By Bruce Hakutizwi
In a recent article on AllBusiness.com, I discussed three abilities successful business sellers share. But being able to sell your business successfully (within a reasonable amount of time and for the right price) doesn’t rely only on those three abilities. It also relies on the seller’s persistence and fortitude in the face of common challenges.
Here are three common challenges nearly every seller is going to face during the selling process, and how to effectively meet them without jeopardizing the sale.
#1: Employee insecurity
If you have employees working for you while you’re in the midst of selling your business, it’s going to stress them out. Like tenants living in a house that’s for sale, they know that a new owner brings a certain level of uncertainty about the future.
This is a challenge for the seller, both on a professional and a personal level. You need your employees to continue doing their jobs well while you focus on the sale–both to keep the business operating profitably and to prove to any potential buyers that you (as the owner) aren’t the only key to the company’s success. At the same time, since you have probably developed a rapport with your employees, the pending change in relationship has a personal side to it.
The best way to overcome this challenge is to meet it head on with honesty and transparency from the start of the process:
- Let your employees know about your intention to sell early in the process.
- Take the time to answer all their questions and address all their concerns honestly.
- Make an effort to rally their support as integral parts of the plan–you need their best efforts if you hope to make a success of the sale.
- Keep them in the loop at each step of the process.
Above all, don’t make any promises to employees you can’t keep. Unless you intend to make their continued employment, wages, benefits, or any other aspect of their job a contractual part of the sale (not a good idea), the new owner will be responsible to make those decisions when he or she comes on board. Understanding that will make the crucial transition period easier on everyone.
#2: The low-ball offer
As buyers, we’re always looking for the best deal. Whether we’re buying an old paperback book at a yard sale or a brand new car off the showroom floor, we’re going to dicker with the seller to try to spend less.
So, it’s reasonable to expect that nearly every buyer who shows interest in the business and gets as far as making an offer will start at a very low price.
The key to overcoming this challenge is to have a clear understanding ahead of time of the true value of your business, and to have the necessary evidence to back that up.
Business valuation is not extremely complicated, but it can be determined in a few different ways; no one-size-fits-all formula exists. The best way to understand and prove the value of your business is to have a professional (likely a business broker or accountant specializing in business valuation) assist with the valuation and provide you with a report outlining the reasons behind the value they’ve established.
Getting the input of professionals will help you set realistic expectations as to what you can expect to get for your business–apart from any emotional investment you’ve made, which has value to you but not to a prospective buyer–and also should provide practical insight into how you can raise the value of the business in preparation for a sale. A report also offers black-and-white proof to low-ballers that their offer isn’t adequate.
Of course, selling at a time and under circumstances where you can easily say “no” is an important factor in overcoming this challenge as well. If you’re desperate to sell and the buyer knows that, a low-ball offer may be all you’re going to get.
#3: Staying motivated
In the previous post in this series, we learned that staying motivated affects many business owners who are involved in sales that take more than a few months (which is most of them).
The problem is that running a business is hard work–it always was, and it always will be. But once you’ve set your mind on selling, you may start to step back from the company psychologically, and that can be dangerous since the period between when the business goes up for sale and when a buyer signs on the dotted line are crucial. You are not going to sell a business that’s on a downward spiral for a good price.
Overcoming this challenge has everything to do with understanding human nature and making the conscious decision to stick with the company until the end. Simply making that decision can do wonders for your ability to stay mentally engaged and focused through the entire process.
From a practical standpoint, arranging the company’s affairs to effectively remove yourself from the day-to-day operations will help as well. Any prospective buyer considering taking over ownership is going to want to see evidence that you–as the current owner–are not the only thing keeping the business running smoothly since you’re the only thing that doesn’t come along with the purchase.
So, in preparation for the sale, make sure you have both personnel and systems in place that can keep the business running smoothly and profitably whether you’re there or not.
Selling a Business: Final Outcome
As a business owner, if you can overcome these three inevitable challenges during the selling process, you can expect to walk away with a fair price in exchange for your hard work and emotional investment in the company you’re selling, and the buyer can expect to walk away with a valuable, profitable investment of their own.
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For additional information regarding Florida business sales, acquisitions and valuations, please contact Eric J. Gall at Eric@EdisonAvenue.com or 239.738.6227. Also, visit our Edison Avenue website at www.EdisonAvenue.com or my personal website at www.BuySellFLbiz.com.
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