Common Pitfalls When Selling Your Business

19 Jan 2023

When it comes to selling a healthcare business, there are a number of challenges and pitfalls that owners can face. These can make the process difficult and time-consuming. In this article, we talk about some of the most common issues that we see business owners encounter, and provide tips on how to overcome them.

 

Misjudging the value of the business

It is common for business owners to undervalue or overvalue their business. This is usually because they don’t have the knowhow to ascertain its value, or because they have unrealistic expectations. Undervaluing the business can lead to a quick sale, but it also means that the owner is leaving money on the table. Overvaluing the business can make it more difficult to find willing buyer and drag the sale process out. To avoid this pitfall, we recommend getting a formal business valuation from someone who understands the valuation methods and your market. This is typically a specialist broker or accountancy firm.

 

Being unprepared for the sale

Another common mistake we see owners make is failing to prepare for the sale of their business. This typically includes having inaccurate financial records, no contracts in place, and a general lack of procedures. If you are working

Before putting the business on the market, it’s important to spend some time getting your affairs in order. If you are working with a good broker, they will likely be able to identify which areas need addressing. If you are considering a business several years in advance, find a good mentor or business coach to help you prepare.

 

Not marketing the business effectively

The key to a successful sale is reaching the right buyers. This means marketing the business effectively, which can be extremely difficult if you don’t have the right experience or networks. This is where a good business broker adds a lot of value. They will know how to present your business and where to advertising it. However, it’s important to work with a broker that understands your business sector.

 

Being unrealistic about timing

We dread receiving an enquiry that starts with ‘my lease is due to run out in a couple of months, can you help me find a buyer?’. Assuming a business will sell quickly is a mistake and often leads to a below market value sale. It is not uncommon for a business sale to take a year from start to finish. Finding the right buyer takes time, and it’s important to be realistic with the time scales involved.

 

Refusing to negotiate

Some owners have a predetermined price and deal structure in mind and are not willing to budge. Achieving a fair outcome is important but refusing to compromise at all can make it difficult to find a buyer and close a deal. It’s important to be open to negotiation and to work with a broker or solicitor who can help you navigate the process.

 

Engaging with a limited number of buyers

Starting with a large pool of buyers will maximise the chances of a successful sale and ensure you achieve the best outcome. Failing to reach out to enough buyers can limit your chances of finding the right match and leave you with nothing to benchmark offers against. It’s crucial to cast a wide net and engage with multiple buyers to ensure the best possible outcome for your business.

 

Clocking out too soon

Sellers often make the mistake of mentally checking out of the business once a buyer has been found, which can lead to problems during the due diligence and completion process. If the business performance drops significantly during the lead up to sale, the buyer may change the terms of their offer or worse, pull out of the deal. It’s important to remember that it’s your business until the deal completes and to remain engaged until the end.

 

Focusing on the ‘operational aspects’ and handover rather than transaction

This is very common in unexperienced sellers. We often see business owners get caught up in the details of how the business will be run after the sale and neglect the transaction. It’s important to work with the buyers, their solicitors, your solicitors and your broker to ensure you know what is needed from you to get the deal to the finish line.

 

Informing staff too early

Finally, telling your staff about the sale before too soon can lead to uncertainty and instability, which can impact business performance just when you want everything to be operating smoothly. It’s important to keep the staff informed, but only once the sale is finalised.

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