For most entrepreneurs, selling a business can be daunting and emotionally taxing. You’ve likely invested years of hard work and passion into building your company, so if you feel overwhelmed by the idea of selling your business, that makes sense. To make matters worse, misconceptions about business selling can add to the stress of this already anxiety-inducing process. These misconceptions (which we’ll go into more detail about below) can sometimes cause entrepreneurs to make poor decisions or miss out on once-in-a-lifetime opportunities.
Let’s explore some of the most common misconceptions you’ll likely read about or hear about while preparing to sell your business. Knowing about these misconceptions and having a deeper understanding of where they come from in the first place should help you make more informed decisions when it comes to selling your business. The business selling process is no walk in the park, but having a solid grasp of the misconceptions that come with this process could help you gain the confidence you need to achieve the outcome you’re hoping for.
Why should you sell your business?
Before we jump into the misconceptions that accompany the intricate process of selling a business, let’s briefly go over why an entrepreneur would consider selling their business in the first place. As a business owner, the thought of selling your business might have already crossed your mind (which could very well be the reason you clicked on this article). Contrary to popular belief, when entrepreneurs sell their businesses, it’s not always because they’re struggling financially. Selling your business can be a super smart business decision, as it can open doors to new, exciting opportunities.
One of the main reasons you might want to sell your business is that you can get liquidity in the company. Several entrepreneurs also end up selling their businesses because they’re tired of dealing with the risks that come with growing a company. In the initial stages, most business owners will be a lot more confident when it comes to taking risks because they don’t have a lot to lose yet. As the company grows, however, they’ll oftentimes become more conservative — and this may ultimately take a lot of the joy and passion out of being a business owner for some people.
What are the most common misconceptions about selling a business?
Selling your business is a complicated process, and you’ll need to take a lot of factors into consideration before the final sale. Some of the misconceptions on this list might seem like common sense, but it’s important to remember that selling your business is also a very emotional process, and therefore, you may not have the clearest mind when it comes to making this incredibly important decision. For this reason, you may want to hire a business valuation expert to help you price your business properly as well as negotiate with buyers on your behalf. Now, with that out of the way, let’s get into the most common misconceptions that come with selling a business below:
You don’t have to properly research the buyer
Your business is your baby! You probably shouldn’t hand it off to a random person and then wash your hands of it without asking any questions or doing any follow-up. One of the biggest misconceptions associated with selling a business is that you don’t have to properly research your potential buyers. However, this couldn’t be farther from the truth.
Some entrepreneurs feel that as long as they find someone who’s willing to buy their business, they can move forward with the sale without vetting the buyer. This is not a good idea. If you don’t do your research, you could end up selling to someone who doesn’t have the expertise or resources required to run your business effectively.
Selling is a quick solution
You shouldn’t assume that selling your business will be an easy way to get out of a difficult situation because it’s frankly not that simple. It’s also not a shortcut to financial success, so if you’re going into the process of selling your business with that in the forefront of your mind, you might want to take a step back and reevaluate. Selling a business requires a lot of careful planning and negotiation. As we stated previously, it’s anything but quick and easy and can ultimately have a major effect on your employees, customers, and stakeholders.
You shouldn’t bother anticipating changing markets
A surprisingly common misconception among entrepreneurs is that they don’t need to bother with anticipating market changes when going through the business selling process. Some business owners believe that all they need to attract buyers is a strong business model and that the market conditions don’t really matter. The truth is that you should absolutely anticipate changing markets before selling your business. Try to keep in mind that buyers will be looking for businesses that are able to withstand market changes. They’ll be even more impressed (and likely to buy) if you have a plan in place to adapt to certain market fluctuations.
You don’t need to prepare for tax implications
A lot of business owners think that they don’t need to prepare for the tax implications that come with selling a business. This line of thinking stems from the assumption that they can sell their business and use the proceeds as they see fit without worrying about the potential tax consequences. It would be nice if that were the case. However, if you fail to prepare for tax implications, you’ll likely have to face some unexpected costs. If you’re not sure how to prepare for tax implications during this process, consult with a tax professional. That should, at the very least, put your mind at ease!
The nonmonetary benefits don’t matter
Some business owners automatically assume that buyers are only interested in the financial aspects of their business (i.e., profits and revenue), so they don’t bother going over the intangible benefits that their business can offer the buyer during negotiations. This is an understandable assumption, but it’s definitely one you’ll want to unlearn. Most buyers look beyond the financial benefits of buying a company, as factors like the company’s reputation and potential for growth are just as important.
You can ignore employee rights during the transition
Your employees are a key part of your business, and it’s important to take your employees’ rights into account while facilitating the business transition. You still have responsibility and certain legal obligations to your employees even after you’ve sold your business. Remember, your employees are protected under the law, so you have to take their rights into consideration if you don’t want to run into legal issues. Your employees are human, and they deserve to have their rights respected throughout this process (it’s stressful for them too).
You can sell your business on your own
Some business owners feel like they can handle the entire process on their own. This is oftentimes the case when the entrepreneur doesn’t realize just how in-depth and complicated the business selling process can be. The fact of the matter is, selling a business involves a lot of emotional and personal investment, and this can end up clouding your judgment.
You may have a hard time separating yourself from your business because, after all, you’ve put a lot of hard work and dedication into building it. If you seek help from a professional advisor, they’ll be able to see your situation from an objective perspective as well as help you navigate your way through any especially complex legal or financial issues your business is facing.
You should hold out for the highest price
As a business owner, you might assume that you should focus on getting the highest price possible when it comes to selling your business. This assumption initially makes sense, but if you take the time to think about it, you’ll realize that this narrow-minded thinking might ultimately lead you to overlook important factors that can end up negatively affecting the success of the sale.
It may be tempting to rush into a deal with the highest bidder (a common mistake), but try to take it slowly. Before rushing into a deal, consider the buyer’s reputation and compatibility with your company’s culture and values. Otherwise, this person could end up turning your company into a completely different company altogether. You’ll also want to consider the fact that some potential buyers may offer you benefits like long-term support and strategic partnerships. You won’t necessarily get these benefits from buyers who are simply trying to throw a lot of money at you.
Some factors to keep in mind before you sell
Like most entrepreneurs, you’re probably constantly striving to achieve your financial goals. This also applies in regard to selling your business. You’ll likely have to audit your financials and make sure that you’ve got a strong executive team in place before moving forward. You’ll also need to consider how you time the sale, as that can make a big difference in the final sale price.
You’ll also want to put some serious time and effort into finding the right potential buyers. The buyer you decide to go with will impact the future success of your business significantly, which will impact everyone who’s involved. Finding the right buyer is especially true if you’re only selling a small percentage of your business, in which case you’ll want to consider the reputation of the potential buyer as well as the chemistry you’ve already built with them.
Misconceptions about selling your business: The bottom line
Selling your business can be a tricky process, to say the least. It’s definitely not something you want to go into without properly preparing and researching your potential buyers beforehand. Some of the most common misconceptions entrepreneurs tend to have when they enter into this process include lines of thinking such as “I don’t have to properly prepare” or “I can sell my business all by myself.” The main reason some business owners experience thoughts like this probably has to do with just how complex the business selling process is. It also tends to be an emotional process for most people.
Selling your business is scary because you can’t be sure that everything is going to go well. If you keep these misconceptions in mind, that should definitely help! If you’re thinking about selling your business, check out what Project Newport has to say about how selling your business can foster long-term growth.