Selling your business is a once-in-a-lifetime event. Your grand opportunity to walk away and take care of what’s next on your list has finally arrived. However, in order to make this goal a reality, you must take the appropriate measures to avoid the pitfalls that will show up along the way.
The pitfall that will present the greatest risk is the one you didn’t see coming. This is why we’ve published a series of articles outlining these very mistakes, and how to avoid them.
You can read them in order, or scroll straight to the mistake that might catch your eye the most.
1-Being The Key Employee
A key employee is someone with a majority ownership and decision-making role in the business. The Internal Revenue Service defines a key employee as someone who has more than 5% share in the ownership of the business or someone who receives a certain high level of compensation. (Read More)
2-Lack Of Preparation
When you put your business out for sale in the market, you are essentially asking for financial returns against your life’s worth of efforts. Considering the importance of the decision, refusing to plan ahead of time makes no sense. You have meticulously planned for each aspect of your business over the years to ensure your business performs to the best of its abilities. Why change now? (Read More)
3-Overvaluing Your Business
We jokingly like to call this mistake “The Emperor Has No Clothes!” Pretending your business is worth a certain amount and expecting the prospective buyers to go along with it is rather naïve.
Your asking price determines the fate of your business sale. Asking for way more than what your business is really worth could be the kiss of death for your hopes of a successful exit. (Read More)
4-Selecting The Wrong Buyer
When looking for a buyer for your business, you must know what to look for. Are you willing to sell your business to anyone who offers you the right price? Is it a meaty enough offer? More than likely you have been instrumental in the success and longevity of your business. Surely, you do not want your company to end in the hands of an owner who does not know what to do with your business. (Read More)
5-Waiting Too Long To Sell Your Business
When it comes to selling a business, timing is important. Retirement may be an alluring prospect; however, selling your business can be a difficult and time-consuming process. After all, you have spent years immersed in the day-to-day operations and planning the strategies to boost the growth of your business. It is all you know! Your emotional attachment with your business and your indecisiveness can be a mistake that can cost you a financially viable deal. (Read More)
6-Selling Your Business Without Professional Advice
You may not feel the need to access a third party expert opinion, as you might think that nobody knows your business better than yourself. Yet right there lies the issue… You know your business well, but you are not an expert at the business of selling businesses! Selling a business is a lengthy and complicated process that requires experience and a set of particular skills to master. (Read More)
7-Only Talking With One Buyer
How do you measure the success of a sale? If your answer is the price a business is sold for, then you need to have more than one interested buyer, as nothing drives the price or value of a business up than multiple buyers fighting to acquire a business. (Read More)
8-Having One Key Customer
There are many things buyers look for in a business, such as stability, resilience, market share, projected revenue, and growth. Additionally, customer base is an important driver of the value of your business. Potential buyers seek for businesses with strong financial and organizational structures that do not rely on one single client for more than 10% of their revenue. Buyers hate risk! A broad and diversified customer base represents reduced risk and flexible revenue-generation structures. (Read More)
9-A Hands-Off Approach
This attitude 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. (Read More)
10-Only Entertaining All-Cash Offers For Your Business
Most business owners refuse to accept any offer unless the buyer is willing to pay 100% cash on the closing of the deal. On the surface this demand seems perfectly reasonable. However, upon further inspection you may agree that it is downright unrealistic and extremely hurtful to the chances of finding a buyer for your business. If your main goal is to sell your business, you may have to let go of the notion of an all-cash sale! (Read More)
11-Not Preserving The Confidentiality
Confidentiality is the key to business stability. It helps keep the business afloat and ensures proper continuity. You try to keep the sensitive business information under wraps while establishing and expanding your business, so why should it be any different when trying to sell the business? (Read More)
12-Placing Your Business On The Market Too Quickly
We see many businesses failing to sell for the right price or not selling altogether due to this seemingly inconsequential mistake. Your business cycle, the outlook of your particular industry, market sentiment regarding purchase and acquisition of businesses, the availability of finance and capital in the market, and the overall state of the economy are some of the notable factors that must dictate the time you choose to put your business up for sale. Choose the wrong time, and you can jeopardize your retirement dreams! (Read More)
13-Failing To Focus On Your Business While Selling
This is an all too common mistake that can end up damaging profitability and ultimately, adversely affecting the sellability of a business.
It is important to understand that a business must ideally be sold when it is performing at its best. Being immersed in the intricacies of the sales process yet failing to pay the attention to the operations of your business can be a costly mistake. Your business’ performance may suffer and consequently, its value in the eyes of the potential buyers may plummet. (Read More)
14-Ignoring The Business’ Shortcomings
This is a potentially dangerous mistake on various different levels, as it can hinder the progress and performance of your business, reduce its value, and prevent you from taking the necessary steps to address those issues that may be driving down the value of your business.
If you choose to lock on rose-colored glasses and decide to ignore any weaknesses in the business, your exit strategy may crash before it launches. You need to put your best foot forward when seeking a suitable new owner for your business. Pinpointing the shortcomings of your business and taking steps to rectify them can help you do just that. (Read More)