, “We focus solely on the future earning power.”

4.   Restricting buyer prospects to those they know or those located nearby

Too many business owners waste time on poorly qualified buyer candidates such as local competitors or employees. These buyers usually lack the means and motivation to pay what a company is really worth.  This private briefing highlights the entire buyer universe, showing who and where the best prospects are.

5.   Accepting the only offer that comes along

One buyer is no buyer.  Without competition, a single buyer has no sense of urgency and can gain control of transaction – weakening the seller’s bargaining position, undermining leverage and value.

6.   Failing to understand buyer motives

Many premium buyers buy smaller enterprises in order to ensure continued growth of their own revenue and earnings. Building a company from the ground up take significantly more time, energy and a different approach than buying an operating business.

That’s why public companies often view acquisitions as the smartest way to fact-track growth.  “Building a new business from scratch is just too difficult for us to manage,” stated Edward E Hood, Vice Chairman of General Electric.

7.   Not speaking the buyer’s language

The price a seller ultimately receives for their company may hinge on the ability to communicate in the language buyers understand.  Identifying realistic opportunities to expand the company’s revenue base, verifying buyer expectations for future profits and applying key ratios buyers commonly use to make buy-and-sell decisions go a long way in distinguishing a company from other candidates under consideration.

8.   Believing their company is too small to be of interest to public companies and large buyers

First and foremost:  To obtain full market value, a seller must abandon the notion of “why would anyone want to buy my business.”  Last year 39% of private North American companies sold to U.S. public companies had annual revenue less than $5 million, and 76% had revenue less than $25 million.  Among those bought by European public companies, 33% ha annual revenue less than $5 million, and more than 69% had annual revenue less than $25 million.

9.   Failing to plan for the future

A business is probably one of the most important investments a business owner has.  And, an exit plan is a vital part of any investment strategy.  Many business owners, caught in the day-to-day challenges of managing a company, lose sight of this reality and are left with limited options when the time comes to sell their company of pass it on to a successor.  Little do they realize, it takes a minimum of two to three years to sell and completely exit the firm.

The current recession brings about a unique opportunity to sell your business for top dollar. With over 10 years experience in more than 200 industries, NetWorth Business Brokers Management has weathered the challenges of our economy's peaks and valleys. We continue to net positive results for Minnesota business owners, with a high level of customer satisfaction. Contact Jeff today to find out why now may be best time to sell.

Jeff Slaton is with http://www.NetWorthBusinessBrokers.com belongs to one of the nation's largest networks of business consultants. Jeff has been working closely with business owners for more than 10 years, ensuring their sales, marketing, financial, and exit objectives are successfully executed. NetWorth Business Brokers delivers face-to-face business consulting to small business owners seeking a future exit from their companies. He can be reached at Broker@NetWorthBB.com or 612-419-2905 for more information.

# # #

NetWorth Business Advisory M&A is a company of people who believe all independent business owners have the right to a fair price when they sell their company, or to follow a strategy that will create the highest value during their ownership.