Sellers must pay attention to red flags when it comes to selling a business. They need to keep their eyes open because problems can always arise. Until the deal is official, sellers need to evaluate every aspect of a transaction to make sure something isn’t happening that could ruin the deal.

Common Red Flags

A company expresses interest in your business, but you are never able to directly contact key players. This indicates that the interest level may not be as great as you initially hoped.

An individual buyer looking to buy your business but has no experience in acquisitions or in your industry. This could prove to be problematic if the buyer becomes nervous upon learning what a deal would actually entail. The specifics and the reality of owning a business could come as a shock to an inexperienced buyer.

These are examples of early-stage red flags. Red flags can come at any stage of the selling process. An example of a middle-stage red flag is the denial of access to the buyer’s financial statements. The seller must verify this information to make sure that the buyer is able to actually make the acquisition. A late-stage red flag example is a loss of momentum in the process.

Sellers Need To Protect Their Assets

The time sellers invest with a prospective buyer is time they could spend doing something else. Frequently, businesses run into trouble when they place their company on the market. The business can become more difficult to sell if this trouble negatively impacts the bottom line and can cause the final sale price to be lower.

Sellers must protect themselves from buyers that are not truly interested or are not a good fit. Working with a business broker is a highly effective way for sellers to protect themselves from buyers that are not the right fit. EBIT Associates will help you “weed out” unfit candidates.

A red flag does not mean that a deal is at an end. With the guidance of an experienced business broker, many of these issues can be overcome. The single best way to deal with a red flag is to confront it head on as soon as you recognize it.

 

Davdeka/BigStock.com

AUTHOR: EBIT Associates, Ltd.
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