Business owners who put their businesses up for sale may be aware of the more common mistakes they can make -- for example, assuming that a potential buyer will pay twice what the business is actually worth or thinking that a buyer will be satisfied with a profit and loss statement compiled by the owner at the last minute. However, there are some mistakes that sellers make and may be completely unaware of.

One mistake that often occurs is neglecting the business once the decision to sell has been made. It’s very easy to let things slide. Sellers are human and, like most people, assume that their house, car or business will be in such great demand that it will sell immediately. It is easy to neglect a business if it is going to sell right away. Unfortunately, a quick sale rarely happens. Neglecting the business can take many forms: not replacing a light bulb in a sign, opening late, closing early, not ordering inventory to restock emptying shelves, etc. Two things can happen as a result of neglect, and neither are good -- sales go down and buyers interested in a second look notice the neglect.

Another uncommon mistake is not really being ready to sell. Selling is a big decision and one that should take a lot of thought and consideration before going to market.

However, once the decision is made, a seller should be ready to accept the price that the marketplace is willing to offer. Business intermediaries can usually get the best price possible for a business, but they are not magicians. Business owners may set the price, but the market determines it.

A third uncommon mistake involves confidentiality. Many sellers want their business sold, but also want to keep the fact that it is for sale completely confidential. That’s pretty hard to do. The statement is made so often to a business intermediary: “Sell my business for top dollar and do it tomorrow, but don’t tell anyone it’s for sale.”

Probably the biggest uncommon mistake sellers make is thinking that they can sell their businesses by themselves. A professional business intermediary can make all of the difference because of their acute awareness of all the mistakes a seller can make when it comes to selling what is usually the seller’s biggest asset. An intermediary can help in pricing the business properly, reminding a seller about not neglecting the little things that make the business unique, and maintaining confidentiality as much as is possible. Most of all, a business intermediary can generally help a seller get the highest price possible and in the shortest amount of time.

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Who is the Serious Buyer?

Successful business intermediaries find out the answers to the following questions from a prospective business buyer:

• Why are you considering the purchase of a business at this time?
• What is your time-frame to find a business?
• Do you have an open mind about the types of businesses to consider, or are you looking for a specific business type?
• How much money have you set aside to invest?
• Are you comfortable with being in business for yourself?

The above questions qualify a prospective buyer, but the real key is whether he or she can make the “leap of faith” so necessary to purchase a business. There is no such thing as a “sure thing” business. No matter how much due diligence a buyer does, the degree of success is up to the new owner. And, no matter how qualified a buyer may be, they have to be able to have the courage to actually buy, and run, a business.

Serious buyers:

• have the necessary funds that are readily available.
• can make their own decisions.
• are willing to consider different types of businesses.
• have a genuine need to purchase a business.
• have a reasonable time-frame in which to buy a business (within six months).
• are cooperative and willing to listen.

The professional business intermediary is experienced in interviewing and qualifying potential buyers. They will only show a business to a serious and qualified buyer so that business owners will only have to meet with buyers who are genuinely interested in their business. As a result, the chances of a breech of confidentiality are also reduced.

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Do You Know Your Customers?

It’s always nice when eating at a restaurant to have the owner or manager come up and ask how everything was. That personal contact goes a long way in keeping customers happy and returning. It seems that customer service is now handled by waiting on a telephone for what seems like forever with a recording telling you that your call will be handled in 10 minutes. Small businesses are usually built around personal customer service. When is the last time you “worked the floor,” handled the phone, or had lunch with a good customer?

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What Does A Buyer Really Expect?

When it comes right down to it, the following items are really what a buyer expects from a seller.

Financial statements. A close review of the financial statements is imperative to verify the authenticity of all the items, particularly inventory, receivables, and payables.

Assets. The buyer wants to be sure he is gaining full title to the assets, particularly as it pertains to items such as intellectual property and patents. Also, the buyer wants assurances that the machinery and equipment are in good working order.

Taxes. Not only is it critical to verify any tax liability if it is a stock purchase, but in the case of an asset purchase, the owner wants to be sure there are no liens on assets due to failure to pay taxes.

Employee relations. Employee contracts and employee benefits are important even if it is an asset sale because a new owner who knowingly, or unknowingly, takes away an employee’s privilege walks into a hornet’s nest.

Environmental. Many transactions in today’s merger and acquisition business are being negated because of environmental liabilities. Leasing the premises instead of buying the property does not free a tenant owner from responsibility for any contamination caused before his or her arrival.

Pending and potential litigation. This becomes a bigger issue with a consumer product company just by existing in our litigious society. The seller will want to place a time period or cap on his or her total responsibility. Usually, the buyer ends up sharing some of the risk for previously made products.

Authorization. To sell the company from stockholders, directors, or third parties such as banks, the owner will require authorization. He will be expected to ensure to the buyer that: all liabilities are represented; all contracts are disclosed; all wages, taxes, and insurance are current; and all bonus plans are disclosed.

While most of the burden for representations and warranties is on the seller, the buyer may be required to warrant that the acquisition does not violate their loan agreements or, if stock is to be used, that it is properly authorized. Obviously, if the transaction is a stock sale in which the buyer assumes all the assets and all the liabilities, the representations and warranties are more lengthy and complex. Often the buyer is only willing to undertake a stock transaction based on the tightness and thoroughness of the representations and warranties.

The following advice from Nelson Gifford describes what a buyer expects from a seller. As former CEO of the Dennison Manufacturing Company, Gifford was involved in more than thirty-five transactions.

“Everything you know, you told us.
Everything you told us is true.
Everything you didn’t know, you should have known.”

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Increasing the Selling Price of a Business