In this series of articles, we are going over the top mistakes business owners make when they decide to sell their business.
Savvy business owners do not leave any tables unturned to take their business to the aspired heights. However, when the time comes to reap the rewards and cash in on their business, we find many business owners making drastic mistakes that cost them significant amounts of money, that is, if they are able to sell the business at all.
We always tell business owners to address these potential mistakes way before even thinking about selling their business, in order to secure the outcome of a successful sale.
Deadly Mistake: The Hands-Off Approach
The ninth deadliest mistake is when the business owner decides to take a hands-off approach to selling their business. It can greatly reduce the chances of finding the perfect buyer for your business, negatively impact the value of your business and make the entire selling process slow and complicated. It shows a lack of resolve and concern on your part, and makes it difficult to get the kind of deal you and your business deserve.
In a previous article, we explained the mistake when choosing not to rely on capable professionals to sell the business. The mistake we’re discussing here is practically the opposite, as in this one, the owner decides to disengage from the process completely. DIY’ing can be catastrophic, as you most likely do not have the expertise nor the experience necessary to effectively deal with all the intricacies of selling a business. However, completely disengaging from the selling process and leaving everything on the hired professionals does not make much sense either.
It is important that you access the legal, financial and brokerage skills of professionals to smoothly transfer the ownership of your business to new hands. It is also important to understand that your work does not end with hiring a quality business broker. In fact, it might merely be the first step on the journey to a successful sales deal. Harnessing the experiences and expertise of the professionals to leverage the best possible deal for your business is what you should aim for. A synergistic approach is what works best!
Why You Should Remain Involved
Remember, it is your business! Although your intermediary or advisor will work diligently to market your business, no one has more motivation to sell, nor as much inside knowledge about the business, than you do. There is no better promoter of your business than yourself. A broker can help you get some leads, but to ensure the sale process gets the most traction and buzz, you have to remain engaged as well. Do not forget to keep the search away from the eyes of your employees and customer base!
No one knows the ins-and-outs of your business and your industry quite the way you do. Your advisory team may have prior experience of selling in your particular industry and they will try to learn as much as they can about your business in the limited time; however, do not expect them to have a comprehensive and nuanced knowledge of the internal structures and environments as well as the future goals and aims of your business. If you want a new owner that can help your company fulfill its growth potential, you need to stay involved in the selling process.
Effective promotion is not the only thing you can ensure. A collaborative effort by you and the business advisors can help you prepare your business for a smooth transfer of power and ownership. It is important that you carve out a great working relationship with your advisors. The team of advisors you work with should be able to chart a reliable path to sell your business, including very specific actions they will need you and your staff to take. These steps will help you get your legal and financial house in order, and secure the highest possible valuation and asking price for your company.
In addition, once the advisor has found some promising prospective buyers, you have to convince the buyer that buying the business will offer value. There is no one better for the buyer than the seller himself to ensure the company will be easy to purchase and manage. For that to happen, you have to forge a relationship with the buyer and allow for trust to develop between the two parts. Building a high level of confidence can be difficult if you fail to actively participate in the selling process.
The prospective buyer needs to know that your business has all the structures in place to accommodate the change of ownership. Most of the buyers prefer buying businesses where the owner is willing to guide them through the transition period and help them ease into the new business. Your active and engaged participation in the selling process can drive the value and sellability of your business up. Your interaction with the potential buyer — of course, with the assistance of your selected third-party professionals — will have a significant impact on whether your business sells.
However, a lack of interest or motivation to actively participate in the selling process of your business can be outright dangerous. Your refusal to interact with prospective buyers can send them warning signals about the viability of the business itself. They may be forced to think that either you have something to hide or are not interested in selling to them at all. If you want to secure a great deal for your business, there have to be no barriers between you and the buyers. Lack of interaction with potential buyers can give rise to mistrust, doubts and consequential loss of potentially favorable deal.
To avoid all these problems, you need to work closely with your advisors throughout the selling process. Hire the help of some experienced lawyers, CPAs and brokers, and create a team that can help you exit your business lucratively. Plan out the sales process in advance, have a conversation with your qualified team of advisors about which role each party will assume along the process, and see to it that each party — including you — fulfills the assigned responsibilities and duties. You will be surprised as to how smooth the selling process of your business turns out to be.
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