When You are Selling Your Business, Don’t Make Major Last Minute Changes

Prospective buyers are looking for revenue, consistency and growth when looking at businesses to buy. Last minute changes, especially major changes, can impact the value of the business or make the buyer nervous about the unknown consequences. The buyer could also leap to an unfounded conclusion about why the owner is selling.

Here is an example:
A man talking about selling his business purchases a $700,000 piece of publishing equipment. He believes that revenues will rise and more clients will come on board because of the new capabilities. The problem is nothing can be proven yet. All we have to go on are the actual numbers from the past three years. These numbers do not support the increase in price that the seller is considering, and our recommendation is to wait to sell his business until he has proven the new publishing equipment is going to have a significant impact on the bottom line. If he decides to move forward, he will probably end up taking a loss on the capital expense if he wants to sell now.

A better way to have handled this would have been to recommend the machine and potential results to a prospective buyer. There are many ways that the prospective buyer could have funded the purchase of the equipment instead of taking on the debt. The seller was debt free when this decision was made.

Before you make a major decision, be sure to talk to your broker about the impact on business value and sale strategy as well as timing.