14 Mistakes to Avoid When Selling Your Business

Today most business Owners are first time sellers of a company. They’ve run their business for decades and typically never thought much about the end game. Some wait too long and never see a sale. Others have prepared, to a greater or lesser degree, to sell and will enjoy the benefits that come from a sale. It could be your entire retirement savings plan or simply icing on the cake.

You may have started a while ago and sought out advice on selling family business by asking someone who provides coaching for business owners, family business coaching and consulting or a trusted business advisor. They answered some key questions. How can I sell my business? What is the process of selling a business? When is it time to sell your business? And offered some more general tips for selling a business.

Hopefully they included advice on avoiding certain mistakes that could potentially hinder the process of selling a business or decrease the value of your business. When you calculate value of a company your mistakes can add up very quickly.

During the sale of a business, it is simple to make mistakes that could end up costing you thousands of dollars or more. The most frequent errors made when selling a business are listed below, along with advice on how to avoid them when selling your business:

1) LACK OF PREPARATION

It's crucial to keep your financial records current and your business history well-documented in order to guarantee a positive experience. Failing to prepare your business for sale can significantly impact its value. Ensure that your financial records, contracts, and legal documentation are in order. Buyers will quickly back away when the Seller can’t supply basic information in the initial steps to selling a business. You may never even get to the M&A Due Diligence checklist. When you do, I’m warning you it can be brutal assembling the information. So the better prepared you are, the smoother the process of selling a business will go.

Conduct a thorough analysis of your business's strengths, weaknesses, opportunities, and threats (SWOT analysis) to identify areas that need improvement before the sale. Anyone who provides coaching for business owners should be able to assist with at least some of these,

2) OVERVALUING OR UNDERVALUING YOUR BUSINESS

Determining the right valuation for your business is crucial. Overvaluing it can scare away potential buyers, while undervaluing it can lead to financial loss. Consider hiring a professional appraiser or business broker to get an accurate valuation. You want professional business value consulting. Basing a value on what a competitor sold for or what your buddy told you he sold for is not a reliable methodology. You should take every step possible to make the business as appealing to potential buyers as possible, just like you would if you were selling a home. If you don't do this, the sale might take longer and bring in a lot less money than you had hoped.

3) NEGLECTING CONFIDENTIALITY

Maintaining confidentiality throughout the selling process is essential. Prematurely disclosing the sale to employees, suppliers, or customers can create uncertainty and negatively impact the business. Use non-disclosure agreements (NDAs) when sharing sensitive information with potential buyers. To successfully sell a business, it's crucial to plan how, when, and whom to inform about the process. Revealing it too soon can significantly impact morale and sales. Keeping sensitive information confidential from prospective buyers is equally important, as careless disclosure may lead to severe problems such as lawsuits or the loss of key employees. By structuring these actions carefully and diligently, you can ensure a smooth and successful sale. Do not rely solely on hiring a broker or an investment banker to sell your business. Remember, nobody is as motivated as you are. When the broker sends you potential buyers, your responsibility is to charm them and instill confidence that they can efficiently handle the business. That's how you ensure that your business gets sold to the right buyer.

4) INSUFFICIENT MARKET RESEARCH

Conduct thorough market research to understand the current trends and demand in your industry. Failing to do so may result in an inaccurate pricing strategy or an ineffective marketing approach when seeking potential buyers. Your sale advisor or someone providing family business coaching should be able to assist you with this. When selling a business, finding the right asking price is a delicate balance between your desire for a high valuation and the buyers' willingness to pay. Going too high may deter potential buyers or invite low-ball offers, while asking too little may leave you with less than you deserve. Striking the right balance requires strategy, market research, and a clear understanding of your business's value proposition.

6) NOT HAVING BOTH PERSONAL AND BUSINESS TRANSITION TEAMS

You're going to need a personal transition team to work with your business transition team. Some team members may be on both teams as most business Owners tend to integrate their business lives with their personal lives. ie legal, financial, wealth, real estate, insurance and tax. In all cases your trusted Advisors should be experienced in working with business Owners and the sale of a business. You may not require all their services but better to be prepared.

7) LACK OF PROPER DOCUMENTATION

Maintain accurate and up-to-date financial statements, contracts, permits, licenses, and legal agreements. Incomplete or missing documentation can lead to delays, increased M&A due diligence, or even a failed sale.

