5 months ago, Jane decided to sell her business - but it hasn't gone very well.
Jane decided to sell her coffee shop after operating it for the past 12 years. Jane hadn't put much thought into selling, as she always thought her General Manager would buy the business. But this assumption turned out to be wrong. For one, her Manager didn't have the money to purchase the business. Second, after 12 years, her Manager was also ready to move on from the business. Jane started to worry, as she didn't have a back-up plan to sell the business.
Not knowing what to do next, Jane approached a few of her customers - but they weren't interested. Reluctantly, Jane even asked her local competitor (they weren't interested either).
Out of options, Jane put together a short 'business-for-sale' ad on Craiglist and Kijiji.
Buyer inquiries were exciting, at first, but Jane soon realized these weren't serious buyers. As most of the time, the Buyers would go radio silent and never get back to her. Other Buyers would ask for a laundry list of information about the business. These lists would include information ranging from tax returns to supplier lists (which Jane wasn't 100% comfortable sharing). Compiling this information would take hours, only for the Buyer to decide it wasn't a good fit.
After 5 months and countless hours wasted on non-serious buyers, Jane was exhausted. At this point, Jane decided her business was unsellable and held a 'going out of business' sale.
While unfortunate, Jane's story is the reality for 80% of business owners. Does this mean 80% of businesses are unsaleable? Of course not. But 100% could do a better job of marketing the sale of their business.
Below are a few ways to avoid Jane's mistakes.
Common mistakes to avoid
Much of Jane's pain and misery is due to 3 common mistakes:
- Not having a marketing plan in place
- Being unprepared
- Not establishing buyer trust
Not having a marketing plan in place
A common misconception is those small businesses are only bought by local buyers. When in reality, buyers can come from anywhere. For example, look at the different countries our DealBuilder buyers are from:
So how do we grab the attention of a global marketplace? Start by writing a compelling business-for-sale listing for your ideal buyer.
This is worth underlining: you are marketing to a global buyer pool. These are people who might be unaware of your business, city, industry, etc. Your job to educate them and paint a picture of the opportunity.
The next mistake is being unprepared to sell your business. Think about it this way, a majority of people spend decades building their business, yet only spend a couple of hours planning to sell it.
Here's a few examples of how not to do it:
- Carelessly writing and posting an ad on Kijiji, Craiglist, trade magazines, etc.
- Remember that first impressions matter. So make sure that you are confident in your presentation from the moment you list your business. As the perfect Buyer could be the first person to see the listing.
- Selecting the cheapest 'business-for-sale' sites vs. the most credible sites
- While it may seem less expensive, you may end up spending $30/month for 12 months on a bad site vs. $80/month for 2 months on a good site.
- Not having your financial statements prepared by your accountant
- This is a big one. Put yourself in the shoes of a Buyer, would you invest $100,000+ in a business based on a strangers word?
- Not having a buyer presentation prepared
- Paint a picture for the Buyer. What will their job look like? Will they be working 10 hours a week or 80? All these details matter.
- Not being willing to disclose financial information, even after the buyer signs an NDA
- We see this happen a lot. A business owner is 'open' to selling their business (at the right price). But they aren't willing to show the Buyer their books. This doesn't make a ton of sense as you are going to have to show them your books at some point. Even worse, it looks like you are hiding something.
Not establishing buyer trust
You build trust by providing transparent, accurate, and relevant information to a buyer. But it is providing relevant information that is most often overlooked. Hint: your preference for Sage or Quickbooks won't kill a deal, but your misleading financial statements could. Focus on what matters most to the Buyer. Start by asking them what about your business caught their interest and focus your conversations on those attributes.
Want to implement the strategies in this article? Get started with DealBuilder.
DealBuilder is our DIY software helping demystify the business-for-sale process for owners looking to exit their business. You can learn more about DealBuilder here.