Myths about Selling

There are several myths that business owners must understand:

Myth #1: I can sell my business myself without any outside assistance.

Some owners believe they can do a better job selling a business without the use of professional assistance. Others believe they can save money by selling a business themselves. Owners forget to factor in their ability to reach the largest audience, something that business brokers and business exit consultants can do.  Many of our buyers are looking for businesses in Rockingham and Kwinana.  We also work closely with migration agents to sell businesses to business migrants in Perths.

Business brokers and business exit consultants have the tools and experience to position the business in the best light and sell business potential. A business broker or business exit consultant will recast the business financial statements to calculate seller’s discretionary earnings to show the true economic picture of the business. Since businesses are typically priced at a multiple of ebitda, for every dollar we recover that is legitimately buried in the financial statements, a business owner will receive a multiple of it in the selling price. Selling a business is not like selling any other product or service. If you’re looking to sell on your own without someone assisting to screen initial enquirers, confidentiality is lost. If word of a potential sale gets out, there are definite risks of losing existing and potential customers, employees, or suppliers with favorable credit terms.

Myth #2: I will sell my business when I am 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, financial lending capabilities and interest rates, unemployment and many other economic measures. It is important to align your personal, business and financial goals when you plan to exit your business. A well researched and well implemented Exit Plan means you can sell when you are ready, and then achieve maximum value.  Such an exit plan caters for unexpected events, meaning if you have to sell urgently, we will be there to quickly get the sale process underway.

Myth #3: I know what my business is worth.

Some owners will base the company value on what they need for retirement. Others will tell you they want $X because that is what they paid for the assets. And others will tell you that Business Owner XYZ at the golf club sold their business for a 6x multiple. Hmm…6x multiple of…Net Income? Seller’s Discretionary Earnings? EBITDA? EBIT? Most business owners can’t answer this question when asked. And of course others utilize industry multiples, but if they are not applying the multiple to the right base or logically work the numbers, the business will potentially be over or under priced.

A professional market appraisal is a good idea for anyone seriously considering the sale of their business. An outside appraisal 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 or opinion of someone at the golf club.

Myth #4: Selling a business is like selling a house.

Preparing to sell your house may take a couple weeks. Then you talk to people to get the word out that the house is on the market. Once you get a satisfactory offer, you sign the paperwork, turn over the keys and move on. If real estate agents are involved, you may never even meet the home buyer.

Selling a business is a much more complex process. A successful business sale usually requires a great deal of pre-planning. This may require that you operate your business for an extended period to continue sales growth, develop and cross train key employees, document your procedures and control expenses.

The average house will sell in less than four months, while a business sale is three to eighteen months. Even after the business is sold, the seller can be expected to put in at least a several months  of transition time, helping  new owner to learn the business.

Understanding the realities of a business sale will prepare you for the process as well as help maximize your price and minimize your taxes. For most business owners, a significant amount of their net worth is in their business. Just like most individuals will go to a specialized doctor to address specific health issues to receive the best care, look at your business in the same light.

EurekaMax will provide you the specialist Exit Planning guidance and assistance that you want & need to sell your business easily for the highest possible price.

We focus much of our time on improving all the key factors that will make your business extremely attractive to buyers, services that typical business brokers are not interested in providing.

Contact Martin Dabb on 0458 290 100 or email me whenever you’re thinking of selling your business.

 

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