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Mistakes that Sellers Make whebn considering selling thier business

The Ten Most Frequent  Sellers Mistakes *

1. The owners do not understand the value of the business:

Most owners of closely held businesses have suppressed profits to 
reduce taxes. The company's financial statements don't begin to 
reflect the true value of the business. The actual financial statements 
need to be restated to eliminate the owner's discretionary and non-
recurring personal expenses. Attention also needs to be drawn to 
"off-balance sheet assets," tangible and intangible. Historical 
financial statements don't tell the real story.

2. The owners have an unrealistic price in mind:

Recent surveys indicate that few companies have a current, 
accurate business valuation. Half of the time owners are 
unrealistically high in their asking price, and the other half of the time 
they are low. Whether you think its worth $5 million or $50 million, 
without a professional opinion for reference purposes, you can't 
begin to discuss or justify a selling price that makes sense.

3. The owners do not understand the investor's motive:

Rather than emphasizing the business's growth potential, they dwell 
on past performance. Investors are looking to the future for return on 
investment and growth potential. “BUYERS DON’T BUY WHAT THE 
SELLER THINKS HE IS SELLING”

4. The owners do not have proper counsel:

Talk with business owners who made an ill-fated attempt to sell their 
own business. Most wish they had used an experienced 
intermediary. Without professional help, they are prone to taking 
advice from the wrong people.

5. The owners try to sell to the wrong people:

One of the biggest mistakes is to think that the best investor for the 
business is a competitor, customer, supplier, or employee. If the 
deal doesn't happen, and most don't, then a great deal of 
confidential information about your company has been disclosed. 
Suddenly, everybody knows more about the company's profits and 
operations than they should. Keep your intentions confidential unless 
you're ready to sell at a rock-bottom price.

6. The owners assume the best investor is local:

Most sellers naturally assume that the market for their business is 
the immediate surrounding area. The world is now your marketplace 
and the best investor may be anywhere across the country, or 
around the world. Thousands of very quiet private investment groups 
and offshore investors are interested in acquiring profitable, U.S.-
based, privately held companies.

7. The company is not positioned for sale:

Organization, growth opportunity, reputation, market conditions, and 
industry leadership, are some of the many intangible qualities 
investors appreciate. Documenting improvements that could be 
made by an investor with new capital helps you to better position the 
company and increases value. There can be a swing of 50% or 
more in sale value if the company is solidly positioned for future 
growth.

8. There is improper documentation:

Investors are evaluating the purchase based primarily on future 
growth potential and expected return on investment. They want to 
see what the profits would have looked like if you had run the 
business like a public company. They also want you to prepare 
three-to-five-year pro forma financial projections, backed by solid 
market research substantiating the future potential of the business. 
Simply stated . . . create a presentation to explain the past and sell 
the future!

9. The owners do not plan for the sale:

Many business owners have not thought about what their real 
personal financial needs will be. If you're willing to wait for some of 
the payments, the investor has more flexibility to pay a higher price. 
If you insist on an "all-cash" deal, savvy investors will discount their 
offering price by 35% or more!

10. Don't be the first to mention price:

One cardinal rule of negotiating is to never be the first one at the 
table to mention price. An experienced acquirer who sees the future 
potential may have a higher price in mind. Value is very subjective. 
You will always regret "leaving money on the table" if you make this 
pricing mistake.
Published Monday, December 06, 2010 7:18 AM by Pete Harrison
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Comments

Saturday, December 30, 2017 1:21 PM by Benjamin Martinez

# Nice post

I agree. These are the mistakes seller make and even http://www.eessayontime.com/ wrote the same mistakes as you did. I hope that the sellers learn something from this post haha.

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