8) NEGLECTING TO HIGHLIGHT UNIQUE SELLING POINTS

Identify and emphasize the unique aspects of your business that differentiate it from competitors. This can increase its attractiveness to potential buyers and justify a higher price. Business owners often make the mistake of waiting until their companies are in trouble before thinking of an exit strategy. The right time to plan for selling your business is actually right from the beginning. Keep in mind that the best time to sell is when your business is thriving. If you wait until sales are dwindling or your health and well-being is compromised, finding a worthy offer could be a missed opportunity. Don't wait until it's too late!

For many entrepreneurs, managing a business comes naturally, but selling one isn't quite as straightforward. If it's your first time selling, trying to do everything yourself could be a risky move. Some owners choose to go it alone in hopes of cutting costs, but hiring professionals like brokers, outsourced CFOs, financial advisors, investment bankers, or lawyers can actually save you money in the long run. Don't underestimate the value of expert help- overlooking it could lead to costly mistakes that outweigh the initial savings. Selling a business is a complex process, and it's crucial to seek guidance from professionals such as accountants, lawyers, or business brokers who have experience in mergers and acquisitions. They can help navigate legal and financial complexities and maximize the value of your business. Advisors come in many forms from a sale advisor to business value consulting, family business coaching and consulting to a trusted business advisor.

10) RUSHING THE PROCESS

Are you asking yourself how long does it take to sell a business and what are the steps to selling a business? Selling a business requires time and careful consideration. Rushing the process may lead to poor decision-making or overlooking important details. Give yourself ample time to prepare, market, negotiate, and close the sale. The entire selling process can be 3-5 years. From making the decision to do it all the way to closing, and then transitioning the Owner completely out. When selling your business, do not rush into choosing the first broker or consultant you come across; it can be a costly error. Rather, take the time to find someone with significant experience selling businesses in your industry, who holds a great reputation amongst past clients. Conduct interviews, and ask your peers for referrals. Checking references is a proof of due diligence, and it will help make an informed choice. Remember, selling your business is a life-changing endeavor, so always take the necessary steps to ensure a successful outcome.

11) FOCUSING SOLELY ON PRICE

While price is important, don't overlook other essential factors such as the Buyer's reputation, their plans for the business, and the compatibility of their values with yours. Selling to the highest bidder may not always be the best decision for the long-term success of your business or your employees. Use a business value consulting professional to calculate value of a company. How much do I sell my business for? Is a question best answered by the real market value of a company. You don’t dictate the price. The market will. You can impact the price by avoiding the many potential mistakes I have identified above. But ultimately a Buyer will pay what the company is worth to them.

Is your office ugly and disorganized? Paint it after cleaning it. Do you have any staffing concerns? Look after them. Do you owe any taxes? Paid them. Do you have any issues with your record-keeping? Adapt them. Things that seem insignificant to you may be very important to potential buyers. You could lose money if you don't take care of them before marketing your company for sale.

13) UNWILLINGNESS TO CONSIDER NONCASH, PART-CASH, OR DEFERRED CASH OFFERS

When selling an asset, you may find the perfect buyer who doesn't have the expected cash resources. Don't worry! You can still strike a deal by considering other factors such as stock shares or interest in other businesses. This may prove to be valuable and offset the price difference. Of course, there are risks involved, but overlooking this avenue may mean missing out on a good opportunity. If cash offers fall short, a savvy buyer may request concessions, such as deferred payments or help to obtain third-party loans. Be open to these possibilities! Not only can you turn them to your advantage, but spreading out the receipts over multiple years may also offer tax benefits.

14) CHANGING YOUR MIND

Many business deals have crumbled due to seller's remorse. That is why you need to be absolutely sure that selling your business is your end goal way before even considering listing it for sale. You should envision what your life would look like after making the sale and also come up with a solid exit plan. Remember to analyze all offers and make sure they align with your plan. It's a win-win if you make an informed decision!

Maximize Your Business Value With Our Expert Help    Start Now!

FINAL THOUGHTS

Your financial future may be greatly improved by selling your business. But if done incorrectly, it can also lead to serious issues. The majority of business owners shouldn't attempt this on their own. Finding the right experts to help you with the process can reduce your stress levels and possibly result in a better deal. Check out our BUSINESS SELLING COURSE to gain expert knowledge in business selling and avoid major mistakes.By avoiding these mistakes (and plenty more) and engaging in careful planning and preparation, you can increase your chances of a successful business sale. Using professional advice throughout the process to ensure a smooth transition is non-negotiable.

As a trusted business advisor and sale advisor I appreciate the opportunity to share my years of experience working with Owners just like you. In fact you may want to consider our online program Sell Your Business 4 More. Click on the Eric Gilboord Coach cap above.