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Practical articles to help small business owners when selling and buying small businesses.

Avoid 3 common traps that delay you selling your business.

Michael Kerr - Friday, September 27, 2019

Avoid these 3 traps that stop you getting on with planning and selling your business.

In this short article I outline the 3 common traps and how you practically overcome them.

1. The new client / project / contract that will change everything!

You are feeling confident as you are just about to land X (X being an important new client/project/contract).

And as a result you start thinking. If I leave it a few weeks, or maybe a few months, then the business will be more profitable and I'll get an even higher sale price.
 
The assumption here is that you will miss out on a higher price in the future, assuming you land the new client/project/contract, if you start the sale process now and do the valuation and prepare the Business Summary and other information needed for the sale.

But that thinking is wrong. Well run business sale processes should never be 'set & forget'.

Sale processes always run longer than you would like and it's not uncommon for them to take a year or two, sometimes more. In that time a lot of things can change, including revenue, staffing and profitability. So the value will also change. You need a fluid, well designed sale process that anticipates and takes account of the things that change.

Practically this means you need to regularly update key documents such as your Information Memorandum (a summary of the business for buyers to read), your historical financial summary and financial forecasts. Genuinely interested buyers will value these updates and that's a great way for your business sale advisor to keep in touch.

Owner's also needs to expect that there will be changes in value based on changes in business profitability and buyer sentiment.

There is very big potential trap in waiting for X to happen. What often happens though is that the highly anticipated new client/project/contract gets delayed, and then delayed again, or worse doesn’t happen. As a result you just end up losing precious sale preparation time.

If you want to sell your business within a few years, these extra weeks and months spent waiting become intolerable. And the stress will really start to mount.

The best approach by far is to draw a line in the sand and START. 

Start your sale planning but make sure that the process (and your business sale advisor) are flexible enough to adapt to changes. If you land a significant new client/project/contract then you just update the valuation!

As long as any changes are communicated in the right way they won’t scare off the genuinely interested buyers. It’s actually a positive for them. They would rather buy a business with ongoing growth and prospects, even if the price is higher. Of course the flip side is also true. Any deterioration in financial performance will lead to a reduced valuation!

2. If employee/customer/supplier finds out about the sale that couid really cause some issues!

  • What if the staff find out?
  • What if my customers find out?
  • What if my competitors find out?
You are afraid that if Y (Y being employee/customer/supplier)finds out that they might derail the sale. 

It’s true that some or all of the above can have a major impact on the sale process, negative or positive. BUT IT'S STILL YOUR BUSINESS, not theirs. And unless you want to avoid the issue by closing the business down you need to sell sometime. 

There is a smart way to deal with this potential issue.  

At some point in the selling process these 3 stakeholders (staff, customers & competitors) are going to find out. The key is for you to be in charge of what they are told and when. 

This involves developing a basic communication plan and again a good business sale advisor will help here. The communication plan is just a simple by clear story about the sale. It can contain whatever you want it to;

  • The reasons for selling,
  • What you will do after the sale, 
  • The kind of buyer you want, 
  • The great things about the business etc. 
It just needs to be your story. And it needs to be released when you think is right, based on a timeline you set out.

There is no doubt that;

  • Some staff will get anxious, but some might be glad for a change, 
  • Some customers might get nervous, but some will be grateful for you being upfront about the sale,
  • Some competitors might start spreading rumours, and some might become buyers. 
You can never be certain as to how these stakeholders (staff, customers and competitors) will respond. But you are far better off trying to tell the story you want to sell, and on your terms. 

This not only reduces the potential for the wrong story to get out there. It can also create positive opportunities that enhance the sale process. Staff who now know what is going on concentrate on working hard and keeping their job. Customers who feel confident that they will not be left in the lurch actually support the sale. 

3. What if I put in some 'hard yards' and implemented all those business improvement ideas that I've been thinking about for years and years!  

There is no doubt that thinking about selling can bring on some regret about what you should or could have done. What if restructure the business, build a website or invest in some better marketing?

If you have been running your business for many years and haven't gotten to these business improvement ideas yet then it's probably unlikely you will get them done. And putting off selling for another year or two, thinking you will all of a sudden make these changes, can cost you even more if your health suffers.

You are probably better off asking some important ‘me’ questions.

  • How do I want to spend my time?
  • What haven't I done that I wanted to do?
  • What will life be like for me without a business to run? 
  • What do my nearest & dearest want you to do? 
Rushing a decision is not the answer. Making decisions based on what you think others expect is not the answer.

This one is about you. You need to decide what makes you happy and what your post-business future plan is. You need to spend time thinking them through. 

While finding this time, while running also the business might be hard, it’s a whole lot better than just drifting through the next 2, 5, 10 years without direction and answers. 

For some the best thing might be to stay in business. And if that's what you really want then OK.

For most though it’s about asking and finding answers to the above questions. It needs a good hard think about life post your small business.

From talking to business owners over many years I know that deep down most have a sense of when the time is right. It's a gut instinct and they just know. The really sad thing is that many don’t do anything about it and the resulting personal and financial cost ends up being really high.

Don’t let that be you
Michael 
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