business selling advice

Mistakes to Avoid When Selling Your Business

Selling a business, especially in the current economic climate, can be a complicated process. You want to get the best price from the right buyer and smoothly transition the business to the new owner. The process takes a significant amount of planning, negotiation, due diligence, and transition.

1. INADEQUATE PREPARATION

To ensure a successful experience, it is important to keep your financial records up to date and your business history well-documented. Any legal issues should be cleared up. You should maintain a data room of essential financial and legal documentation and support, including a detailed sales portfolio, in anticipation of the moment when the perfect buyer shows up.

2. NOT CONSIDERING APPEARANCES

Just as if you were selling a home, you should do everything possible to make the business as attractive as possible to potential buyers. Failure to do this may make the sale take longer and can result in a much lower price than you hoped for.

Is your office space ugly and cluttered? Clean it up and paint it. Do you have personnel issues? Take care of them. Do you have taxes due? Pay them. Are there problems with your record-keeping? Fix them. Issues that seem small to you may be of great concern to prospective buyers. Failure to address them before listing the business for sale may cost you.

3. NOT CONSIDERING THE STRUCTURE OF YOUR BUSINESS SALE

Too many business owners focus only on getting the desired price, but there are other considerations that can turn a full-price offer into a bad deal. For instance, you need to determine how much you will be willing to pay in closing costs, income taxes, and other expenses. Will the entire purchase price be paid at closing or is the buyer asking you to carry a loan?

You should consider whether and how much you want to stay involved after the sale. Are you willing to accept requirements of confidentiality and non-competition that could hamper your ability to engage in other businesses? Are there non-cash benefits that could make a lower-priced bid more desirable?

4. WAITING TOO LONG TO PREPARE

It is a common mistake for business owners to wait until the company is in trouble before thinking about an exit strategy. Ideally, preparations for selling your business should begin as soon as the business is organized. Remember, the best time to sell a business is when it is doing well. If you wait until sales start to dwindle, your health deteriorates, or you become desperate, it may be too late to attract a good offer.

5. ASKING THE WRONG PRICE

If you ask too much for your business, you may have trouble finding a buyer. Having to lower your price is a blow to your ego and may attract bargain hunters who try to get you to lower it even further. On the other hand, if you ask too little, you may be leaving money on the table.

Leave a Comment

Your email address will not be published. Required fields are marked *