Business

9 Mistakes to avoid while selling a business

You’ve worked hard to grow your business, and now you’re ready to exit and retire or move onto other, more exciting prospects. It is not a simple or easy process, but it can be a lot less worrisome if you avoid these common nine mistakes while selling your company

These errors include insufficient preparation, unwillingness to lean on professionals, selling when revenue is down, and listing too high or too low. 

It is not a quick process either. You can expect it to take at least six months to sell your company

Here’s a look at nine common mistakes to avoid. 

  • Insufficient preparation

One of the most common mistakes when selling your business is failing to plan. For example, you wouldn’t sell your house without giving it a facelift. 

You’re ideally going to want to have all of your affairs in order before you decide to sell, including consistent revenue, no staffing or leasing issues and any other concerns that might deter a sale. 

Failing to do so will reduce the overall price that someone will be willing to pay for your business. 

Many brokers suggest a two year runway before speaking with actual buyers. 

  • Not organizing your records

Along with insufficient planning, you should also make sure that all of your records are in order. You’ll want them immediately handy if the perfect buyer comes along. 

This means keeping up-to-date financial records along with a complete history of the business

A prospective buyer is going to conduct a thorough due diligence analysis of your company before agreeing to sell so having this information at the ready is crucial to a smooth transition. 

It will also tell the buyer that this business has been run professionally for years if this information is quickly made available. 

  • Unwillingness to leverage professionals

You may be an expert at running your business but you’re not an expert in selling it. Making sure you have the right team behind you can yield a bigger purchase price. 

Hiring a broker can cost around 10 percent of the sale price but working with one will almost certainly lead to a smooth process and a deal that is actually closed – worth the money if you have your own timeline for a sale. 

Lawyers can also help with due diligence by supplying such as bills of sale, promissory notes, secretary and officer certificates and resolutions and meeting minutes of directors, shareholders, members and managers. 

  • Selling when revenue is down

You’re trying to maximize the amount of money you can get for your hard-earned work. And that means selling when revenue is either growing or, at the very least, consistent. It’s hard to get your maximum price when sales are down. 

This might mean selling ahead of schedule if you’re worried about flagging revenue in the short- to medium-term. 

  • Not maintaining confidentiality

You need to be careful maintaining confidentiality when you’re looking to sell your company. If the news gets out too early, morale might weaken among your staff. Important people could leave and sales could be impacted as customers move to other suppliers. 

An experienced broker will know how to maintain confidentiality while providing the appropriate information to a buyer. 

  • Mentally checking out

You need to stay involved in the process even if you’ve hired a qualified professional. It will send a strong message to your employees that you are engaged and that can trickle down to your customers. 

It also sends a signal to your prospective buyer that you care about this sale as much as you cared about growing the business from the start. 

They will likely feel more comfortable that you’ll be around to handle any potential problems during the sale and around for advice if issues arise after the deal is done. 

No one is going to have as much passion and commitment to the sale as you so keep invested in the process to avoid this common pitfall. 

  • Listing too high or too low

Conducting a thorough valuation of your business — whether by a professional or yourself if you’re capable – is essential to a good sale. 

Setting a price that is too low means less money for you but it also may scare off buyers who wonder why the price is so low. 

Doing the opposite can also scare off potential buyers. 

A valuation advisor will usually offer a range ($1.2 million to $1.5 million, for example) which will provide a good starting point for negotiation. 

If you’ve hired a broker, let them earn their fee by getting the best price for you. 

  • Failure to pre-qualify buyers

Another common mistake is failing to pre-qualify buyers early on in the process. Confidentiality agreements and financial documents are standard requirements for prospective buyers. 

You’re going to have to share a lot of sensitive information so you want to make sure you’re doing that with serious buyers only. 

This can also save you time so you’re not negotiating with someone who can’t seriously purchase the business. 

  • Not discussing the transition in advance

Another error is not discussing what a detailed transition looks like in advance of the final sale. It’s important to understand that your responsibilities are not finished as soon as the deal is closed. 

What does a meaningful transition look like? How will the process unfold? How long will it take? 

You’ve spent years or maybe decades growing your company and a clear transition can help ensure the long-term success of your venture after you’ve left. 

Conclusion

Here’s a quick look at some of the common mistakes to avoid when selling your company. 

You’re going to want to organize your records well in advance of a sale. You should strongly consider hiring professional help. 

Stay involved in the process throughout to ensure a smooth transition. 

Make sure to list at a price that isn’t too high or too low and one that has been determined after a thorough valuation. 

All of these tips will help you negotiate a smooth and hopefully timely exit from your business.

About author

Articles

I am a content writer, who has worked for various websites and has a keen interest in Forex and stock market. He is also a college graduate who has a B.A in Journalism. Read More: Forex Signal Service Read More: Stock Trade Signals
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