Sell Your Business Faster: Get In The Mind Of Buyers
Many business owners/sellers often hear the statistic “70% of businesses don’t sell”, but what they don’t hear is that most of those businesses don’t sell because of preventable mistakes by the seller. Many times, owners begin the selling process with poor assumptions and mindsets that hinder the marketability of the business throughout the process. These poor assumptions and mindsets can be avoided through sellers actively putting themselves in the mindset of brokers. Becoming objective and understanding the perspective of those being marketed to is the first step in becoming a more effective seller.
The first mistake sellers make is determining the selling price of their business subjectively. Estimating the value of a business based on personal feelings and experience is bound to lead to an inflated price point that will not be attractive to buyers. What owners should do instead, is calculate the market value of their company from its financial data and industry multiples. Sales, gross profit, and EBITDA are some of the financials that can be multiplied by industry multiples to find prices that together create a range to find a selling price within. Determining a price from financials doesn’t scare buyers away (as it will be realistic), and it will be helpful during negotiations. The range of prices calculated beforehand can be used during negotiations to set a lower limit and explain the original price point.
Along with creating a selling price to advertise, owners must realize that buyers need information to be interested in a business for sale. When selling their businesses, owners can become overly paranoid and secretive about posting company information, as they fear competitors will find their marketing and use the posted information against them. While this fear is rooted somewhat in reality, it often leads to sellers hiding information behind meetings and NDAs, which is not attractive to buyers. Buyers are more likely to click on postings that provide financial and general information, as it requires less effort and time than postings that only release information after being contacted. This is not to say that sellers need to put all their business’s information on a posting, but enough to intrigue buyers by giving them a rough idea of the operations and profitability of the business.
While giving enough information and selling terms is important, sellers must also be careful to provide information that won’t change too much while listed. When an owner lowers the price of a business for sale, and or changes key aspects of the posting too much, the posting loses credibility among buyers that notice its mercurialness. Before marketing a business for sale, it is key to be certain on the selling terms of the business and the information used to describe the business. Maintaining consistent, quality marketing material is key in attracting suitable buyers.
Sellers can also market their business wrongly in a big picture way, advertising a concept that is a bad representation of the actual business. A seller might sell a service as related to one industry, when it is more closely tied to a different industry. For example, an owner of a commercial kitchen may advertise it simply as that, when actually the business has a catering service that has potential and is more desirable to buyers in that area. Marketing a business for sale correctly can limit confusion when buyers learn more and realize that the business is not what they are looking for. Understanding the true nature of a business before trying to sell it can help tremendously. For instance, a seller marketing their home-based business to only one location would be limiting, as it can be relocated anywhere that has a demand for it.
Finally, sellers shoot themselves in the foot when marketing their business without a support team ready for escrow. Sellers often lose deals because they are not ready for the escrow process and buyers move onto another suitable business whose seller is ready for escrow. Creating a team of professionals that can guide someone through selling a business should be at the top of every sellers’ to do list. Being prepared for every step in the selling process way in advance can help streamline a sale and make the process less painful.
Sellers that are aware of sabotaging self-behavior and eliminate it, sell their businesses faster and get a return on their investment more quickly.