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Do Not Sell Business on Your Own

Selling a business on your own is not a very good idea. This is the reason you might not have seen many "Business For Sale" signs in the streets or ads. This is because selling a business by ad or word of mouth threatens the business' reputation and future and destroys its goodwill. Selling a business is a complex situation and needs confidentiality to be maintained.

If you try to sell business of your own, you might make lot of mistake with respect to finding correct contacts, genuine buyers, accounting, law, taxes and marketing. Also, you might not be able to maintain the level of confidentiality required to prevent the current damage, if the news of your business in on the verge of getting sold spreads in the market.

Selling a business is not an easy task and the primary concerns in selling a business are listed below:

  • Confidentiality – The most important aspect of selling a business is confidentiality. It has to be maintained throughout the selling process as if it comes to light it will impact the business in a negative way. The correct time of disclosing the sale is when all paper work has been done and the sale is to be closed.

  • Negative Impact on Customers, Employees, Suppliers & Bank – If customers, employees, suppliers and bank gets the wind that your business is in the market, then your business is set to see the biggest setback in terms of losing customers, employees, suppliers and bank benefits. No customer or employees want to work with business which might be sold any moment leaving them midway with unemployment crisis. Customers tend to move to your competitors and employees would start looking out for jobs. All these will affect your business drastically bringing down the profit margin and also the market standing. In such a scenario you might not be able to find a prospective buyer who would be willing to pay a reasonable price for your business.

  • Professional Help – Whenever you want to sell your business, it has to be done in a very secret manner through a professional agent or agency. You can find a reputed broker through referrals from fellow professionals, accountants, attorneys, small business lenders and others who have used brokers previously.

To conclude, businesses should be sold in a very professional manner maintaining all secrecy for maximum profit. If you try to sell business of your own you might lose lost customers, vendors, or employees which will impact the sale.

Another issue often overlooked by a small business owner is whether they have too much of their sales from one big customer. Having one big customer may seem like a good idea at the time, but could result in financial ruin for the small business owner if that customer falls on financial hard times. A potential buyer will look at a business with only one big customer as more of a risky business even if the customer gives a good boost to the bottom line as reflected in the income statement.

A buyer is also interested in knowing that there are "people infrastructure" in the business that will handle the day to day once the small business owner is no longer running the business. If there is no one else, a potential buyer will assume that customers may leave or a lot of the knowledge about the customers and the business that the small business owner has will leave with them. This causes the business to be worth less to the potential buyer.

It may take six months to two years or longer to sell the business. Prior to that time, the small business owner may wish to hire a broker and seek financial advice from their tax attorney or CPA about the best way to structure the deal to obtain the best tax result for the small business owner. It is important for the small business owner to plan ahead to obtain top dollar for their company.