Every industry has its myths, and when your business is everyone else’s business, you hear a variety of them.
Of course, being a business broker has its own share of urban legends. Perceptions of what we do and what happens during a business exchange aren’t always accurate. Thus, we present to you some of the myths of selling a business.
Myth #1 – Manna from heaven
We talk to a lot of business owners who just assume there is a large pool of buyers out there for their business, and they further assume the buyers will pay top dollar for their company.
Many times, when a business owner says, “Call me when you have a rich buyer and then we’ll talk,” what they are really hoping for is a synergistic buyer, perhaps a competitor who is looking to grow through acquisition.
Yes, it happens, however, there are two key issues: it may not happen in your industry, and it may not happen when you want it to. Planning, including third-party analysis, is essential for your business sale because you could be looking at a long lead time for a sale to take place.
If you are serious about retiring, or selling your business, you need to take action – not wait for a call out of the blue (that may or may not happen). This starts with succession planning, which offers the option to transition the company to your employee(s), family or other parties without going through the full sale listing process.
Myth #2 – I know what it’s worth
Some owners will base their company’s listing price on what they need for retirement. Others will tell you they want $100,000 / year for “sweat equity”. Still others utilize industry indicators. These may be okay in your mind, but ultimately you do need a proper listing price, one that is attractive to buyers (albeit not so low that you undervalue your business).
A third party valuation is a good idea for anyone seriously considering the sale of their business. An outside valuation will include a thorough analysis of the business and the market it operates in. This will provide a solid understanding of the company’s growth potential, not some vague industry average.
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; but personal readiness is just one factor. Economic factors can have a significant impact on the sale of a business.
Sale prices can be affected by industry consolidation, interest rates, unemployment and many other economic measures. You may want to consider selling when the time is right – not necessarily precisely when you turn 65, or at a certain month in the year. Talk with a professional and aim to sell when your personal goals and market conditions align.
Have a myth – or a concern that the word you’re hearing in your market place may be a business sale urban legend – contact Beal Business Brokers and Advisors at 204-478-7266 or fill out our contact form here.