Common Misperceptions in Business Sales

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While we do sometimes deal with repeat buyers and sellers, most of our clients are either selling one business and will not sell another, or buying one business and will not buy another. That means we’re always revisiting common — and understandable — misconceptions from buyers and sellers. In this article, we’ll share some of the ones we hear most frequently.

Seller Side

“I heard I can get 2-3 times revenue for my business.”

We’re polite, so we don’t lead with, “Who told you that?” What we’re more likely to do is say that we have different valuation methods we can use to find out what your business is worth, but ultimately, the true decider is the marketplace, and we won’t know what it thinks until we list.

Answer: Your business is worth what the market is willing to pay.

“So, I can get all cash at closing, right?”

If you have a cash buyer, yes. However, many of our deals are done with the help of the SBA, and banks often ask for some kind of seller financing. Sometimes, you might have a portion of the sale subject to an earnout. Whatever the case may be, what’s more important is that you have a handle on the tax strategy you’re going to use for the liquidity event itself.

Answer: Possibly.

Buyer Side

“I’m going to have access to the seller for at least six months, right?”

Sellers are often out of the business within months, but in a few cases, a transition could stretch to a year or more. Buyers underestimate how much a company has been systematized and owner-proofed to be worth selling, so they often overestimate how much they need access to a seller post-sale.

Sometimes the seller becomes an employee of the buyer, working in some specialized part of the business, but this is rare.

Answer: You’re going to get him/her for at least 60 days, but you won’t need that access as much as you think you do.

“Do I need expertise in the industry?”

We’re never going to tell you that expertise is a bad thing. Sometimes a particular license or certification has to be obtained, which may require additional money or training. But often it’s not expertise in an industry that is required, but a passion to grow the business in general. Let’s be clear, if you don’t like being outdoors, buying a landscaping business is a bad idea. But don’t fall into the trap of needing to be “passionate” about the industry you’re buying into. What you’re looking for is an opportunity that’s exciting and fits your skills and situation.

Answer: No.

Both Buyers and Sellers

“So can we get this done in a couple of weeks?”

This is only slightly kidding. Let’s just say that buyers and sellers often have unreasonable expectations when it comes to how long it takes to close a deal. What we usually say around the office (because it’s true) is that an average deal can get done in three months from an accepted LOI,  start to finish.  We’ve seen deals close faster and sometimes take much longer. But what else is true is that there isn’t a shortage of qualified buyers. We have, thankfully, a ton of those here at Apex whose trust we have earned over the years. What we love, and what we’re always looking for, are qualified sellers. If you’re one of those, we’d love to look at your business and see if we can help.

Answer: Probably not.

What are some things you are thinking about that might be misperceptions? Give us a call so we can tell you.