This contributed post is for informational purposes only. Please consult a business, financial and legal professional before making any decisions. We may earn money or products from the affiliate links in this post.
Selling your business should generate enough capital for you to launch your next one, or enough cash for you to retire if that’s your plan. Many business owners are overconfident about a sale. Don’t let your sale get scuppered by these common pitfalls when selling your business.
Failing to Prepare
Jumping the gun before preparing your business for sale is a big mistake. Prospective buyers will look into every nook and cranny of your operation. Don’t get started on a sale until you update and organize all your records and ensure they are accurate and complete. This includes financial information, tax forms, contracts, leases, information about proprietary products or processes, and information about pending litigation. Buyers will want to know how your business spends its money, down to the individual expense reports, capital equipment, and depreciation.
What your business is worth to you isn’t the same as what it may be worth to a prospective buyer. Too many business owners set a value on their company based on what they hope to get for it, rather than what it is actually worth.
Announcing you’re selling your business before the deal closes puts you at a competitive disadvantage in negotiations. It can also cause your employees to pack their bags and get out as fast as they can, and your customers and clients to lose confidence in the business. Only those absolutely essential to preparing the business for sale should know—and even then, know only what they need to know—to help you organize and prepare essential information.
Switching to Autopilot
Your business must continue to thrive and even grow after you’ve decided to sell in order to remain attractive to prospective buyers. Checking out of day-to-day operations too soon can cause a slump right when you can’t afford one.
Wasting Time on Buyers Who Haven’t Proven They’re Serious
Businesses for sale can experience “lookie-loos” just like real estate that’s on the market. Don’t waste time on buyers who aren’t willing to demonstrate they have the wherewithal to purchase the business and the immediate willingness to sign a confidentiality agreement.
Going it Alone
You may be confident about your sales and negotiation skills, but selling a business requires more. Attorneys, accountants, and key employees are all involved in getting a business ready and mapping out the deal. In addition to preparing financial documentation, you must plan an exit strategy that includes how your own and your key employees’ expertise and experience factors into the days and weeks after closing.
There are many advantages to using a business broker to assist in the sale. Brokers have access to a pool of qualified and interested buyers, ensure confidentiality, and allow you to concentrate on keeping the business running smoothly and successfully. All the while, your broker prepares a realistic valuation, works with your accountant and lawyers to prepare, and identifies serious prospective buyers. Using a broker is the best way to avoid common pitfalls when selling your business.