Key Mistakes to Avoid when Selling your Business
According to the latest survey by the Exit Planning Institute, over 75% of entrepreneurs surveyed plan to leave the business in the next 10 years and almost 50% plan to make the transition in the next 3 years, but 83% do not have a migration plan or a plan that has not been documented or communicated (which we mostly see as no plan). With the economy and credit markets improving, many sellers now think it’s time to put the business up for sale. If you fall into this category, don’t fall into the 83% statistic.
Murphy Business Brokers is selling more businesses than any other business broker in Colorado and we are here to help you avoid 5 important hurdles that can be avoided with good planning.
We understand that everyone wants to pay as little tax as possible, but here’s the reality: Buyers want verified business and cash flow data.
While the tax strategy you and your accountant have implemented may have been useful for you in your business, it might be time to rethink that strategy now that your goal is to sell –. Yes, that might mean sending more money to Uncle Sam, but it’s worth it. Obviously, earning from viewing takes a while, so the sooner you start the better.
There are many Steps to Consider when Selling your Business
One will find it a priority to call and get your calendar on this week and make it easy for the customer to see how they are taking the reins. For many, this means the start of a systematic move away from being the center of the universe for your business.
If you have inventory or part numbers for your business and you haven’t taken inventory for a long time, add that to your to-do list and check that information against your financials so that the buyer can recognize any “surprises” early in the game.
About 90% of business transactions involve seller financing and most corporate buyers simply don’t have enough money to buy a business outright so bank financing only fills part of the gap. Typically buyers will sign a personal caution and offer personal assets as collateral.
Remember, this does not mean you don’t receive cash at close. Seller financing can be a portion of the proceeds in the form of a note that complements the buyer’s bank finance and cash injection. So be sure to make this a topic of discussion when meeting with an accountant.
Avoid the Common Pitfalls when Selling your Business
Business can be your brainchild, you stay up late at night, you have spent countless hours on it, and you think it is perfect and special, but the truth is, prospective buyers do not care; it can be a difficult emotional hurdle to overcome. You need to emotionally detach yourself from your business and start looking at it the way buyers and lenders see it.
This is just a starting list of pitfalls to avoid when you try to sell your business at the best price and on the best terms. The good news is that these mistakes and others can be completely avoided. Try to understand the brutal facts with no rose-colored glasses. Once you can see your business as an outsider, you can identify bright spots and make a specific list of areas to “clean up”.
You can also trust your team of trusted advisors: spouse, lawyer, accountant, financial advisor, and business broker. Basically, you’ve all been in the race to get to this very moment: When you can sell the business on your terms you can move on to the next chapter of your life. Murphy Business Brokers will help prepare your business for sale and find the right buyer.
Are you a business owner planning to sell your business and need help with an exit strategy and valuation? Perhaps you are considering buying a business and would like guidance with your acquisition. Either way, Murphy Business Brokers in Colorado can help you find a company that suits your needs or can transition your business to the next entrepreneur. We have more than 25 years of experience in buying and selling businesses and service all of Colorado including Fort Collins, Windsor, Timnath, Loveland, & the Greater Denver Metro Area. Contact Murphy Business Brokers now for a free consultation at (720) 292-1627.