Be Flexible When Selling Your Business

Every successful entrepreneur desires to obtain top dollar for the value of his/her enterprise. They’ve spent the time working it and slaving over it. And many entrepreneurs have a good idea, or at least think they do, of the tangible and intangible assets which are housed in their business. Because of this many business owners make assumptions about what their business is worth and what type of sale price they should obtain when it comes time to sell the company.

Sometimes they under-predict the value and sometimes the value is grossly over-predicted (which is more often the case than the former). In addition, Type-A personality business entrepreneurs can often have a hard time being flexible on a number of aspects during the sales process. The key to being flexible is coming into the transaction with the right expectations. The following will give an idea of how this can be done effectively.

Being Flexible on Business Valuations

When it comes to the worth of your business, no one—and I mean no one—can question your dedication. That may be one of the primary reasons you went into business for yourself in the first place. However, many business owners may not rightly know the proper valuation of their company and all of the tangible and intangible assets associated therewith. Whether an entrepreneur has a skewed view in a favorable or unfavorable way, it does not matter. What is important is that the owner be flexible when going into preparation for the business valuation.

Once a proper valuation has taken place, both seller and advisor should be in agreement and see eye-to-eye. Proper preparation in the planning and valuation stage is essential. Make sure you are at least somewhat flexible on price.

Hopefully, you have the luxury of finding that right strategic buyer who is willing to pay more than the book value for your company. If you find this to be the case, count yourself lucky. However, if fate does not smile upon you that handsomely, then you may have to wait. Downgrading below what your broker has stated however, may not be wise either, especially if you have the time and are not in a rush to sell.

*Side note: Many business brokers may downgrade your business to sell it quickly. Sellers beware. Make sure the broker is not too hasty when it comes to the preparation, valuation and sale of your company. While you need to be flexible, make sure the M&A advisor you decide on is thorough and fair when it comes time to value and put your business up for sale. Much like a real estate agent, don’t allow an advisor to leave any money on the table because they simply want to go through with the deal. This type of behavior is simply uncalled for and unethical.

Flexibility With Deal Terms

Of course you would like an “all cash” deal. That is ideal. Everyone who sells their company will want to get a premium for the business and have it paid in cash. Unfortunately, that is not the reality for every sale. In most instances, there can be a combination of arrangements which will need to take place when the transaction itself takes place. If buyers are too rigid here, they can miss out on a good deal which could be helpful, but which may not be cash.

Be Flexible on a Buyer

When it comes to selling your company, it is like letting your daughter get married to the right suitor. It can be a very emotional experience. Handing over the keys to the Bentley to the next owner can cause some entrepreneurs a great deal of frustration and even some rigidity.

For instance, some business owners want to find the right buyer who has the very best fit for the business itself and its customers. While we do not advise taking all emotion out of the process, we do advise to determine to be less picky when it comes to a buyer. Some businesses, such as dental practices can require a bit more of a search to find the proper replacement as many patients and/or clientele have an emotional bond to the owner of the business and the company may need a similar figure going forward. For the most part, however, emotion should be assuaged and the decision should be based more from the numbers.

*Side note: this is not generally a problem, because most owners are fine with just getting top dollar for their enterprise. There are some limited examples where sellers tend to become a little picky on the buyer.

Be Flexible on Time

I will make this short and sweet. Valuations take time. Finding and courting buyers takes time. Finalizing the deal takes time. Being flexible and patient throughout the entire sales process and all will work out just fine. If the deal is right for you and your business it may take between 6 to 18 months from start to finish. So, don’t get nervous about selling. If you truly own a business that has real economic value, there is a buyer out there who will certainly want to snatch it up. Having the right network of people in place to find a buyer is extremely important.

Begin Now

While you may not be ready to sell your business today or even this year, it is best to start courting business brokers early in preparation for your timely exit from the company. If all of your sales documentation is ready to present when the market is at a high point, you will be able to sell your business for its highest possible price. Begin now, prepare early and discuss options with an advisor today.

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Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC which includes InvestmentBank.com and Crowdfund.co. Nate works works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He is the chief evangelist of the company's growing digital investment banking platform. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Nate resides in Seattle, Washington.
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