When you are looking to get a return on all your years of hard work and sell your business, there are a range of mistakes that many small business owners make when looking to put their business for sale.
Potential buyers are out there, but it is paramount as a seller that you take all the necessary steps to prepare your business for sale, and importantly for the potential buyers to see the future success to maximise your return and have a mutually beneficial sale.
When you are ready to sell your business, be careful not to make these two mistakes!
Be very aware of non-compete provision
When the time comes to put your business up for sale, depending on what type of business there will usually be a ‘non-compete’ clause in the contract for sale.
Known as a ‘restraint of trade clause’ in Australia, this clause is designed to protect the purchaser by preventing the vendor from opening up a competing business nearby.
Imagine this, you list your café up for sale, you negotiate the sale with the potential buyer, work through a broker and everyone is happy with the sale. Then, you open a café up across the street, take all of your regular customers, ‘goodwill’, and essentially compete directly with the café that you have just sold to the new business owners for a profit.
Regardless if you use a business broker or not, any legal representative or business owner would most certainly include a restraint of trade clause, including a time frame, geographic catchment or location as well as the products or services included within that restraint in any contract for sale.
However, if you were to open a shop up across the road that did not compete, such as a clothing or book store, then you are in the clear.
It is important to remember that when you are looking for potential buyers to purchase your business, it is vital that you go in with the best intentions for you to make a profit and for the new business owners to enjoy the success that you once did as the previous owner of the small business or enterprise.
Overconfidence can cause you to under-prepare
Often small business owners look at their own business when they are looking to put them up for sale through rose-colored glasses. What they feel the business is worth, how much negotiation power you actually have as an individual and what you understand about your business may under-prepare you for negotiations.
For this reason, it is essential to employ the services of a business broker. Brokers are specialists in bringing together buyers and sellers and are specialists in providing you with a detailed checklist of all the items you need to prepare such as financial statements, business plans, marketing plans, budgets, intellectual property and more.
Getting an independent, third-party evaluation through a broker can not only achieve this but also it can avoid common mistakes as well as achieve up to 10-12% more on your sale price!
Through utilising expert advice, you can avoid a great deal of unnecessary downtime in preparation for your business sale, ensuring that your cash flow is consistent, you a well prepared to meet with ‘real buyers’, not tyre-kickers and you maximise your sale price in a timely fashion.
Selling your business doesn’t need to be a stressful ordeal, that is why third-party consultants and brokers ultimately exist – to allow you to do what you do best and ensure that their area of expertise.
Whether you need accounting, business planning or legal broking – all of these services are essential to help sell your business.
Author: Hayley Clark
Hayley Clark is a content writer born and bred in New Zealand. She has been writing, editing, and working in the industry for over five years, for a myriad of companies, including Virgin Money, Thrifty, Destination New South Wales and Michael Page.