After many years of selling flower shops and other businesses, I’ve compiled a list of the top five reason sellers “Slip up” when trying to sell their business. Rest assured there are many more than five reasons; these are just the most common.
1.
Spreading the word: this is a common practice of business owners who think a competitor or an acquaintance may buy their business, they let it be known usually through wholesalers or distributors and sometimes customers that they are looking to sell. If your competitors know your thinking of selling they will use that against you, if I was your customer and you mentioned you were interested in selling I would start looking for someone who I felt was going to be around a while. If I was your vendor I would keep close watch on your account and I may not extend more favorable terms to you because the future is uncertain. Remember, trying to sell a Flower shop does not always mean you will sell it! You may end up keeping it and run the risk of damaged relationships with your customers, employees or vendors.
2.
Placing an ad or sign: Often I see ad’s in our local paper with the name and sometimes address of the business in the ad. This just invites anyone to stop by and check your business out, speak to your employees and your neighbors. Other business owners just have their phone number in the ad, inviting disruption to their business with call after call. Then there’s the “Business For Sale” sign in the window. You might as well say goodbye when this occurs. If you going to advertise your business for sale keep your ad simple, don’t put your name, address or business number in the ad. Use a cell phone or pager number to get these calls.
3.
Confidentiality: Ok, you’ve placed your ad, your cell phone is ringing and the buyers are asking to see your “tax returns”? Time to get serious! As a general rule I don’t reveal the business name and address until I know whom I’m dealing with. I also won’t give any detailed financial information until I have a solid offer. Before releasing any information that may be confidential, get a non-disclosure signed by this person and ascertain if they have any money and where it’s coming from, ask them if their credit is good. After your satisfied then release the info and explain to them that it’s confidential and you want them not to disrupt your business by coming by unannounced or talking to your employees, vendors or other tenants.
4.
How much is my business worth: The age-old question. One times gross, two times net, three times gross profit, 20 times your electric bill. You’ve heard them all! I’m not going to get into detail on valuing your shop. The area most people do not take into consideration is expenses that are not business related (I know you don’t do that, right?) or one-time expenses that will not occur again (remodeling, moving expenses, etc). All of these will add to the bottom line and enhance the value of your business. Some business owners value their business too low because they do not take these items into consideration.
5.
To tell or not to tell: Should I tell my employees I’m thinking of selling? There are many reasons why you should not tell your employees your thinking of selling, until your business is actually sold. Employees are naturally skittish about loosing the person they work for, almost always the new owner wants the employees, but that’s not what’s in the employee’s mind. Once they know, they almost always start looking elsewhere or worse they start talking to customers or start thinking they deserve a few things from the business. I had a transaction where the seller told the employees the day we opened escrow that they were selling the business. The next day all the employees quit!
There are a lot of issues to deal with when selling a business, I would always recommend you seek the advise of a professional before making any commitments.
Posted on May 21, 2009 | 
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