Articles

Selling a small business can be a daunting task, particularly if you’re doing it without the help of a broker. Business for sale by owner is a popular option for many entrepreneurs who want to avoid the fees and commissions associated with working with a broker. However, selling a business on your own can be risky, and there are several red flags you should look out for. In this article, we’ll discuss some of the most common red flags to watch out for when selling your small business.

Red Flag #1: Lack of Financial Transparency

When you’re selling a business, buyers will want to see detailed financial records, including tax returns, profit and loss statements, and balance sheets. If you’re not willing to provide this information or if your financial records are incomplete or inconsistent, it can be a major red flag.

A lack of financial transparency can make buyers hesitant to make an offer or lead them to question the value of your business. Make sure you have complete and accurate financial records before putting your business for sale by owner.

Red Flag #2: Unexplained Decline in Revenue or Profits

If your business has experienced a sudden decline in revenue or profits, buyers will want to know why. A decline in revenue or profits can be a sign of underlying issues with the business, such as increased competition, changing market conditions, or poor management.

Be prepared to explain any changes in revenue or profits and provide evidence that you’re taking steps to address the underlying issues. If you can’t explain the decline, it can be a major red flag for buyers.

Red Flag #3: Unresolved Legal Issues

If your business has unresolved legal issues, it can be a major red flag for buyers. Legal issues can include pending lawsuits, unresolved disputes with customers or vendors, or regulatory compliance issues.

Be upfront with potential buyers about any legal issues your business is facing and provide evidence that you’re taking steps to resolve them. Failing to disclose legal issues can not only scare off buyers but also lead to legal issues down the road.

Red Flag #4: Dependence on Key Employees or Customers

If your business is heavily dependent on a small number of key employees or customers, it can be a major red flag for buyers. Dependence on key employees can be risky because if they leave, it can disrupt the operations of the business.

Dependence on key customers can be risky because if they leave, it can significantly impact revenue and profits. Make sure you have a plan in place to mitigate the risks associated with dependence on key employees or customers.

Red Flag #5: Lack of Growth Potential

Buyers are typically looking for businesses with growth potential. If your business has plateaued, it can be a major red flag. Make sure you have a plan in place to show potential buyers how the business can continue to grow.

If you don’t have a plan for growth, it can be a major red flag for buyers who are looking for a business with potential to increase revenue and profits.

Call Murphy Business Today

If you’re planning to sell your small business, it’s important to be aware of these red flags and take steps to address them before putting your business for sale by owner. However, selling a business can be a complex and time-consuming process, and it’s often best to work with a professional.

At Murphy Business, we specialize in helping small business owners sell their businesses. We have years of experience working with entrepreneurs and can help you navigate the process of selling your business. We pride ourselves on offering excellent customer service and are committed to helping you get the best price for your business.

To get started, call us at 850-374-8884. We’ll be happy to answer your questions and provide you with more information about our services.