Importance of Owner Flexibility When Selling a Business
Selling your business will most likely be among the most complicated transactions you will ever be involved with. It will take a lot of time and preparation to get the business ready to put on the market, and it could take several weeks or perhaps months to find the right buyer. In the current economic environment in 2021, businesses are selling faster in most industries, so that is good news if you are considering selling soon.
One of the keys to a successful business sale is having the right mindset. Of course, this type of transaction will require patience. Rarely does the perfect buyer come along overnight, and you need to be prepared for a significantly longer and more complex sales process than transactions like selling a residential home, for example.
Flexibility is another attribute that business sellers need to have. Business buyers do not always have to secure the financing needed through conventional means, and they are not always ready to take the business over completely on day one. But even if they fall short in these areas, this does not necessarily mean that they are not qualified buyers. Therefore, it is very important to stay flexible.
Flexibility on Price: A major part of being flexible in a business sale is leaving room to negotiate on price. The initial price you set for your business of course largely depends on a lot of specific factors. A professional business valuation is a good starting point, but you also need to look at the current market conditions for other similar businesses for sale.
This is one of the areas that working with an experienced business broker can really pay off. A business broker will help you determine the right price to set when your business goes onto the market. Going into the transaction, you should have a price range in mind, with the high-end being your ideal price for the business, and the low-end being the least amount you are willing to accept to make the deal.
Flexibility on Terms and Conditions of the Sale: In addition to the price of your business, it is also good to be flexible on some of the terms and conditions of the sale. For example, maybe your ideal buyer cannot secure all the financing on their own, but they would be able to make the deal if the owner financed a portion of it. This may or may not be something you are willing to do, but if you are willing to self-finance, it could open the door to a larger pool of buyers, which might help you get a higher price for your business.
Another thing a buyer might want is for the owner to continue working in the business for a period. This makes buyers more comfortable as they take over, and it helps ensure a smoother transition. Again, you may or may not be willing/able to stay on with the business, but if you can, this could be very helpful in getting the deal closed.
Willingness to Compromise When Selling a Business: As the previous points illustrate, business sellers need to be ready to compromise in some areas of the transaction to make the deal. For example, if you want a higher price, you might need to be willing to self-finance. If you need to sell the business fast and that is what is most important to you, then you should be ready to come down some on the price.
The important thing here is to set proper expectations when you put your business on the market. Negotiations are a give-and-take, and we cannot expect to get everything we want without giving up something in return.
Speak with your business broker and come up with a list of “must haves” as well as a list of areas wherein you are willing to compromise. Clarifying these things ahead of time will allow your broker to better serve you during this transaction and put you in a position to complete a successful sale.