By Denise Barnes, Author of Seller Beware How Not To Sell Your Business
Selling your business can be one of the most exciting things you will ever do in your working life; a turning point for you to change your career, start a completely new business, take up a hobby more seriously, or simply have more time to devote to your family. Equally, it could turn out to be one of the most disastrous, as the path to freedom is strewn with pitfalls. Before you groan in despair, take the time to read my tips, not all of them obvious, which should help you towards a successful sale.
1. …try to cut expenses by selling your business yourself. A good business agent will be worth their weight in eye-watering fees. They have the expertise, experience, contacts, and up-to-date lists of people looking for a business in your field. They will even give you a valuation on the basis of your last 5 years of figures – a useful comparison to your accountant’s.
2. …let any prospective purchaser sign the confidentiality agreement until your business agent has thoroughly checked their backgrounds. Your agent must vet them for their financial standing and reputation before disclosing your company’s name. Signing the confidentiality agreement gives your buyer access to your accounts, and there won’t have been much time for any trust to build up, so you need to rely on your agent’s recommendation.
3. …sell if you have any personal problems or sickness in the family. It’s hard to judge when the exact time is right as life has a nasty habit of getting in the way, but if you know you have a house move coming up, or a divorce, or someone close is ill, delay the process. You need to give your full attention to the sale, as well as continuing to steer the business, and you’ll be run ragged if you try to juggle anything extra.
4. …accept the first offer. It might be the best one in the end, but it might not. Give any other interested party a chance to bid. They might have more experience in your line of business, or may not have set any onerous conditions, such as including the freehold premises, or claiming payments on invoices which have 30-90 days grace, but you’ve already made the sales. Whatever you do, don’t take the best of a bad bunch. Wait a few months and try again.
5. …accept any offer where the up-front figure is less than 75%, no matter how attractive the package is. Obviously, 100% up-front is ideal.
6. …allow the new buyers to change the name above the door. It’s imperative to have this clause written into the contract if you are on any kind of earn-out scheme. It’s surprising how new buyers are desperate to make their mark and forget they’re buying your reputation. A name change could mean customers will think you’re no longer involved and take their business elsewhere.
7. …have any verbal or informal agreement. Everything you and your buyers agree MUST be in the contract. This should include all details post sale, such as whether you will remain in the company to allow a smooth change-over period, and if so, for how long, and what your daily rate will be.
8. ...become too friendly with your buyers or the business agent or the solicitor.This may sound harsh advice, but you must stay professional at all times. You’re selling your biggest asset and it’s easy to be taken advantage of in a too-friendly atmosphere. This also means no alcohol at any meeting. You need to have your wits about you at all times.
9. ...be remiss at keeping notes on the transaction. Keep files of ALL documents, emails, reports, diaries, minutes of meetings etc both before and after the sale. These records could prove vital if you ever have to take your buyers to court for late or no payments.
10. …ignore gut feelings as ‘nonsense’. Instincts and first impressions can shine a light on to a stranger or situation if your antenna is up. Any doubts at all, either on the first meeting, or when Heads of Terms has been signed (it’s not a legal document), or even when the contract has been agreed but not yet exchanged, WALK AWAY!
Space doesn’t allow me to give you dozens more potential pitfalls, but more tips and information can be found in my book: Seller Beware: How Not To Sell Your Business. Don’t let the pitfalls put you off – it can be fun, but just be aware at all times.
Good luck for a successful sale. Cheers! (You’re now allowed to crack open the fizz!)
You can visit Denise on twitter @denisebarnesuk or see denisebarneswriter.com