Selling your business does not always go smoothly from beginning to end. There may be breakdown points during the negotiation. It may seem as though talks are done, but this may just be an opportunity to regroup, research and reorganize. Do not give up on the process!
If you are a supermarket or convenience store owner whose deal is falling apart, let’s look at how to overcome challenges in selling a business.
Business valuation expectations and disputes
As a seller, you will likely overprice the value of your store. Your buyer will come into the negotiation with a much more sober perspective. His price will likely be based on hard numbers – cash flow, profitability and ROI, to name a few. Do you have these numbers ready to back up your position? If you can’t present a well-backed up market valuation, your buyer may not see eye to eye with you. This is a killer if you are looking to transfer ownership.
You can avoid this problem by quantifying all your valuation claims with hard numbers.
If you are currently in a gridlock with a buyer because of a valuation issue, ask your buyer what his metrics are and get a business value based specifically on those metrics.
State of the business
If your paperwork is shady, you can forget any intelligent buyer doing business with you. Dealing with expired contracts, flawed administration and operations that are below industry standard cut into profitability. If there is too much cleaning up to do, your buyer will move on a business that is more readymade.
You can avoid this problem by keeping your business in a good state until the day you sign paperwork to sell it.
If you know that your business is currently out of compliance or substandard, spend the money to bring everything current and add the expenses to the asking price.
Lack of transparency
You need to be as honest as possible when representing your business. You may score a sale by lying, and you may also score a lawsuit soon after that. Poor record keeping is as good as a lie, so do not use poor administration as an excuse. The result is the same as being purposefully untruthful. If your buyer catches you in a lie during the negotiation process, then he may not pick up your calls after that.
You can avoid a lack of transparency by simply remembering that your ethics help to protect your negotiation, not hinder it.
If you are currently facing accusations of a lack of transparency, move to show that you are an honest businessman through opening the books – perhaps submitting the business to a third-party audit.
Lack of commitment from both parties
If you are not completely ready to sell, then you will drag your feet as soon as the buyer gets serious. Conversely, some buyers are perpetual window shoppers. One of you is going through the motions and wasting time until someone comes clean. A lack of commitment from only one side keeps both parties from their stated goals, and there is no reason to do business if this is the case. Someone is definitely losing money in this situation, and it might be you.
You can avoid a lack of commitment on your part by preparing a financial plan outside of the business, and on your buyer’s part by requiring security deposits from prospects before you allow inspections.
If you currently think that you or your buyer is simply dancing around a sale, cut off negotiations immediately and stop wasting each other’s time.
You may tire of negotiations if you sense inflexibility from your buyer. Your buyer may tire as well if you cannot provide justification for your demands. Inflexibility is the opposite of negotiation, and it should be avoided at all costs.
Avoid inflexibility by ensuring that you stand on numbers, not your gut feeling, and require that your buyer justify all of his demands with numbers of his own.
If you are currently locking horns with your buyer and neither of you is moving, find one issue that you can agree on and have a conversation about that first.
Make the most of selling your business by investing in professional help. You do not have to know everything about keeping the business sale transaction flowing smoothly – this is why negotiations usually involve financial, business and legal consultants at every stage.