Selling a business – 4 more myths

Category: Helpful tips for SME's | Preparing to sell a business

Thu 27th February 2014

In meeting and talking with business owners, we often come up against certain preconceptions on the process of selling a business. We wrote about some in a recent article, here are a few more examples:

1)      It does not matter if people know I want to sell my business.

Whilst if you are retirement age it may not be a surprise to the people around you that you wish to sell the business, until you have a tangible plan for what will happen to the business in the future, it is best to keep the sale process to yourself. Uncertainty about the future may raise anxiety amongst your staff, and concerns with both your supply and client base. These key stakeholders in your business finding out about the sale “through the grapevine” must certainly be avoided.

Confidentiality is of utmost importance and keeping control of the communication about the sale is paramount.

Of course you will need to inform your staff, suppliers and clients once you have concluded a sale or just before completion. Once you have reached this stage, you will be able to present the transfer of ownership as a positive opportunity to all concerned.

2)      I don’t have to give a reason for selling my business.

“Why are you selling” is one of the first questions any prospective buyer will ask, so not having a clear understandable reason can have a detrimental impact on whole selling process.

It is hard for potential buyers to understand why anybody would want to sell a healthy profitable business. Building trust and confidence with buyers is key to a successful sale of a business, so if you have nothing to hide you should state the reason for the sale.

There are a number of common reasons for sale which we discussed in a recent blog article: Why do business owners sell their businesses?

Understanding your objectives is key to finding the right buyer and the best deal structure for you, so it is important to be honest with yourself as well as prospective buyers.

3)      I have to leave the company after the sale.

This comes back to your reasons for sale and the deal structure agreed. Although many company owners want a complete exit from the business, in many cases it is beneficial for both buyer and seller if the sell wishes to stay on and continue to play a vital role in running the business.

If the reason for sale is due to the owners and business reaching a crossroads where more investment and management expertise is required to take the business forward, a deal structure where the owner remains involved in the business, provides confidence to the buyer in the continuity of the business going forward and a potential second bite of the cherry for the seller on the eventual final exit.

4)      They don’t know how to run a business

Many business owners assume that if they sell their firm to financial investors, the buyer may have the money but will not understand how the business works. But the truth is that the right private equity group can offer you much more than just money. Many of them have contacts and professionals, who can go to their portfolio companies. They can provide a strategic guidance, find more customers or suppliers and can bring a new level of sophistication to your finances, marketing and operations.

 

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