DEAL – KILLERS TO AVOID WHEN SELLING YOUR BUSINESS (PART 2)
Covering Up Problems
Almost every buyer or his/her business broker will conduct a due diligence investigation. If your business has undisclosed problems, chances are they won’t remain invisible to the buyer and if the buyer discovers business problems you have failed to mention, the logical next thought is, what else is lurking in the dark corners?
On the other hand, if looming risks do escape detection, they’ll likely rear their ugly heads after the sale which could cause problems. Remember honesty is the best policy.
So if your business faces risks, reveal them early on, along with your plans for dealing or overcoming the situation.
Stretching the Truth
There’s a fine line between promoting your business as a good purchase opportunity and exaggerating the opportunities that await a new owner, the line, however fine, is one you can’t afford to cross over.
Playing fast and loose with facts and projections puts your sale in danger on two fronts:
First a smart buyer can see through hype that isn’t backed by facts and supported by financial statements reflecting your claims. If a buyer thinks you are being less than frank or unreasonably grandiose about your business’s condition, red flags will raise and the buyer will probably walk away.
Second, most purchase and sale agreements include a section called “representations and warranties’ in which the seller promises that information provided is honest and accurate. Exaggerating your business’s health gives a buyer an excuse for defaulting on loan payments if the business falters and the buyer can prove that you misrepresented facts.
When it comes to forecasting the future, heed all cautions that your attorney advises you to take. These will likely include being frank about risks your business faces and how you’re addressing them and being upfront and honest about business liabilities and how you’re working to clear them. Also be frank as to the reasons you’re selling the business.
When describing your business’s future, be careful to present projections not as promises but as best-estimate forecasts based on documented current business trends.
Taking Your Sweet Time When Communicating with Buyers
If a buyer expresses interest in your offer, reply immediately. The majority of sales start with internet searches and online shoppers expect the kind of rapid-fire response that e-mail has trained us all to expect. If you make prospects wait days or more for a reply, you’ll probably lose them altogether. So check your email daily, even if most days you don’t get any bites; when you do get one, respond to potential buyers, pronto.
After you make contact, keep communications moving. If you promise to provide information or promise to check out a price or payment structure with your accountant, say when you will be back in touch and don’t miss your deadline. Especially if the request has to do with deal structure or with business financials or legalities, the longer you take to respond, the more the buyer’s apt to think you’re trying to solve or avoid a problem. That why in the arena of business sales, the word is that delay kills deals.
It is much easier to hire a reputable business broker such as TBAC, especially when your business eats up the hours in your day and you can’t give adequate attention to your sale.
Waiting Too Long To Qualify the Buyer
You may think you will scare prospective buyers away if you start asking for things like confidentiality agreements and financial background too soon. The opposite is more likely to be true. If you hand over information on your business without a confidentiality agreement, or if you respond in detail to buyers who haven’t proven their financial ability to purchase your business, you’re more than likely telegraphing the fact that you care more about unloading your business than about moving it into good capable hands.
Just about the only prospects who’ll object to buyer-qualification requests are those who aren’t qualified. Better you rule out such respondents early on, before they can divert your attention away from other, more capable prospects.
Refusing to Negotiate
Negotiating doesn’t mean giving away the farm. It means listening and weighing up every serious offer, both in terms of the price and the way the payment is structured.
Should you be considering buying or selling a business in Pattaya contact TBAC first on 087 283 5349 or email [email protected] or visit our website businessbrokersasia.com We look forward to receiving your enquiry. TBAC mission statement – ‘Buying the right business: Your vision, our goal’