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Expert Answers to Biz Questions
Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.
3 mistakes to avoid when selling your small business
Small business owners launch their companies without having a contingency plan. They are so excited to start a business that they do not think about the risks involved. At one point or the other, they have to sell the company that they worked so hard to get off the ground. Selling a small business is just as complicated as starting one. Every day, entrepreneurs make huge mistakes and lose a lot of money in the process. When you sell your own business, you have to be very careful. The transaction is complex and mistakes can end up costing you more in the long run. Stop what you are doing for a few moments and read about the most common errors made in the selling process.
1. Not taking the time to plan
Preparation automatically leads to success. When you formulate an adequate plan ahead of time, you are able to execute the project, reach your goals, and fulfill your vision. It takes from two to four years to sell a company, so you have to make a long-term strategic plan. Think about how much your company is worth now and whether that value will increase in future time. Equally important is to think about the financial aspects. Selling a company is basically a liquidity event, meaning that you can cash out some money. Make an investment plan and consider the tax ramifications. You will want to present a professional image. Update the records, keep a detailed business history and have the portfolio ready at all times. As you can see, a lot of preparation is required when it comes to selling a small business.
2. Making yourself indispensable
Being a small business owner is not easy. Yes, you have people to perform various tasks and keep the company going, but you also have responsibilities and it is necessary to live up to them. As a business owner, you have to prepare the business plan, decide on benefits for employees, handle complaints and requests, implement marketing strategies, and more. The world is on your shoulders. The enterprise should run smoothly without your help. Ensure that your team is capable to manage without you, at least for a little while. The more independent the small business is, the more valuable it will be in the eyes of the buyer. As for you, you can spend the time gained preparing to list the company for sale. Experts over at ExitAdviser recommend you not postpone the sale. Commit yourself to selling the small business.
3. Asking too much or too little
Are you looking for a valuation that is three times the average earnings multiple for the industry? If the answer is yes, then you need to know that you are asking too much. Setting an unrealistic price tag on the enterprise is not a good move. You will deter potential buyers. Take into consideration the industry, companies similar to yours, the economy, and, last but not least, the marketplace. Pricing the small business too low is not advisable. What you need to understand is that you have the opportunity to make money and you should take advantage of it. If you set the price too low, you will not make any profit. Do your homework and do not rush things.
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