"Watch Your Step" - Entering or Exiting Business

Lately, I've seen an increase in the number of people looking at either starting or purchasing a business.  

With respect to those in the process of buying a business, many are searching the market on their own, while others aren't shy to ask others for some assistance in locating one that's available for purchase. The approach you choose is totally up to you, but having said that - "Watch your Step!"  

Experience can be a great teacher. If you're interested in buying or starting a specific type of business, but have never worked in one like it ... there's a higher probability that you could 'slip' and take a 'nasty fall' over an obstacle that a more experienced operator could handle. Planning can help! One of the things I've emphasised with clients and audiences that I've addressed over the years is to make sure that you've got a team of professionals to help guide you on your business journey!  

As a part of that "team" of professionals, we're pleased to help those looking at putting their business plans together, whether that's for start-up, expansion or preparing themselves for making a "pitch" for funding. Planning is also important throughout the life of the business and during that all-important stage of the owner transitioning away from the business.

We've also seen that an experienced business broker can be a terrific ally to help those looking at buying or selling a business. So we've invited friends from Sunbelt Business Brokers to once again share some of their thoughts and expertise with our audience.

Please feel free to pass this post along to those you feel could benefit from this information. And thanks for keeping us in mind as you consider your requirements for business planning, growth and development, and business funding needs. Please enjoy this guest blog post.

20 Ways Business Owners Mess Up

When Selling Their Business

by Dale Alton

This is Part I of a 3 part installment on “What Not to Do When Selling Your Business”. It touches on some subjects that may seem a little challenging.  A good business broker working with a team of experienced professionals can help simplify the process and increase the after tax benefit you receive on the sale of your business.

Some things shouldn’t be rushed. Selling a business is one of them. Speed kills—failing to take the time to prepare for the sale of your business could cost you the very lifestyle you have worked so hard to build. Conversely, when in the throes of the sales process, timely action can be your greatest ally.

The rules of the business highway work to protect and benefit travelers in both directions—buyers as well as sellers—and sellers who ignore them, innocently or intentionally, usually end up losing time and money. Sunbelt Business Brokers help simplify and optimize the process of preparing your business for sale.

What Not to Do When Selling Your Business 

1. Fail to prepare for the life you want when you leave your business. 
Start thinking about the life you want, once you leave your business. Will you have enough money for what you want to do next? What will it take to get you there? Our business is usually our largest asset. A Broker’s estimate of value will tell you what your business is worth now and its most probable selling price. But just as important to your planning, you also need to understand the amount you’ll net after adjustments and taxes. A team of professionals (i.e. business broker, accountant, tax lawyer, wealth planner, coach) can then help you build a road map for increasing the value of your business, selling it, and taking advantage of tax strategies to maximize the proceeds of its sale.

2. Tie the success of the business to your efforts 
Buyers want to know that they can step in with resources in place to keep the place running when you’re gone. Make yourself replaceable. Put in place people and systems so the business is less dependent on you. If you can take extended time off and be confident in your management to keep things afloat, this is a good sign. 

3. Imply that learning how to operate the business is hard 
Complexity scares buyers. Buyers need assurance that they can learn to run your business in a reasonable time and that you will be there to help them through the transition process. 

4. Start putting your paperwork in order after you meet a potential buyer 
A keen buyer will want to act right away but will lose interest after weeks of delay while you assemble due diligence material. They’ll assume that your business is disorganized, too. Be prepared with financial documents that are accurate and up to date. Your broker can advise you on what is needed early in the process so you are prepared. Updates can always be provided as required. 

5. Blab to others that the business is for sale 
The value of a business drops once word that it is for sale is out on the street. Employees, suppliers and customers get nervous. Respect the need for confidentiality. Business brokers have protocols in place for advertising, disclosing information and handling buyers in order to protect the seller and their business. The shorter the time frame to sell a business, the less chance of word slipping out. 

6. Hide why you are really putting it on the market i.e. burnout, health issues, family issues 
Be honest. There is nothing wrong with burnout or health or family issues, but you have to be upfront about it. Buyers need to understand what they can do with the business. If you have lost the passion or energy to devote to the business, tell them. Maybe you weren’t very good at delegating. The buyer may be better at management and can get the business running smoother. Never try to hide deficiencies. If profits are being generated with weaknesses present, fixing them will increase the profits. 

