09 May Around the Web: A Week in Summary
A recent article from Inc.com entitled “Why Building a Company to Last and Building a Company to Sell Are the Same Thing” discusses best practices that benefit both a business owner planning to hold a business and a business owner planning to sell a business. The main thing to keep in mind is that taking shortcuts in business will never be a good idea if you want to build a business with longevity, whether you are the owner or if you sell to someone else.
Implementing best practices is a good way to ensure that the business can earn as much money as possible and will add value to the company if you decide to sell. One example of a best practice is to stay in direct contact with your customers and keep the relationships up to date. The relationships you have with customers will be an important aspect that potential buyers will look at.
Another best practice is to have accurate financials and to get certified financials. Certified financials will add value to your business and also gives potential buyers more confidence in the company. They are also helpful in certain cases such as applying for a loan. Using best practices not only helps to make sure the business will have longevity but also will help you get the maximum price for your business if you decide to sell.
A recent article posted by Business in Vancouver entitled “Buying and selling a business is the business of managing emotions” explains how emotions are a larger part of a business transaction than most people expect. One of the main factors of a successful business transaction involves emotions for both the buyers and sellers. They have to look at how their personal objectives fit into the plan, such as considering if this is a good time to retire, if they want to slow down and bring in another partner, and how their personal family objectives factor into the business sale.
Professor Gerald Zaltman from the Harvard Business School noted that 95% of consumers’ purchase decisions take place unconsciously and that most financial decisions we make are emotionally based. Another issue for sellers is making sure they don’t let their egos get in the way during a sale. “Deal fever” also happens, where a purchaser has spent a lot of time and money on the transaction process but the deal falls through. They say that the first loss is often the best loss, though, and losing out on this deal may be beneficial for you in the end.
A recent article from the CBB Blog entitled “Learn From Other People’s Mistakes: 8 Sure-Fire Lessons Before Selling Your Business” gives us 8 common novice mistakes to avoid when selling your business:
- Selling because of an unsolicited offer to buy – This could cause you to sell despite being unprepared and potentially selling for a lower price than you should.
- Poor books and records – Have an accountant help you get your financial records in order so they are ready for a potential buyer to look through them.
- Going through the sale process alone instead of using a team of experience professionals.
- Hiding your business’s skeletons in the closet instead of fixing or disclosing them.
- Announcing the news of the sale too early which can cause problems with employees, customers, vendors bankers, etc.
- Contracts or agreements can kill deals or cause issues after the sale, so make sure all contracts are in order, and that they are transferrable/renegotiable.
- Not understanding the value of your business – Be sure to get a professional business valuation.
- Getting beat up in negotiations and due diligence – Be prepared for a buyer to negotiate and fight hard on certain issues. Using a good team of professionals will ensure that you get a good price even after the buyer does their due diligence.