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If You Lose Focus When Selling Your Business...
Just deciding to sell your business can leave you feeling exhausted. This might be why so many business owners find their minds already on Waikiki Beach when the journey to a sale has barely begun.
Losing focus on your business when you decide to sell can be a dangerous mistake. As an owner, you need to keep your foot on the gas right up until the point when you pass the finish line and hand over the keys. This keeps profits high while the business is for sale and ensures you get the best price and conditions in your transaction.
Time to Sale
Even if you have a profitable business with a good reputation in a growth industry, selling a company can take some time. Most brokers agree that businesses are usually on the market for between 6 and 11 months. That doesn’t factor in the time between deciding to sell and getting the business on the market, where you have to prepare your business and get marketing and advertising materials ready.
During those six months or more, you still need to make a living. Losing focus while expecting a quick sale can affect your turnover, possibly lowering your wages or your ability to run your business.
Although not selling is never ideal, it can happen. Perhaps the bottom falls out of the market, or you can't get the price you want. If your attention has been on that future Hawaiian vacation while the business is on the market, getting dropped back into reality can be difficult.
Some owners put off vital business decisions, such as upgrading equipment or hiring a new manager, because they think the new owner will make those calls. If the worst-case scenario happens, you may find that there’s no holiday in your future. Instead, the business you still own is in difficulty because your focus has been elsewhere. You’ll have to build the business back up again before attempting another sale.
Thinking about the lengthy sale process and the possibility of not selling is an important part of your risk management as you go into the sales process. But the real reason to keep your eye on your business is the effect it could have on your sales.
Potential buyers will ask to see your year-to-date numbers as they come to the end of their decision-making process. If you haven’t been putting your energy into the business, those numbers could be down on previous years or not as healthy as expected.
Lower numbers make it look like the business is not doing well. If your numbers are on track to be bigger than the previous year, offers will reflect that. However, if your year-to-date is trending downward, buyers will see the business as a risk. The price they’re willing to pay will be lower because of this risk.
The structure of your deal can also change if it looks like the business isn't doing well. Buyers may offer a lower price with earnouts, meaning you won't get all of the sale price at the time of settlement. Buyers may also make it a condition of sale that you stay on to run the business for 12 months to ensure it realises its potential. This puts those holiday plans on hold for quite some time.
When you decide to sell, you need to keep your focus on running your business. This protects you in case you can’t sell, or the sale takes some time. Maintaining focus on the company means you can continue to grab opportunities and grow your business, which will lead to better outcomes when negotiating with a buyer. A buyer doesn’t want a risky business, and if you can show that yours is healthy, you’ll find it easier to make the sale.
Contact one of our LINK Offices and speak with our expert team of brokers to help you buy or sell a business smoothly and confidentially.