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Don't Be An Idiot Selling Your Business

Posted On - 25/11/2016 07:47:18

Don't be an idiot when you sell your business - don't treat buyers like fools

With a title like this we could have written about anything. Stuff that's pointless and stupid. Stuff that's patently ridiculous. It's easy to drum-up top-tens of crazy advice that'd scupper any chance of you selling your business.

Now, doing that might be entertaining, might even make a fun read, might do wonders for our SEO, but would it really help you?

Not really, it's just noise. More clickbait and fodder for social sharing. So we're not doing it.

Instead, we're going to focus on the one thing that as easy as it is to do, is also the one thing that'll ruin your chances of selling. What's more it's so good at what it does, it does it instantly. No water required!

Are you on Tinder?

Research shows the more time you spend on social media the more likely you are to be depressed. Seems strange when so many people are almost addicted!? But whatever. Perhaps it's to do with cyber bullying? Or perhaps a nagging sense of pointlessness? That as fun as it may be, it's actually a waste of time?

Well, while these may or may not be the reason the research points to something else. It states it's the result of "idealised representations of others happy successful lives". Of others whose businesses are always doing well. Who get nothing but rave customer reviews. And who always seem to do everything better than you. Let's face it, when was the last time you saw a post about someone who'd failed to win a contract, lost a sale or got a customer complaint? We've seen them – but they're as rare as hen's teeth. When people post it's always the WOW stuff that goes up, right? And whether it's being done intentionally or unintentionally, it adds up to an unrealistic depiction. And that completely throws your view.

Now about that Tinder profile. If you – hypothetically of course – were on it, how realistic would your profile be? After all, you'd want to be 'attractive' wouldn't you?

I can resist anything…

…but temptation. So wrote Oscar Wilde.

But what's this got to do with selling your business? Well, what could possibly be the temptation when selling? What is it you might feel you should – must – do? Err, let's see...

Could it be going all out to get the highest price possible? Could it be you're lured into talking-up how well your business is doing? Spinning its performance to show it in the best light. Emphasising the positives. Downplaying the negatives? Nothing dishonest of course - heavens no! That would be lying. Just ‘selling'. No harm in that. Is there?

To be expected?

But isn't ‘selling' your business OK? It's a trade after all and selling's all about emphasising benefits, yeah? Isn't it just the ‘natural' thing to do? Something that shouldn't come as a surprise?

Well, while this post isn't about ‘selling', we'd never recommend downplaying disadvantages and dis-benefits – it's not good practice. But be all that as it may, let's look at why behaving like this could be expected sensible and what it means. To do this there are two things you need to understand.

The first is "The Endowment Effect" and concerns things we possess. Experiments show people place disproportionate value on what they own over what they don't. That we prize what's ours over what isn't. To cut a long story short this means it's unlikely anyone'll be reasonable when it comes to the price of their business. Or to put it another way it's very likely they'll think it's worth more than it is.

Think about it. You know what your business is worth – you built it. The years of effort and love you've given it. You'll be damned if anyone tries giving you a paltry offer. It's worth a mint!

Can't stand losing you

Was released by The Police in 1978 (hell, I'm getting on!) But there's a serious point to this - it's the second part of why it may be tempting to spin things when selling up.

Research shows people tend to prefer avoiding losses over securing equivalent gains. In other words it's far, far "worse" to lose a £5 than it is "good" to find one. It's thought the result of evolution. For example, failing to find food could mean starvation - even death. Whereas finding more than you need while lucky, won't stop you dying someday. And put like this it makes sense: one outcome's pretty grim and while the other is far better, it's not amazing.

Does this way of thinking have a name? Of course: it's called "Loss-Aversion". What's it got to do with selling? Everything - it points to how you're likely to behave in negotiations. There's no-way you're losing a penny on the deal!

Set-up for a fall

When you consider these two ways of thinking together - "The Endowment Effect" and "Loss Aversion", it's easy to see why people embellish things. The price of your business - your baby - it's priceless! The highest price you'll get is the lowest the buyer can get away with! It's unbearable!

The only way to deal with it is square up and steel yourself for a fight. Start at the highest price possible, paint the rosiest picture imaginable and dig-in. This is war. There's no way you're getting screwed!

But doing this is flawed. Not only that, behaving like this will bring on the very thing you least want: the buyer walks. You don't sell. Worse still you pick up a reputation for being unprofessional, maybe even lacking integrity. None of this is good. It isn't worth the risk. But if you think it's to do with your hard line and them being soft, think again. This has nothing to do with negotiation.

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