5 Keys for First-Time Business Sellers
First time business sellers have quite a bit to contend with regarding their first sale. While it’s exciting to think about how much you will net and the freedom from responsibility, it’s also a nerve-wracking experience for a first time business seller. Selling your business is complicated. We provide four suggestions to assist you in making this transformative decision to help you experience an enjoyable and lucrative outcome.
KEY ONE: Prepare yourself for success in selling your business.
It’s a mindset. Truly. There are a number of aggravations that regularly come up in business sales. As a first time business seller, you will do yourself a big favor if you maintain a favorable mindset that you will be successful and that the ups and downs and a business sale are normal. Avoid taking anything personally, Negotiate in good faith and do your best to be fully engaged, responsive and timely throughout the process.
KEY TWO: Don’t forget your business during this process.
It doesn’t necessarily mean your business is being sold. It is important that the business continues to generate profit, not only for your financial benefit but also to attract a new owner. You have the opportunity to make a profit on your investment.
You don’t want the business to be neglected during the sale process. If your business’s revenues decline during this period, the buyer may ask for a lower price or worse walk away from the deal altogether. As a first time business seller, don’t check out before the business is sold. Hang in there and operate the business as responsibly as you always have.
KEY THREE: Keep your sale confidential.
First-time business sellers might think that advertising your business for sale is the best way to get it sold. Unfortunately, word-of-mouth can cause negative reactions from clients and suppliers. This can cause unnecessary stress and increase your workload. This can lead to unwanted attention for your business sale. Keep your sale confidential from employees, friends and even some family members (especially if they are chatty!).
KEY FOUR: Keep an open mind in negotiations.
Do not be offended by a low initial offer. It is normal to wonder if there are better offers out there as a first time business seller. Many first time business sellers are reluctant to accept the first offer. Yet, there is a good possibility that the first offer will be your best option. Keep an open mind and stay engaged in the process.
Negotiations can take time. You will want to continue the negotiation process until you’re sure that the buyer will not offer any more. You may be surprised to find out that not necessarily the best offer is the highest. The best deal is usually made to the buyer who commits to closing, that is, is open to communication and willing to move forward.
KEY FIVE: Do your buyer due diligence
Many first time business sellers see selling a business as more than just money. It’s about passing on a legacy. It’s natural to desire to see your work in the hands someone who shares your passion after years of hard work. Finding the perfect person can be difficult. You will want to spend some time assessing your prospective buyer to be sure that you are passing your business to someone who is worthy of owning it. Doing your buyer due diligence will help you let go of your business and support the buyer in taking over the helm from you.
Are they trustworthy?
The world of business transactions is full of bad actors–irresponsible buyers, inexperienced buyers, dishonest buyers…and buyers who aren’t actually buyers at all, but scammers. These and many more have been our experiences in the field, and we are now able to recognize them when they approach clients.
How can we tell when a potential buyer is not trustworthy? We look at some key information about their background:
* Has the buyer a track record of successful business practices?
* Is the buyer a respected business person?
* Is the buyer present online and in person within their industry?
* Are references available and are they open to discussing their purchases?
* Can the buyer confirm the identities of their bankers, accountants, and attorney?
Protecting your business and yourself by researching each potential buyer is a great way to protect it. Everyone should make every effort to protect your legacy, whether it’s by identifying common scams or looking for references.
Are you excited about the buyer?
It takes years of hard work and often even decades to build a business that is successful. Entrepreneurs who persevere and reach the top want their creations to live on.
You want to find you a buyer who shares your passion for the business and is willing to learn about your industry. They will hopefully have a vision of your business’s future that is aligned with yours. The right buyer should make it easy for you to sell your business. It will feel less like selling and more like passing it along to a friend if we find the right buyer.
Is the buyer responsive?
When it comes to finding trustworthy buyers, communication is crucial. Many offers fail because potential buyers are unwilling to provide proof of funds or don’t have the proper documentation. Although these offers were substantial, they didn’t lead to a deal because the buyer refused to communicate.
Buyers who are trustworthy and communicate well will be excited about the possibility of their offers being accepted. They will not complain about following the process requirements and they’ll be open for questions and sharing information. These buyers are the most likely to close and follow through.
Selling your first business is an amazing experience. You will be thrilled when it’s done and it opens up new vistas and opportunities in your life. As a first time business seller, keep focused on this outcome and you’ll be able to whether the process. We highly recommend that you get your team in place to help you navigate your sale. Contact us today to start the conversation about selling your first business.