It’s a big decision to sell a business, and many business owners take time to get to that point. Once the decision has been made, the goal is to have a smooth process that ensures the business owner makes as much money as possible. After all, no one wants the years of hard work building up that business to go down the drain during a sale. However, selling a business is a complex process and most business owners lack experience in it.
Here are 5 of the most common mistakes business owners make when selling a business. With advanced preparation and awareness, it is possible to avoid them altogether.
1.Lack of Preparation and Planning
Without proper preparation causes many business owners to miss on getting the best possible price during a sale. Rushing to set a price or even to sell the business too soon often means missing out on the true value you deserve. Long-term planning and taking the right steps to get your business in ready go a long way toward getting a fair price. Here are some ways to prepare your business before a sale.
2. Not Understanding Buyers
Too often business owners waste time speaking with potential buyers who aren’t pre-qualified or who aren’t ready to make an offer. Sometimes owners think that competitors, suppliers, or even friends could be a good fit for the business but these “buyers” may not even be interested. Another scenario is when a business owner sells to an unqualified buyer who then run the company into the ground. If the sale involves an extended contract, both parties end up losing money. In today’s global marketplace, sellers need to evaluate all options and make decisions based on the long-term big picture.
3. Not Having the Right Team In Place
Many business owners built a successful business based on financial savvy skills. This sometimes causes them to mistakenly think that they should save money by not working with advisors or by picking the first one they meet. A seasoned business broker provides much-needed guidance during the complex process of a sale. It’s their job to help you get the highest amount and best possible terms for your business. Without a team of legal and business professionals on your side, you risk losing a lot more time and money.
4. Proper Promotion of the Sale
Sellers that announce the sale of the business to too many people can jeopardize maintaining the value of the business. When word gets out about a sale, employees, vendors and even customers may become uncertain about the future of the business and turn to competitors instead. However, expecting only the broker to market your business isn’t the correct approach either. You will be your most passionate advocate about your business and carefully brainstorming a limited number of people to approach as potential buyers is a smart strategy.
5. Not Knowing The True Value of the Business
Setting the price too soon due to burnout or from poor advice (i.e. family and friends rather than professionals) may mean you ask far too little for a business capable of getting more. While you may have multiple offers, you may also be missing out on the highest price possible. Similarly, over-valuing the business based on unrealistic expectations or emotional attachments may leave you with no offers at all. You may have a number in your mind, but it should be confirmed with research and a business valuation based on your industry, similar businesses, the economy and the marketplace.
As more and more business owners look toward retirement, the number of businesses for sale will continue to increase. Those who are considering selling in the coming months or even years should start planning now.
If you would like a free business review and consultation, contact us today.