All business owners can sometimes make mistakes and when running a business. There are always risks in any business decision. When you are selling your business, you do not want to make a mistake that will hinder your retirement.
We have compiled a variety of mistakes that business owners make when they sell their business. Having an experienced business broker can help you avoid these common errors when selling a business.
1. Not Preparing To Sell Your Business
A common mistake business owners make when selling their company is not preparing to sell it. Preparation is key to selling a business successfully. If somebody offers to buy your company before you are even 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.
2. Waiting To List Your Business For Sale
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 owners of businesses say how they wish they would have listed their business a while ago. It can take 6-12 months or more to sell a business, and then you will need to provide a transition for the next owner.
3. Trying To Sell Your Business Too Quickly
Many company owners that wait too long to sell their business want to sell their company 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 so important to have a business valuation to sell your business for its full worth.
4. Inaccurate Business Valuation Is A Huge Mistake
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 get paid for what it is 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.
5. Neglecting Your Company During The Sale Process
Some business owners get so focused on selling their company that they neglect to run it as efficiently as they used to. Or, since you know you will be leaving your company, motivation can be lacking in your daily work tasks.
While you may have one foot out the door and are ready to sell your business, keeping your company running efficiently is important. You will need to provide updated financial information during due diligence. Keeping your company on the right path requires you to be present in your business. This will ensure that your business continues to grow, and you can sell it for its full worth.
6. Failure To Keep The Sale Of Your Business Confidential
A mistake smaller business owners make is not keeping the sale of their business confidential. While it does not seem to be a mistake at first, the repercussions of this error are detrimental. Your business could decline before it sells if the news spreads you are selling your company. Make sure you don’t make this mistake when selling your company and keep the sale of your business confidential.
7. Communicating With Employees About Selling Your Business
Similar to not keeping the sale of your business confidential is the risk of letting your employees know you are selling the business. We all know how gossip can spread in a company. So even telling a trusted employee has a large amount of risk involved.
It would be best if you did not communicate that you are selling your business to the employees. However, it is a good idea to discuss how you will tell your employees with your company’s buyer. This will help to make the transition process effective. Most of the time, this is not done until after the deal is closed.
8. Not Communicating Selling Your Business With Your Family
Who you should be talking about selling your business with is your family. Failing to communicate your plans in selling your company with your family is a mistake that will not hurt your business, but it could hurt your family if they are blindsided by this major event.
By having a clear conversation with your family on the future plans of your business, you can navigate their feeling towards the business and discuss if any of your children were interested in taking over the business. Selling your business without telling your family can make them feel like you pulled out the carpet from under them.
9. Failure To Market Your Business For Sale
Marketing your business is one of the most important steps to 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 a large group of interested buyers. The more interested buyers you have, the more likely you will 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.
10. Liquidating Parts Of Your Business
Some business owners need money quickly and will liquidate parts of their company while waiting to sell it. This can be a big mistake that will make your business more difficult to sell and decrease your company’s value.
When you liquidate assets, the value of those assets is then removed from your business’s overall value. If your buyer sees that you have liquidated assets, this will make them nervous. They will feel they don’t fully know what they’re buying anymore, and they will question if you have plans 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 the valuation of your company, and it will not become a difficult area when negotiating the sale of your business.
11. Having Incorrect Information About 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.
The truth about your company will eventually come out, and interested buyers will no longer be interested if they feel that they have been deceived. Business brokers will also not want to sell a business unless the owner provides accurate information.
12. Avoiding the business sale process
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 stay involved with the sales process of your business so you can help provide information when needed.
It is also good for you to be involved so you can help navigate the negotiations. For example, a buyer may want to have a transition period before you leave the business. Having the broker negotiating the sale in communication with you and being aware of your wishes can make the process flow better.
13. Representing Your Business On Your Own
While you should not avoid the sales process, it can also be a mistake to manage the whole sales process on your own. There are a few problems with managing the sale of your business. First, it is difficult to keep the sale of your business confidential, and we know that is a mistake you should avoid.
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. The emotions of selling your business can compromise the sales process. Don’t make the mistake of trying to sell your business on your own. Having a business broker who is not emotionally attached to your business is a huge benefit when negotiating.
14. Not Hiring A Business Broker
Many business owners try to sell their business on their own before contacting a business broker. It might seem like it does not hurt to try to sell your business on your own, but it can lead to you making a lot of the mistakes listed here and take yourself 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.
15. Selling Your Business To An Unqualified Buyer
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. An unqualified buyer 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.
Do Not Make These Mistakes When Selling Your Business
Save yourself a large amount of 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. Contact Synergy Business Brokers. We have nearly 20 years of experience selling companies for their full value.