Any business owner can make mistakes when running a business. Risks exist in any business decision, and when you sell your business, you do not want to make a mistake that will hinder your retirement. An experienced business broker can help you avoid these common mistakes when selling a business.
One mistake to avoid when selling a business is not preparing to sell it. Preparation is key because if somebody offers to buy your company before you are prepared, you could lose a lot of money. When someone offers to buy your company, you should consult a professional business broker to get a valuation and consult your accountant to determine your financial future.
Don’t make the mistake of waiting too long to list your business for sale. Selling your business and transferring business ownership is not a fast process. Many business owners report wishing they had listed their business earlier. Selling a business can take six to 10 months or more, and that does not account for the transition period.
The best time to sell a business is when it’s succeeding. However, many owners make the mistake of waiting until their business is in trouble before considering selling. Buyers want to buy a business with a positive growth trajectory — if you wait until your company is struggling, you may not receive any good offers.
Many company owners who wait too long to sell their business want to sell quickly. While selling your business quickly is sometimes possible, it can be an error unless you know the proper value of your business. That is why it is necessary to get a business valuation to sell your business for its full worth.
Addressing appearance issues can make your business more appealing to buyers. If your space is cluttered, the paint is chipped or your equipment is outdated, work on organizing, painting and updating. While these may seem like minor issues, addressing them can make your company stand out to potential buyers.
One of the biggest and most costly mistakes when selling a business is not finding out how much your business is worth. If you list your company for too little, you might sell it quickly and not receive what it’s actually worth. On the other hand, you will have difficulty finding interested buyers if you list your company for too much.
The biggest challenge to selling a business without a valuation is negotiating the price. An interested buyer can simply say, “I don’t think your company is worth the listed price.” And your response is that you believe it is. When you have a professional provide a valuation, you now have secondary backing on your company’s worth and value.
Some business owners become so focused on selling their company that they neglect to run it as efficiently as they used to. Additionally, when you know you will be leaving your company, you might feel a lack of motivation in your daily work tasks.
While you may have one foot out the door and feel ready to sell your business, keeping your company running efficiently is important because you will need to provide updated financial information during due diligence. Keeping your company on the right path requires you to be present. This will ensure your business continues to grow, and you can sell it for its full worth.
However, this is a delicate balance, as it can be challenging to sell a business that’s too reliant on its owner. When owners are essential to the company’s day-to-day operations, potential buyers may fear the business won’t survive or thrive after a change in leadership. If your business relies too much on you, transferring some of your duties — such as hiring, handling payroll and making strategic decisions — before putting the company up for sale is beneficial.
A mistake smaller business owners make is not keeping the sale of their business confidential. While it may not seem to be a mistake at first, the repercussions of this error are detrimental. If the news spreads, your business could decline before it sells. Make sure you don’t make this mistake, and keep the sale of your business confidential.
Similar to not keeping the sale of your business confidential is the risk of letting your employees know you are selling the business. Gossip can spread in a company, and even telling a trusted employee involves a large amount of risk.
It’s best not to communicate that you are selling your business to its employees. However, you will want to discuss how you and the buyer will inform employees when the time is right. Most of the time, the right time is after the deal is closed. Being intentional about employee communications will help to make the transition process effective.
You should talk to your family about selling your business. Failing to communicate your plans will not hurt your business, but it could hurt your family if they feel blindsided by this major event. When you have a clear conversation with your family, you can navigate their feelings toward the business and discuss whether any of your children are interested in taking over the business. Selling your business without telling your family can make them feel like you pulled the rug out from under them.
Marketing your business is one of the most essential steps in selling your company. Unfortunately, some business owners fail to market their business for sale and simply try to cold-call competitors. This is a huge mistake when selling a company.
If you neglect to market your business, you are missing out on a large group of interested buyers. The more interested buyers you have, the more likely you are to get the full worth of your company. If you do not market your company, it will probably take a long time to sell your business.
Some business owners need money quickly and decide to liquidate parts of their company while waiting to sell it. This is one of the biggest mistakes when selling a business and can decrease your company’s value.
When you liquidate assets, their value is removed from your business’s overall value. If your buyer sees you have liquidated assets, they might get nervous. They will feel they don’t fully know what they’re buying anymore, and they will question whether you plan on liquidating additional assets.
If you plan on liquidating assets and selling your business, make sure you liquidate assets before getting a business valuation. This way, a buyer can trust your company’s valuation, and it will not become a difficult area when negotiating the sale of your business.
Just as liquidating parts of your business makes the business valuation inaccurate, it is a mistake not to have accurate financial information. You will need to be as open and honest as possible to develop enough trust when selling your business.
If you’re not, the truth about your company will eventually come out, and interested buyers will no longer be interested if they feel they have been deceived. Business brokers will also not want to sell a business unless the owner provides accurate information.
While a business owner does not need to run the business sale process or be highly involved, it would be a mistake not to stay in the loop. As a business owner, you should remain involved in the process so you can help provide information when needed.
You can also help navigate the negotiations. For example, a buyer may want to have a transition period before you leave the business. Communicating with the broker and making your wishes clear can make the process flow better.
While you should not avoid the sales process, it can also be a mistake to manage it all by yourself. It isn’t easy to keep the sale of your business confidential, and it is emotional trying to sell your business. You will be parting with the company you have invested a large amount of your life in, and the emotions of selling your business can compromise the sales process.
Don’t make the mistake of trying to represent your business in a sale. Having a third party who is not emotionally attached to your business is a huge benefit when negotiating. They can help you keep your expectations realistic.
If you try to sell your business yourself, you may not know how to qualify a buyer properly. An unqualified buyer might not be able to afford your business, or they might not be able to run your business successfully. If the unqualified buyer is both, you definitely should not sell your business to them. They will try to buy your business with very little money paid at the closing and ask you to finance the sale. You might have to fight to see the full payment for your company in the future.
In addition to evaluating the buyer’s qualifications, it’s important to get to know them. Assess why they want to buy your business, whether they’ll be active as the new owner, how they would fit into the company culture, what experience they have in the industry, and what their goals are for the company. These answers can help you limit your prospective buyer list to the best candidates.
Many business owners try to sell their business on their own before contacting a business broker. While it might seem like it wouldn’t hurt to try to sell your business on your own, doing so can lead to the mistakes listed here and take you away from running your business. This could lead to a decline in the business’s value. To save yourself and your business from losing money and time, hire a business broker.
Save yourself money and time by hiring a business broker who can keep you from making these mistakes when selling your business. A professional business broker can give you the advice and guidance you need when selling your company.
Synergy Business Brokers has over 20 years of experience selling companies for their full value. We have a database of more than 40,000 buyers and recognitions from organizations like Inc. Magazine and Medium, so you can trust us to sell your business for what it’s worth. Request a valuation today!
