When you first set up a business, it may be out of necessity, or just a lifelong dream. The thought of what to do later on down the line is not a consideration at that point.
For most small or family operation, the prospect of selling is usually only considered when you are about to retire. Unfortunately, for most people, this is too late.
Ideally, in any business, you should have a strategy session with the stakeholders every year, to decide on where to take the company. If you are considering selling, you need to have a 3-5 year plan in place. You cannot wait until you are ready to retire and then only understand what is required.
SME owners make some key mistakes in running their day to day operation, which also hinders a sale.
Here are some reasons why small companies don’t sell when you want them to:
- Business valuation: As the seller, you will always value the company more than the buyer. It is not to say that all small businesses are not worth the asking price. As the original owner you attach value to all the time, blood, sweat, and tears that you put into the business. A buyer, however, will look at the data provided in the financials of the company. This emotional detachment is what creates the divide between the seller and the buyer.
- Professional advisors: When looking to buy or sell a business, make sure you choose your team carefully. A friend or unqualified “expert” who is not up to speed with all the intricacies of your industry can do more damage than good. Rather invest in a consultant or attorney who has the required experience in your field.
- Business Trends: You may already think about selling your business for around three years before actually going through with it. During this time, you can begin to lose interest and spends less time growing the business, it often declines in revenue and turnover. A potential buyer will look at the last three years of a business, and they want to see growth. Ensure you have a growth strategy in place and sell at the peak for best results.
- Comingled Expenses: The worst thing you can do as a business owner is living out of the company bank account. If you never have any intention of selling, then you can get away with it. When you confuse your expenses with the business, it will reflect poorly from a profit margin perspective and even cause issues with banks and lending facilities down the line. Keep your personal and company expenses separate and your financials squeaky clean.
Bizcash is here to assist with your company cash flow, save on costs and to help you grow. For more information on our Invoice Discounting or Business Loan products, or arrange for a demo on the financial dashboard, get in touch here. Follow our social media pages here for tips for small businesses.