7. Overstate the value of assets 
Sellers are inclined to paint a rosy picture. But in estimating the value of tangible assets they need to be as accurate as possible. The facts will come out at due diligence. If the truth has been stretched in even one area, the buyer won’t believe any of the values being presented. 

8. Misrepresent the presence and use of systems in the business 
Again, do not misrepresent information. The seller has to inform the buyer about the systems—how they work, how they are understood and used. An operations manual that’s current and accurate will be worth its weight in gold to a new owner. But a manual has to reflect what employees are really doing. 

9. Stop doing what you would do in the normal course of business - e.g. cease marketing or the maintenance of equipment 
The buyer’s offer was factored, among other things, on a realistic market value of the assets and liabilities and the true earning capacity of the business. Say, for instance, you stopped marketing and that affected future revenue. What will the buyer think or do if the business doesn’t meet the numbers that were forecast? They won’t be happy with a deal that’s suddenly generating less money than they thought. They might even take legal action. A seller’s focus needs to be on running the business to keep it in top shape while the broker is selling it for them. 

10. Deal directly with the buyer 
Free-flowing conversation is dangerous. Run all conversations through your broker. The buyer will be looking for a reason not to buy. Don’t give him one. Loose lips can sink business deals as well as ships.

These problems may seem to be the purview of smaller business deals.  Sunbelt Business Brokers has managed Mergers and Acquisitions, out of the Sunbelt Business Brokers Ottawa office, for businesses worth many millions of dollars.  Some of these owners needed to attend to a number of issues we covered today.

It is easy to identify the problems in selling a business or recognize them in hindsight. That is not the purpose of this series.  My father used to quote a saying … “Experience Teaches”… This insider look is a compilation based on years of experience Sunbelt has had in the business of selling businesses. We trust that you find it helpful and invite you to catch the next installment.  

Sunbelt Business Brokers Edmonton

Sunbelt’s team of brokers, operating at local and regional levels, have experience selling small to medium sized businesses. 

Michael McCulloch

Dale Alton

Sunbelt is the world’s largest business brokerage firm with approximately 300 licensed offices located throughout the world, and 33 offices across Canada alone. 

More than 1,400 Sunbelt brokers annually coordinate an estimated 4,000 Main Street and Middle Market business transactions.

A variety of strategies are required to sell businesses from different industries, of different sizes, and in different economic climates. Many Sunbelt brokers have specific industry experience and cooperate with their counterparts to identify the buyer and create the right framework for the sale.

Your Local Sunbelt Business brokers sell a diverse mix of main street businesses valued under $3 Million. Mergers and Acquisitions of larger and more complex business transactions of up to $30 Million are managed out of the Ottawa Head Office. We would like to help you plan and look forward to retirement, expansion or an exciting new business opportunity. 

Have you ever thought about selling your Business?

Sunbelt represents clients who may be interested in buying a business like yours. If you are thinking of selling a business now or in the next 3 years, discover what your next steps should be. Feel free to contact our Sunbelt Business Brokers Edmonton office if you have any questions or would like a free confidential consultation. Give me a call. Dale Alton – 780-878-8787

Sunbelt - The Place to Buy or Sell a Business.

* Thank you Michael and Dale - once again, it's great to have your input with respect to these very important considerations on Selling or Buying a business. The 10 point here provide lots to think about, and we'll look forward to the future articles in this series.

As a part of the TEAM of professionals that you'll be using in your business, we're pleased to assist those working on their business plans. Please let us know if that's something you're thinking about, and let's have a conversation! Together, we can help you Build your Business Dream, starting with your Business PLAN.

NOTE: For a closer look at the services provided by Pro-Vision Solutions Inc. and how we can assist ... visit our Website: www.pvs4u.ca

Feel free to add your comments or additional helpful suggestions for entrepreneurs.   Please let us know your thoughts and thank you in advance for sharing this with those in your circle of contacts!