Top 5 Mistakes Owners Make When Selling A Business
Are you getting ready to sell your business? Selling a business can be an overwhelming and complex process, but with the right knowledge and guidance, it doesn’t have to be. Unfortunately, many owners make mistakes along the way that cost them money or a successful sale. In this blog post, we’ll discuss the top 5 most common mistakes so you can learn from others’ experiences and avoid making costly errors yourself. This is vital information for any business owner looking to clinch their dream deal.
1. Not Having Financial Records In Order
Keeping track of your books or financial records is crucial for any business, regardless of its size and industry. However, many business owners struggle with bookkeeping and just don’t have the time or expertise to keep their records up to date and neatly organized. This can be a costly mistake, particularly when it comes time to sell your business. Buyers, banks, third-party lenders, and business brokers will want to see a clear and accurate record of your financial transactions over the years, and if you don’t have that, it can make your business appear unattractive, not bankable, and ultimately less valuable. Therefore, it’s critical to carefully invest time in bookkeeping or hire a CPA or other accounting professional to ensure your record-keeping is impeccable. Doing so could ultimately make a significant difference in your business’s sale price and long-term success.
2. Not Preparing The Exit Early Enough
One of the biggest mistakes business owners make is not preparing their exit strategy early enough. Whether you’re planning to retire or move on to other ventures, it’s essential to start thinking about the future of your business well in advance. By doing so, you can take the necessary steps to make your company as attractive as possible to potential buyers and maximize its value. This can include everything from improving financial performance to streamlining operations and developing a strong management team. Ultimately, the key to a successful exit strategy is careful planning and execution, so be sure to take action sooner rather than later if you want to achieve the best possible business valuation when it’s time to sell.
3. Setting Unrealistic Price Expectations
Setting unrealistic price expectations can be a common mistake that many business owners make. It’s crucial to conduct thorough market research, have a solid business plan, and consult a professional experienced with business valuations for your industry. Otherwise, you could be setting yourself up for failure if your price point is significantly higher than what the market will bear. Additionally, it’s essential to stay up-to-date on industry trends, which can impact your pricing strategy. Setting an unrealistic price can also be a result of an unprofessional business valuation, which may overlook critical factors that could affect your pricing decisions. By taking the time to do your homework, you’ll be in a much better position to set a price that not only reflects the value of your product but also meets market expectations.
4. Allowing Emotions To Cloud Decision-Making During Negotiations
Selling a business is undoubtedly a significant and emotional decision, and for good reason. It can be challenging to not let any emotional attachment impact decisions during business negotiations. When business owner allows emotions to cloud their better judgment, it can lead them to make decisions they later regret, such as backing out of the deal at the last minute. Hiring professional business brokers or an experienced third party can help you navigate the sale process with an objective perspective. To ensure a successful transaction, it’s also essential to emotionally prepare to sell by focusing on the potential benefits of the sale in addition to having a plan for post-transaction. Whether that involves investing in a new business opportunity or enjoying retirement to the fullest, a solid plan can help soften the blow of passing off the company keys and approach negotiations with confidence.
5. Skimping on Professional Assistance
If you’re planning to sell your business, it’s tempting to cut corners and try to handle everything on your own. But here’s the truth: skimping on professional assistance from a business broker or M&A advisor will usually end up hurting you in the long run. These experts have years of experience in navigating the intricacies of buying and selling businesses, and they know exactly what buyers are looking for. They can help you identify potential buyers, negotiate deals, and make sure you’re getting the best possible price for your hard work. While a commission fee may sound costly at first glance, a closer look will reveal quite the opposite. Hiring a professional advisor can increase the sale price of a business by as much as 15-20%, which is more than enough to cover the 10% brokerage fee. Not only will business owners be able to maximize their returns when selling their business, but they will also benefit from the numerous resources and services provided to streamline the entire process, from start to finish. So don’t let a misplaced desire to save a few bucks prevent you from earning a higher return while saving valuable time and unneeded stress.
With these top 5 mistakes in mind, we believe it is absolutely essential to ensure that business owners are adequately prepared with all the necessary resources for a successful business exit. Not having up-to-date financial records, not preparing their exit early enough, setting unrealistic price expectations, allowing emotions to cloud decision-making during negotiations, and skimping on professional assistance may all contribute towards a lower return. Even if they have seemingly covered all the bases of an exit sale themselves, these mistakes could still be made and have a tremendous impact on the outcome. A professional team of experienced business brokers can support owners in avoiding these common pitfalls when looking to transition from one owner to the next. If you’re looking at selling your business or transitioning it onto another profitable platform, contact our experienced business brokers to learn how we can help.
