Here are another 6 myths that sellers, unfortunately, fall victim to:
Myth #1: You (Broker) bring me a buyer and I'll consider selling my operation.
In many jurisdictions, it is illegal and unethical to represent a seller without a written agreement.
Myth #2: The attorney who closed on my house can close the sale of my operation.
The legal due diligence process and documents required to close the sale of an operation are different than that required in a residential sale transaction. In business transactions, the attorney is usually representing a legal entity (e.g., corporation) not an individual. Corporations have specific procedures to follow when conducting a sales transaction. The corporation's board of directors meets then votes on all corporate actions including the sale of the corporation's assets. An attorney who primarily practices residential real estate will most likely need a subject-matter expert in corporate governance.
Myth #3: My tax accountant can sell my operation.
No; your tax accountant can save you money on your taxes. Your tax accountant is not active in the mergers and acquisitions market like a business intermediary. Business intermediaries (business brokers) have the skills and resources to attract buyers, get the parties to agree on acceptable price and terms, and manage the selling process through closing.
Myth #4: I can get a great price by showing the buyer how much money I'm putting in my business bank account.
The best method to show the operation's profitability is to show its tax returns. Bank statements show lots of transactions, but these transactions are not viewed in context. More banks transactions does not necessarily equate to brisk and profitable business.
Myth #5: I should not sell to competitors because they just want to see what I am making.
It is true that you should carefully vet who sees your business information. However, surveys show that competitors tend to pay a premium for well-run operations in the same industry. An owner-operator in the same industry segment can quickly spot opportunities to improve profits or reduce costs. This vision may allow them to offer a premium for operations they believe they can realize such improvements or reductions.
Myth #6: Just like a residential home sale, it takes about 30 day to close.
The International Business Brokers Association recently reported that it takes between 6 and 9 months for a transaction to close (i.e., from signing the sale agreement to closing).
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