What are common business sales myths?
The typical business owner will sell only one business. Understanding the complex process involved will help produce the best results, but don’t fall prey to the myths that can derail or seriously affect a potential sale.
Myth #1 – It’s Like Selling a House
Selling a company is more complex than selling a house. A successful business sale usually requires a good deal of pre-planning. The Seller may want to develop key staff, improve and document the operations and better control expenses.
The average house will sell in less than four months, while the average business sale is nine months to a year.
In real estate you post a sign, distribute flyers, hold open houses. In a business, you probably do not want the employees, vendors or competitors to know you are selling.
Even after the business is sold, the seller can be expected to put in at least a few months supporting the transition and helping to make the new owner a success. In the sale of a house, the buyer and seller may never speak again after the closing.
The National Association of Realtors reported that 8% of home sales in 2014 were FSBOs (For Sale by Owner). The typical FSBO home sold for $210,000 compared to $249,000 for agent-assisted home sales (1). If only 8% of home sales are handled by owners and the average home sale supported by a realtor generated a higher sale price, doesn’t it make sense to use a broker in what is quite likely a more complicated transaction?
Myth #2 – I Can Sell It Myself
See “Benefits of Using a Business Broker” section of this site. Ultimately, selling a business is time-consuming for an owner and can distract you from the objective of running your current business and maintaining its value. A business broker can help you maintain your objective of retaining and improving the business value by marketing and selling your business.
Myth #3 – I’ll Sell When I’m Ready
Certainly, an owner wants to be sure he or she is mentally and emotionally prepared to sell. However, personal readiness is just one factor. Economic factors can have a significant impact on the sale of a business. Perform a Business Readiness Review to determine that your business is ready for sale when you are ready to sell.
Myth #4 – I Know What it is Worth
Some owners will base the company value on what they need for retirement or to net after taxes, etc. Others will tell you they want $100,000/year for “sweat equity.” These estimates may or may not correlate to the market for the company.
Our pricing analysis relates to real-world buyer-specific return on investment criteria and the buyer’s ability to finance the transaction.
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