The selling process can vary from business to business, yet some common challenges in all business sales include deciding how to market your business and find the ideal buyer. As a key transition point in most business owner’s lives, exiting their business can be quite a challenging endeavor. The owner has worked for years growing, evolving and nurturing their business enterprise. Although the emotional nature of a business sale can be extremely difficult to manage and is filled with uncertainty and fear, the reality is that there are many other practical hurdles and pitfalls that must be overcome in order to complete the sale of a business.
Selling a business requires a significant assurance of the owner’s time and resources and as a result, represents a huge distraction from the operation of the business. As the owner shifts focus to the daunting sales process and encounters the level of commitment that it requires, businesses can often lose their competitive edge, market share, a reduction in profitability or fail altogether. For those that have decided to undertake this journey alone, many have done so to the detriment of their profits and in the end, to the detriment of the value of their business.
Maximising the Value
At the start of the sales process, business owners open with an inflated sense of value for their business. This is a very common occurrence as the company has been their project for many years and a lot of hard work has been invested into it. However, in most cases, a high valuation is not suggestive of the real marketplace value. Should the business owner go out to market with an unrealistic asking price? They are really doing harm to themselves and sabotaging their potential success if they do. The owner will experience limited or no enquiries, site visits or offers. Eventually, as their sale offering becomes stagnant, the owner will be forced to lower their original price, and depending on the timing and level of price decrease, may signal instability or even desperation to the marketplace community.
There are many requirements and obstacles that must be contemplated when looking to market a business. For an existing and operating business, maintaining maximum confidentiality is crucial to the success of the business and sales transaction. Unfortunately, this will limit the marketing activity of the business sale. Additionally, a sales information pack must be assembled that presents the highlights of the business and includes all the relevant information that a potential buyer will need to make an initial assessment of their interest.
After that, the business owner must take the opportunity out to the marketplace and reveal it to potential buyers. This is far more difficult than it appears at face value. The biggest logistical challenge is dealing with the potential high volume of enquiries and the eligibility of those prospects as potential buyers. Most owners are caught off guard by the large commitment that is required and many are unable to take on this challenge while still operating their business.
Should the business owner succeed in steering through the above issues and receive a suitable offer to purchase their business, a new set of challenges will await them. They will face the complexities of deal structure, negotiations, legal issues, due diligence, contingency planning, timeframes and the management of many documents to name a few. The process includes a huge series of tasks, deadlines, paperwork and professionals to manage all the way through to closing.
There are many ways for a deal to fall through or get caught up. Professional and thorough oversight is paramount to mitigate this risk. Inevitably, every deal has its hiccups and impasses and in order to move past these unexpected hurdles, creativity, expertise and adept negotiation skills are required. Again, the real challenge to an already busy owner is the significant commitment and expertise required to handle the extensive deal management that is needed to successfully complete the transaction.
Get professional advice BEFORE you’re ready to sell
If you plan to sell your business in future, don’t wait until your company is on the market before getting advice. Get outside help early. EFM Growth will help prepare your business for a future sale, building value ensuring readiness and attractiveness to potential buyers, putting you and your business in the best possible position.
If you need support and guidance throughout your business sale transaction, our team of Growth Partners are here to help. Talk to our central team today for your free 1 hour consultation meeting. Call 01582 516300 or email firstname.lastname@example.org for more information.