Any small business owner in Houston preparing to sell a business wants to be successful in the transaction to ensure a smooth turnover while limiting profit loss. This phase takes preparation, just like the start-up. Recognizing the common mistakes we discuss below will help you avoid unnecessary hardship and loss when selling your small business.
Very often, sudden life changes are the catalyst for selling a business, which can leave minimal time for adequate preparation to sell a company. A proper business plan should establish a timeline that addresses the selling of a business. Plans to sell a small business should begin a couple of years before the actual process to allow you to present a solid business on the market.
To begin the preparation process, address these and other concerns that may present a concern to potential buyers.
If your small business requires staff for daily operations, surround yourself with competent employees, allowing work to continue in your absence. Dependable employees are invaluable. Also, adequately providing for their needs will help ensure their longevity with your business and facilitate a smooth transition to a new owner who feels confident in the team you have established.
A new buyer will want to review the financial operations of your business to assess profits, costs, binding contracts, and tax records. This documentation can support the value of your business and allow a new buyer to develop a fair representation of expectations.
Too Many Deductions
Every business owner strives to save money by taking advantage of tax deductions. However, when excessive expenses reduce the revenues of a business, a potential new owner may fail to see the business possibilities because it is masked by unnecessary excessive spending.
Every business owner benefits from taking a reflective look at the assets of a business and adequately valuing them to support the asking price of a company. Having documentation in hand will ensure that a potential buyer comprehends what they are purchasing and the cost to establish this business from the ground up.
To further support your asking price, a professional business appraisal will lend credibility while helping you set realistic expectations.
Misrepresenting a Business
To prevent future legal action, it is always essential to be honest about the state of a business. Profit exaggerations, providing misleading information about the number of clients a company serves, providing inadequate contract information that may apply to the lease of the physical structure of the business, or any information that leads a potential buyer to assume something different about the current state of a business can cost you in the long run.
Particularly in competitive markets, such as the one you find in Houston, failing to maintain confidentiality in the sale of a business can be extremely harmful. Several factors can work against you to decrease your sales potential.
Competitors Use This to Their Advantage
Local competitors understand the learning curve most new business owners will endure in acquiring a business. Capitalizing on the potential vulnerability of a business transition, competitors can increase their sales strategies to entice customers into their established businesses through heightened sales tactics and marketing.
Employees May Question Job Security
The uncertainty that comes with the sale of a business can place undue stress on employees, causing them to look for stability elsewhere. When a potential buyer becomes aware of changing staff, these red flags may be enough of a concern for reconsideration.
As word spreads about the potential sale of a business through a community, the stories that go along with the reasons for these actions can become creative and damaging. Keeping your business intact by preventing potential rumors is good business. A potential buyer could be on the receiving end of the scuttlebutt that slows or ends the sale of your business.
It can become far too easy to let services in a business decline during the selling process. Whether the seller is tired, the process has become too demanding, or there are other needs vying for attention, staff and customers notice these perceivable changes, particularly in an owner who was once fully engaged and excited about a business.
Mentally preparing to continue as a business owner will keep you mindful of sales, service, and growth potential. A thriving business is attractive to multiple buyers and can ultimately increase your profits. Keeping up with Houston business licensing and permit requirements ensures your business operations do not experience lapses.
Hanging on Too Long
Every business endeavor is subject to a certain amount of risk and experiences seasons of highs and lows. An owner should recognize standard business patterns and fluctuations to avoid panicking. But often, it takes fresh ideas to stimulate a business, and buyers will more likely be open to building on a business before it hits rock bottom.
If you have considered product and service viability, pricing strategy, and market appeal without success, hanging on may be futile. It does not mean you are bad at business, but maybe your current business is not the best suited to your skills.
Failing to Work with Professionals
To cut costs, business owners often forego professional help to save money, only to end up paying more than necessary. Working with a Houston business attorney is essential to business success, even in the successful sale of a business.
Failing to attend to details can slow or prevent the sale of a business. It is critical to be ready to act when a prospective buyer decides to purchase your business. What can a Houston business attorney do to help you sell your business?
- Draft, review, and modify any contracts
- Work as a liaison on your behalf with the buyer’s agents, attorneys, and financial institutions
- Discuss sales arrangements and potential tax scenarios
- Submit completed documents promptly to finalize the transaction as soon as possible
- Negotiate to ensure you receive a fair price and maximize profits
Work with Committed Houston Business Attorneys for a Successful Business Sale
The Houston Business Partnership Dispute Lawyers at Feldman & Feldman has dedicated years of work to counseling successful Houston businesses with sound legal advice given with a keen eye on the local market. We can take the stress off you and ensure a smooth transaction when selling your business is the best option. We value your trust in our legal guidance and will work alongside you throughout the sales process to provide a quality experience and develop confidence for future work relationships. Contact us to find out how we can help you with your case.