Mistakes to Avoid When Selling a Business
Selling a business is a long and very complicated process. It’s foolish to think it’s anything but. It’s the business owners with little to no experience in selling a business who fail to maximize their return, or get frustrated at the length of the process. Why? Because they made the following common, and avoidable, mistakes:
Lack of Preparation
By far, lack of preparation is the most common mistake sellers make — in both timing and execution. Often taken for granted is the amount of time it takes to prepare, and the amount of work that needs to be done. All necessary documents should be accurately prepared and provided to the buyer in a timely fashion. Are there improvements that need to be made to the interior or the exterior of the building? Just like you’re selling a house, you want your business
Not Putting Together the Right Team
Let’s be honest, unless you’ve done this before, your expertise is in running the business, not in selling it. So don’t even attempt to go it alone. Surround yourself by experienced professionals to help get the job done. They’ll be able to not only anticipate any problems before they occur, but they’ll be there to help fix them when they do. For the best results, pull together a talented team of advisors including a business broker, investment banker, financial advisor, attorney and an accountant.
Insufficient IT Systems
Having the proper information technology in place is crucial to a business’ functionality, and potential buyers will be very interested in the IT system that you have in place. An outdated or inferior system, could reduce the likelihood of a sale or dramatically decrease your business’ value. Ask yourself, or an expert, can your current system accommodate growth? If not, you may need to put a little money into an upgrade.
Pricing Issues
Don’t go into the process with lofty expectations. Too many sellers think their businesses are worth more than they really are and overprice their business. If you want to find the actual market value, perform a valuation of your own business. Compare it to recent sales or listings of similar businesses near you to help determine fair market value. The last thing you want to do is overprice your business and not get any offers, or underprice it and leave money on the table. A business broker or appraiser will help you arrive at fair market value.
Not Offering Seller Financing
It’s unrealistic to think that your buyer is just going to be handing over a bunch of cash at closing, and it’s done deal. Not likely. Instead, potential buyers may need assistance with the purchase — and that’s where you come in, with seller financing. It’s just too difficult for buyers today to obtain financing through traditional lenders. Some may need you to take 20 percent of the sale price in the form of a note that the buyer will pay back in installments, with interest. Your openness to offer seller financing will encourage even more eager, potential buyers and will get a deal done that much faster. A win-win for buyer and seller.
An Unclear Transition
To avoid any unexpected surprises after closing the deal, set up a clear transition process and put it in writing during the negotiation process. Make it clear whether or not you will remain on to assist with the transition/training, and for how long you plan to do so. An upfront agreement between the buyer and the seller will clear up any confusion after the papers are signed.