Selling a business can be complex and time-consuming, but it can also be incredibly rewarding if done correctly. Many business owners make the mistake of thinking that selling their business is a straightforward process. Still, there are many pitfalls to avoid to ensure a successful sale. It is worth exploring the five common mistakes business owners make when selling their business and what you can do to prevent them.
Selling Your Business on Your Own
One of the biggest mistakes business owners make is trying to manage their business's sales without a professional's help. A business broker is better equipped to handle the sale of your business as they understand the process and the legal consequences of it. They also have the time and expertise to negotiate a deal that works for you and can offer valuable insights into pricing strategy and financing options. A business broker can filter inquiries and vet buying prospects leaving you free to run your business. This can include bank pre-qualification, proof of funds and distributing and answering questions on financials and other information a buyer requests.
Taking Your Foot Off the Gas
Once you've begun the sale process, it's important to continue operating your business as if nothing has changed. A potential buyer will want to see how the company has done historically but also understand how it is doing now. Since selling a business ca take months sometimes, you want to keep running the business at the highest level possible during a sale. If you start making changes or stepping away from your company, that could negatively impact your business's bottom line and turn interested buyers away. Maintaining focus and energy is important until the closing documents have been signed.
Telling Your Employees About the Sale
Another common mistake is to tell your employees about the sale before it is finalized. This could cause panic and even lead to employees leaving the company, which could negatively impact the value of your business. It is natural to be apprehensive about change. Employees that would typically be very loyal and not be interested in other employment opportunities might start looking or listening. If key employees leave during the due diligence process, that can make it more difficult to sell. It's best to not tell your employees, customers, vendors, and suppliers until after the sale and then you can personally talk to the employees about the buyer you have handpicked to take over and grow the business. You will want to present this is an opportunity for everyone involved and you can personally introduce them to the new owner.
Waiting Too Long to Sell Your Business
The sale of a business can sometimes take a lot of work and several months or even more than a year to complete. It's important to list your business for sale 1-2 years before your planned exit, as this allows for enough time for the full process including an effective training and transition period with the new owner. Listing your business for sale right before you need to sell can compromise the sale value and lead to a less successful outcome.
Unrealistic Expectations
Business brokers are experts in business valuation methods and market conditions, so it's important to trust their expertise and set realistic expectations for the sale price. Listing your business for sale at an overly high price can slow down the process, turn off potential buyers, and ultimately cost you money.
Selling a business is a complex process, but avoiding these common mistakes can increase the chances of a successful outcome. Consider working with a professional business broker (like ours at Transworld!) who can help guide you through the process and ensure you get the best possible result.