Selling a Privately Owned Business – Briefing 4 – Common Pitfalls
our third Blog on selling your business, we look at some common pitfalls to
consider before embarking on your sale. You should now be clear about what you
want to achieve from the sale of your business, you’ve carefully considered all
your options and you’re about to embark on the actual sale process. You’ve almost
certainly never done this before, so here are some of the most common
misconceptions to bear in mind.
start unless you are serious. Much time and effort on both sides will go
into a sale and it’s unhelpful for the
process to be “turned on and off”. A
vendor who appears insincere is a serious negative factor for good buyers.
expectations realistic. The value of a business is always subjective, and often
as much in the eye of the beholder as in the intrinsic value of the business
itself. In some measure all vendors are
discounting the future earnings potential from their business into a lump sum
now, and aspirations on price must accord with market reality.
oversell your business. Buyers will generally be experienced, and will be seeking
facts, not hyperbole. Information should
be factual, substantiable, and preferably conservative. Buyers will seek
explanation and verification on all aspects of the business.
assume you know the ultimate buyers. A common misconception is that buyers will
already be known to the vendor. In
reality this is rarely so. Competitors
and suppliers should be “buyers of the last resort” as for every known buyer,
there will be many others as good as or better.
is always important. Whatever
the circumstances and however cordial discussions with potential buyers might
be, a strong properly signed Confidentiality Undertaking is always essential,
if only as a discipline for each buyer, and a disincentive to abuse information
received. Pressure to proceed without one should always be avoided.
quality documentation. A good business differentiates itself from its
competition in many ways in normal trading and, when selling, the sale
documentation should do the same. That
documentation is normally the first information a buyer receives about the
business, and a high quality document both in content and presentation will
raise the business to the top of the buyers list.
a deal to succeed both parties must be happy with the outcome, neither party
will be forced into signing an agreement they don’t like. Understanding the buyer’s viewpoint, and
dealing properly with any issues or concerns raised, is crucial to a successful
business owners often feel their business will be unattractive because it is
too small perhaps or too specialised. This
is rarely the case. There are always buyers for all businesses, for whom the
business is a vehicle for their own objectives. Buyers will bring skills,
resources and capability to the business to take it forward.
the deal is agreed ensure that you have a really good sale contract in
place. Having come so far, cutting costs
on the legal documentation can be a serious false economy.
a business can be a lonely project, where many owners have little or no
experience. One way to avoid unnecessary
and possibly costly mistakes is to seek specialist professional advice, which,
whilst unsurprisingly coming at a cost, is almost always more than fully
recouped in a successful, and often more lucrative deal.
23 September 2019