Preparation

Motivated to Make a Deal – Consider Your Objectives When Selling Your Small Business

Story Highlights

  • Knowledge is power
  • The Future Of Possible
  • Hibs and Ross County fans on final
  • Tip of the day: That man again
  • Hibs and Ross County fans on final
  • Spieth in danger of missing cut

There can be many reasons for selling your small business. Motivations to sell can range from personal to professional. Your business may no longer be the right fit for your lifestyle, interests or current state of health. Alternatively, your motivation might be professional concerns such as declining sales or unmanageable growth. You will need to identify your main motivation for selling your business and build a sales strategy accordingly.

Mingling Motivation and Sales Objectives

Your motivation will determine your top sales objectives. What do you hope to achieve from the sale? Understanding the priority of your motivations will help you get to the desired outcome and set your strategy to get there. 

What Are Your Top Sales Objectives?

Sales objectives translate your motivation into actionable outcomes including:

  • Immediate sale
  • Immediate departure instead of continued post-sale involvement in the business transition
  • High sale price
  • All-cash payoff at closing with no seller financing
  • Post-sale involvement with your business
  • Post-sale priorities such as little or no disruption to clients or staff
  • Pre-sale preparation followed by future sale

Your motivation will guide you when you have potentially conflicting priorities that can derail the success of your business sale. If you are willing to compromise, it is possible to satisfy your top sales objectives and overcome such conflicts.

Tangled Priorities and How to Separate Them

Sometimes you want to meet several sales objectives at the same time. Your motivation and your top sales priorities will guide you in the right direction.

You want to sell immediately for a high price and an all-cash payoff

  • You want to sell immediately for a high price and an all-cash payoff

Requiring third-party financing will significantly slow down the sales process. Demanding an all-cash payout will significantly reduce your selection of qualified buyers. Offering incentives such as discounts and seller financing are great ways to fast. Make sure that all your documents are in place and organized to help with speed. If your main goal is a quick sale, then compromising on some of your lower priorities will help you make a faster exit.

You want to leave immediately for a high price and an all-cash payoff

  • You want to leave immediately for a high price and an all-cash payoff

Many small business transitions require continued seller involvement for 3-12 months. Demanding a high all-cash price plus an immediate departure will ring warning bells for your buyer. While some buyers might readily hand over the cash and wave goodbye, most will be scared away by this combination of demands. You can reduce hesitancy by negotiating on a lower price or offering seller financing. If you aren’t willing to forgo your original asking price, you can negotiate your level of post-sale involvement on both timeframe and compensation for consulting services.

You want a high price, immediate departure, an all-cash payoff and post-sale involvement.

  • You want a high price, immediate departure, an all-cash payoff and post-sale involvement.

Looking at the long-term outcome of the sale can put things into perspective. Businesses offering seller financing usually sell for a higher price. You can assure your buyer of your confidence in the business by negotiating a timeframe for your post-sales involvement that works for both of you. Your buyer will appreciate your efforts to assist in the immediate aftermath of the sale and you will have a reasonable level of involvement to be comfortable that your company’s future is in good hands.

You want an all-cash payoff, an immediate sale, a high price, and immediate departure.

  • You want an all-cash payoff, an immediate sale, a high price, and immediate departure.

Consider offering seller financing to widen your selection of buyers, show good faith in your business, and achieve a higher sales price in the long term through interest on monthly payments. If giving up an all-cash payoff isn’t an option, consider staying on for a negotiated period as a transition consultant. Negotiating for your time and expertise can attract more buyers and earn you a higher price through consulting fees.

You want heavy post-sale involvement and a high price

  • You want heavy post-sale involvement and a high price

Autonomy is a priority for many buyers, and some are willing to pay you to walk away. However, if having a say in future business decisions is your top sales objective, then you may have to lower your price expectations to attract an agreeable buyer.

You want to require post-sale priorities and sell at a high price

  • You want to require post-sale priorities and sell at a high price

Requiring your buyer to remain at the same location, use the same vendors, or keep the same staff will be a sales deterrent. You want to avoid limiting future opportunities for your buyer with strict post-sales priorities. If you can limit the conditions or reduce the timeframe in which those conditions apply, you have the potential to attract a buyer who might appreciate the stability provided by your post-sale requirements. If you are willing to lower your price, your post-sales priorities will be offset by the good value of the purchase.

You want time for pre-sale preparation followed by future sale

  • You want time for pre-sale preparation followed by future sale

Pre-sale preparation is a best practice that provides no conflict. Pre-sale preparation and planning will help you to identify your motivation for selling, prioritize your most important sales objective and resolve clashing priorities. Clarifying your wants and needs early in the sales process will help you to achieve the most favorable outcome.

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