Common Mistakes People Make When Selling Their Business
Selling your business can be a time consuming and challenging process, especially without a good broker. This means there’s ample opportunity for mistakes, some of which can be costly. As you begin the selling process, it’s helpful to know a few of the pitfalls you should avoid. You can then take steps to prepare that will make your sale go much smoother.
Not Having a Plan
When you sell your business, you need to do preparatory work before you go to market. In many cases, businesses won’t be ready for a transition and sellers will leave money on the table. Sellers should have current and accurate financials, preferably prepared by a CPA. Sellers should also make an effort to reduce owner dependency by delegating their responsibilities and cross training employees. In his excellent book Traction, Floyd Wickman repeatedly says, “ Delegate to Elevate”. This is always a good idea and even more important as you consider a sale. Lastly, it is vitally important to keep your foot on the gas so to speak. Sometimes business owners start coasting when they decide to sell, which results in a decrease in sales that can negatively affect their valuation and cause problems with lending. Conversely, increasing sales and profits will attract more buyers, put more money in your pocket, and increase the odds that your business will succeed after the transition. As you prepare to sell, make a plan to keep your business viable and fully operational during the selling process. Additionally, you also need to make plans for yourself. We recommend talking to a CPA and financial advisor early on in the process. Having a post-sale plan can ensure that you will be financially secure after you’ve sold your business. Selling a business is a time consuming and challenging process, hiring a good broker can greatly alleviate additional stress and result in a higher sale price.
Not Marketing Your Business Correctly
Many business brokers will post their listings on one or two business listing sites, then sit back and hope for the best. This works sometimes, but you could be potentially missing a lot of serious buyers. If you want to sell your business, then you need to get the word out to targeted buyers, PE firms, international buyers, and have a follow-up communication plan in place. To best market your business, you need to define who your potential buyers are, know how to contact them without letting your competitors know that you are selling, and know what to do if they show interest. If you know your buyers, then you can target your marketing. A good business broker will determine how to best reach your target buyers and develop a marketing strategy that targets them while protecting your confidentiality.
Selling to the Wrong Person
An essential part of the sale is finding the right buyer that will successfully close and carry on your business. It is important to take the time to qualify and evaluate different options before you sell. You want to find a buyer that will successfully keep your business running after you’ve sold. When selling, it is important that the seller does their diligence on the buyer to make sure they are qualified to continue running the business. We want the buyer to be wildly successful!
When you sell your business, you want to make every effort to avoid potential pitfalls. Take some time to understand what could go wrong during your sale. If you do this, you can be prepared for these mistakes and take steps to avoid them. Most importantly, remember that you need to be focused on running your business to the best of your ability to ensure a smooth transition. A good broker will find a better buyer, get a higher price, and make the deal go much smoother.
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