As a businessman, you want your business to grow and succeed as much as possible. However, sometimes it’s not meant to be. The Small Business Association states that 30% of new businesses fail during the first two years of opening, 50% during the first five years, and 66% during the first 10. Only 25% make it to 15 years or more.
Selling a business is one of the most important decisions you can make. You have invested so much in your business and selling it can be hard. It requires careful planning on your part. When done right, selling your business can even increase your net worth. When done incorrectly, you can leave a significant amount of money on the table. Here are some of the common mistakes to avoid when selling your business.
Signs It’s Time To Sell Your Business
Owning a business can be rewarding but is not always sustainable. While you may have already considered selling your business before, there are several factors that you first need to consider. As an entrepreneur, the sale of your business is something that you should prepare for. Here are some signs that it’s time to sell your business:
Let’s face it, not everyone is cut out to be an entrepreneur. Being a business owner may just be too overwhelming for you. Perhaps owning a business is not your cup of tea and you are looking to start a new career or pursue a lifelong dream. Whatever the reason may be, being burnt out is a valid sign that you need to sell your business already.
2. Too many risks
The business sector is continuously evolving. How you cope and keep up with these changes will dictate your success or failure as a businessman. According to Bloomberg, 80 percent of small businesses fail in the first 18 months of operation. Owning a business is full of risks and the odds can be stacked up against you. If the risks become too much to handle, it may be time to call it quits being an entrepreneur.
3. You are plateauing
When you started your business, you were teeming with ideas on how to grow your business. You had a lot to offer customers and had a lot of strategies to make your business stand out. This is not the case anymore. If you feel like the growth of your company has stalled or you’ve run out of ideas, it indicates that it’s time to sell your business.
4. Life circumstances
Running your own business might take some of your time away from your family. Being a business owner can be stressful and time consuming. Desiring to have some time with your family and yourself may be another sign to sell your business.
We all reach the point when we want to wake up and don’t have to go to work. You can’t work all your life. As you move into retirement, it is a sign that you need to sell your business. After managing a business for a long time, you may already have enough funds that you need for retirement.
Mistakes To Avoid When Selling Your Business
Selling your business requires careful planning. You have invested a lot of money in and you cannot just sell it without thinking it over. When done right, you could really get value for your money. When selling your business, you need to consider several factors first before proceeding with the sale. Here are some mistakes you need to avoid when selling your business.
Not learning the ropes
Just like when you started with your business, there is also a learning curve when selling a business. You should first learn the terminologies and how the selling process usually proceeds so you can structure the deal properly and make the process a win-win situation for both sides.
Setting a price too soon
You could put yourself at a distinct disadvantage if you say a price without knowing the potential value of your business. A recent study conducted by a CPA firm revealed that 65% of business owners don’t know the value of their company and 85% of business owners have no exit strategy.
You are selling yourself short if you will state a price without knowing the potential value of the business. Carefully assess the value of your business with the help of your accountant or financial advisor. You can decrease the price after determining the true value but you cannot increase.
Selling at the wrong time
Many business owners wait too long to sell but sometimes they wait too long in plotting an exit strategy. After investing so much on the business, which is likely a significant percentage of their retirement fund, they lose leverage by waiting too long to sell. As a result, they are unable to maximize the value of their business upon exit.
If you are planning to sell, pay attention to changes in the economy and to the state of your industry and look for the best-selling opportunity.
Negotiating with only one buyer
When selling your business, you might be receiving inquiries from prospective buyers. Do not limit yourself to just one buyer. The truth of the matter is that seeking out additional buyers will often increase the selling price of your business. The sale of your business does not stop at price, type, or buyer.
There are other factors to consider as well like the type of transaction, method of payment, included/excluded assets, and seller retention post close.
Rushing the sale process
When selling your business, you might be tempted to get the process over quickly. However, the sale of a business is a systematic process. You need to screen potential buyers, negotiate the best deal, draft documents, and formalize and sign closing documents.
In general, the process will take you between 5 – 8 months. Selling your business can be time-consuming and cumbersome. If possible, look for an intermediary that can meticulously manage every step of the selling process.
Not understanding a buyer’s perspective
When buying a business, your buyer will look at many factors such as growth opportunity, channels for development, and potential synergy with their specific skill sets. Each potential buyer should be carefully vetted, interviewed, and qualified to ensure the best possible match for your business.
A business without financials won’t likely sell. At most, you should prepare your financial documents for the past three years which includes tax returns, profit and loss statements, balance sheets, assets and inventory lists, and other documents that your buyer might examine.
There comes a point in time when every entrepreneur will decide to sell their business. Whatever your reason for selling, you need to do it right so that you can get the most out of the proceeds for the sale of your business.
Partner with airisX For Business Continuity
At airisX, we understand how difficult it is to stay in business. But it doesn’t have to come to the point of selling your business. We can help you with business continuity by providing you solutions customized for your business needs. airisX has several partner programs available, depending on the need and requirements. The airisX solutions platform is a great way to expand your capabilities quickly and easily, and thus increase revenue and profit.
Companies can offer more services, and thus more revenue by offering our full suite of services to your existing clients or new opportunities. airisX allows your company to offer a more complete service while utilizing airisX for service delivery. We offer all of our services as an add-on to a company’s offerings: KPO services, BPO and BPS offerings, Branding/Marketing, Social Media, e-commerce management, and much more.