The sale of a business is a transaction that should always be favorable for the seller. Yet, this benchmark is not always the standard. There are a countless number of costly mistakes that can have negative ramifications in both the short term and long term for the seller. All sellers should be educated to avoid a costly pitfall.
Not Knowing What the Buyer Is Buying
What you see in your business is not necessarily what the next person sees. As a result, you might think the buyer is looking to purchase your business as-is, but they could have an entirely different goal in mind.
For example, some large companies will purchase a smaller competitor brand without any intention of growing the company; instead they plan to lesson the competition by maybe shelving the company.
This difference in interpretation becomes a very big deal when a business owner sells their business while still maintaining a share in the business's profits. It is critical that you know precisely why the buyer is interested in the business and what their plans are. In a nutshell, you have to do your due diligence.
Misrepresenting the Business
In the same manner that you have to do your due diligence as a seller, the buyer is going to go about the same process. To avoid any hiccups and lost profits, it is essential that you represent your business accurately.
A common mistake that business owners make is that they value their business at a level that they do not have evidence to justify. If the buyer cannot confirm that the investment is worth what is being asked, they will not be willing to pay the asking price.
It is important that you review all your financial records and other data to ensure that you have all the evidence in place to avoid the appearance that you are misrepresenting your business.
Business Transactions Deserve Legal Review
When you first established your business, you probably sat down with an attorney to ensure that all your affairs were in order. There is no reason that you should not also do the same thing as you sell the business. The goal of an attorney is to protect the client. Through the sale agreement, profit-agreement contract, and any other information, the attorney will review the facts to ensure that your interest is best protected.
To make the sale of your business as beneficial and stress-free as possible, make it a point to avoid these mistakes. Contact a lawyer who provides business transaction law services to learn more.