What have you been working toward as you grow your online business? If you’re like many entrepreneurs, you’ve toiled day in and day out to grow your business, so that you could maximize your return on both your financial and time investments and make as much as possible when it comes time to one day sell your business.
Entrepreneurs who are working now with their eventual exit in mind may be dismayed to know that selling a business isn’t always the surefire process that they believe. A study done by Pepperdine University found that more than half of all hopeful sales of small and medium sized companies with revenues of $2 million or less are never completed.
While sometimes online businesses fail to sell due to circumstances beyond the business owner’s control, sometimes, problems with selling a business are directly related to the business owner. Here are three mistakes to avoid if you want to ensure a successful sale of your online business:
1. Pricing Your Business Too High.
You have invested more than just money in your online business. You’ve also put tons of time and energy into growing it. Just as a parent always sees his or her child as the top performer in a group or among the best in a given area, many small and medium sized online business owners see their businesses through rose colored glasses. Often, they price their businesses based on the idea of how much money they could make in the future or how much the business feels like it’s worth to them emotionally. Unfortunately, buyers do not have the same attachment to a business that business owners do. They’re not willing to pay for what could happen in the future or to pay a premium for love and time invested in a business. As a result, setting a business’ price based on emotion rather than financials can make it virtually impossible to find a buyer.
2. Not Having Organized Financials.
Most online small business owners aren’t financial experts and don’t really know what’s necessary to provide a complete and accurate picture of their business’ health. In some cases, few financial statements may have been prepared in the past, leaving very little information to present to a prospective buyer to convince them of the value of a company. Experts recommend having complete financials professionally prepared at least three times every year throughout the life of a company. If you haven’t been doing that, make sure you work with an accountant to get financial statements drawn up before you begin to actively consider selling. Otherwise, you’ll have a hard time demonstrating the value of your company.
3. Waiting Too Long to Initiate a Sale.
As previously mentioned, buyers want to buy a business based on the possibility of success tomorrow. While buyers do want to invest in companies that have the potential to grow, they want to see that businesses are currently viable. The best indicator of current stable financial health is steady sales or sales that are continuously increasing. Many small business owners tend to not be interested in selling when their businesses are doing well and only begin to think about selling after success starts to wane. This can end up making it very hard to sell, particularly for a price that is appealing to sellers. The better choice is to begin looking for a buyer during times when your business is in a period of sales growth, and you have financial statements prepared that verify this strong performance.
While there is a lot that a business owner can do to positively influence a sale on their own, many online business owners find that the best way to ensure that they get a fair price and have a seamless sale is to enlist the help of an online business broker. An online business broker can help you set the best price for your business, ensure that your financial statements are complete and in order and even help you decide if it’s the right time to sell at the present moment. Plus, an online business broker will do the leg work, finding prospective buyers, vetting them and facilitating the sale from the negotiation process onward. To learn more about the services of an online business broker, contact us today.