It was Zoran Sarabaca’s personal experience of trying to sell his own business that prompted him to start Xcllusive Business Sales.
Back in 2003, whilst trying to sell his maintenance business, he discovered the kind of help and support he needed was not easily available. Unhappy with the service that brokers offered him, he decided to do the work himself.
Realising his approach to business sales was quite different – and appeared more successful, he formed his own brokerin company in 2005.
“When you think about it, the person who knows and understands the business inside and out is the owner. And that makes them the best person to sell it,” Zoran said.
“However, whilst they might have all that knowledge, they are also invested in the business emotionally. They have probably spent years working on it and in it; quite literally blood, sweat and tears!
“So, when it comes to, for example, pricing the business for sale, they can understandably be biased and overprice it. And overpricing is one of the main reasons why a business doesn’t sell – and it can end up being disastrous for the owner.”
GET THE PRICE RIGHT
A common mistake in selling a business is treating it like residential real estate. When selling a home, it is quite common to put a higher asking price and then negotiate down. But, says Zoran, that won’t work when selling your business.
“Often a business owner will put a higher price but say they will negotiate with a serious buyer. However, this is more likely to put off a buyer – and here’s why.
“Let’s say a business is advertised for $500,000. I am interested in buying the business, but my budget is not that high, and I also believe the business is overpriced. I wouldn’t be comfortable with making a lower offer because I wouldn’t want to offend the owner.
“Or it might make me think that the owner isn’t that serious about selling; they don’t really want to let it go so they have upped the price
” Zoran says that overpricing a business is the biggest mistake owners make. And yet he sees it happen again and again.
“The other problem with doing this is that it takes much longer to sell. It’s all about market dynamics,” he says.
“Most people looking at buying a business have been looking for several months. That’s why most enquiries about your business come in the first 60-90 days.
“After 60-90 days, with no buyers, you start dropping down the price. But you won’t get many enquiries because the best buyers have already looked at your business and decided it was over priced. And the longer it sits on the market, the more prospective buyers will think there is something wrong with it.
“The only thing wrong with your business is that it was over-priced to begin with,” Zoran said.
“In addition, the longer it takes to sell, the more pressing your reason for selling becomes. And that could affect the performance of your business, so it is not generating the same profits. So, you end up slashing the price because you are under pressure.”
Zoran said it is crucial to get the right help and advice. Whilst there are online tools available to help you price a business for sale, they are not always exact.
“It’s not as simple as comparing business to business,” he said. “There are many factors involved in correctly valuing a business. You need to find an experienced, trustworthy advisor. You need to believe the source and know they are not talking your business up or down.
“The right person to value your business is someone who is professional and can look at all aspects of the business.