When you know it is time to sell, this can be an exciting time, but it is also important that you be properly prepared. If you lack proper preparation when you are selling your business, you can run into some major snags. Major snags can cost you major money so taking the time to get ready is worth it. In this article, we are going to talk to you about five ways to protect yourself from a bad business deal.
1) Get Non-Disclosure and Non-Solicitation Agreements in Place
Before you start talking to any party about particulars in your business, you need to have an NDA and non-solicitation agreements in place. If you get into too much information before you are protected you could stand to lose a lot. No matter how trustworthy you think someone is or how well you know them, you need to have these agreements signed and filed.
2) Look for Good Character
When you are thinking about selling your business to someone, you need to make sure they are a person with good character. If you are in the early stages of talking with them about your business and they are already showing signs of being difficult to work with, they may not be the best fit for you. When you sell your business to someone, it is going to mean you will be working together for a while to get the transition done. Having someone that is unpleasant or someone that doesn’t operate honestly in charge of your business may not be exactly what you had in mind. Pay attention to those early signs and know that things will only get worse when the sale process continues.
3) Keep Your Focus on Running the Business
If you already have your focus on exiting the business, you may find that your business starts to decline. If you are in talks with a potential buyer and they start to notice the business isn’t doing as well as it once was, they might try to take advantage of the situation. Not only would a lower sales price be likely because the business is starting to suffer, but you might lose the deal altogether if the potential buyer thinks that the business is going down.
While you might be excited at the prospect of exiting your business and going to sip drinks on the beach, you aren’t going anywhere good if you don’t keep your business running and successful through the close of a sale. It can often take two or more years before you can find the right buyer and close the sale on a business.
4) Normalize Your Financials Early On
Your CFO or CPA will be able to help you “normalize” your financials. Normalizing your financials means correcting them for anything strange, so your buyer knows what to expect. If you have to explain your financials, this will cause your potential buyer to question your financials and may put the sale in jeopardy or make them ask for a lower sale’s price. Your buyer is going to want a full three years of financials, so there is no time like the present to start normalizing them.
Paying attention to the numbers and making sure they look as attractive as possible to buyers is important. This is why you need to start preparing for the sale of your business years before you truly plan on selling it. When you do this, you will enable your company to look its best when it goes on the market.
5) Not All Buyers Have the Same Value & Validity
You shouldn’t think that the best offer is always the highest dollar offer. You want to make sure that the sale is going to close. Look for the level of commitment the buyer has, if they truly can close and their track record with other business deals. It would help if you carefully qualified your prospects without being ashamed of doing so. One of the ways to take the pressure off it by finding a business broker. When people learn how to find the best business broker and let them start to work on the project that is when things get less complicated. Since business brokers have seen many different business deals, they know what to look for and how to help you steer clear of potholes.
Getting Help to Sell Your Business
Bringing on a business broker is usually the best way to deal with selling your business. Unless you have specific experience in this area, selling a business can be a complicated process with unexpected happenings that you don’t know how to deal with. The more professional help you have when preparing for the sale of your business, the better experience you are likely to have. Business brokers not only have the know how but they also have the connections needed to find a buyer faster than you would if you were on your own.
Selling a business can be exciting but making sure you protect yourself when you are going through the sales process is key. Being sure that your business is protected and that you are getting the best sales price possible takes a good team, and one of those team members is a business broker. Make sure to find a business broker that is experienced and committed to helping you through the entire process.
Disclaimer: This content does not necessarily represent the views of IWB.