Top Tips for Selling a Business
A leading law firm is warning entrepreneurs looking to sell their business not to underestimate how treacherous the process can be.
Mace & Jones corporate lawyer Ian Hodgkinson said with more than 4m small to medium sized firms in the UK the buying and selling of companies is a booming if dangerous business.
“Business owners need to take real care to prevent the selling adventure from becoming an unmitigated disaster,’ he said. “Poor preparation can lead to an enormous waste of time, effort, energy and money. The first common mistake is underestimating the graft that is involved. Firstly it is critical to prepare the business effectively. Trying to sell a business without the accounts, premises and staffing structure properly organised creates the worst impression.
"Furthermore going it alone without the proper professional advice can lead to fundamentally flawed decision making at crucial points in the selling process. Moreover not having the proper support gives the buyer an advantage when thrashing out the deal.”
Mr Hodgkinson said with so much at stake with the selling of a business, sellers had to be realistic.
“Misjudging the market or failing to realistically see the business for what it is can lead to overpricing,’ he said. “In a stroke an overpriced business can eliminate all serious and shrewd interest leading to time wasting with buyers who are inexperienced or not really interested.”
Ian Hodgkinson’s top tips for selling a business
1. Make sure that your financial documents are up-to-date and as accurate as possible. Even if your business accounts reflect poor figures, buyers are often attracted to potential and therefore may see your business as the perfect acquisition.
2. Be prepared to finance the deal yourself. Many buyers today rely on the seller to help them buy business. A failure to agree to this amay reduce the number of interested parties , particularly if the owner is looking to sell to the incumbent management team.
3. Do not attempt to sell the business yourself. Buyers automatically have an advantage when they see that a seller is willing to go through the process alone, particularly if they hire an army of professionals.
4. Value your business with the help of a professional before you start to sell it – if you start negotiations with potential buyers at the wrong level it will be almost impossible to drive the price up once your advisers tell you it is worth more than you have said you will take.
5. Do not go into the selling process if you have outstanding problems in the business. Your business should have tied up any issues before you begin, but make sure they are tied and not pending.
6. Keep the sale of your business quiet to prevent issues arising such as negative attitudes from employees, customers and suppliers.
7. Sell your business at the best time. If your business performance is unfavourable, if possible wait until it is showing promising results.
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