Top 5 Mistakes to Avoid When Selling a Business
We don’t like to be the bearer of bad news. But industry statistics show that, out of every ten businesses listed for sale, only five will get an offer, only two will sell, and only one will sell on the seller’s terms. When you exit your small business, will your company be among the lucky ten per cent?
Turn the odds to your favour. Follow the right steps to increase your likelihood of closing a great deal. Too many people make mistakes when selling a business that jeopardize their outcomes.
Falling into these traps can cost you money, lead to disappointing sale terms, or even make a buyer walk away completely. To avoid headaches in your sale process and prevent lasting regret, beware of these five common business-selling mistakes.
Did You Know...
Out of every ten businesses listed for sale, only five will get an offer, only two will sell, and only one will sell on the seller’s terms.
Common Mistakes When Selling a Business
Mistake 1: Not knowing what your business is worth
“I’ve worked so hard to build my shop,” you say to yourself. “It’s got to be worth a mint!” Not necessarily. One of the most common mistakes we see is sellers listing at inflated asking prices, causing their business to languish unsold for months or even years.
On the other hand, maybe you’re not aware of the hidden value that’s locked in your company. So, you underprice and walk away with a thinner wallet than you deserve.
When you work with the experts at Transitions Business Brokers, you’ll get a thorough broker estimate of value for your business.
Mistake 2: Thinking it’s all about the money
Want to walk away with a windfall and sail into the sunset on your expensive new yacht? Or does your heart yearn for something more meaningful? Ask yourself what you really want to accomplish in the sale. Many sellers decide that achieving other goals supersedes getting the highest possible price.
Your exit strategy and eventual deal structure will depend on what you’re looking for. For example, maybe you need to get out fast and will be willing to accept a lower closing price. Or maybe it’s important to find a new owner who will continue your business model and retain your employees. Or to structure a deal that minimizes your taxes.
Instead of dwelling on price, think more about how you want to structure your sale.
Mistake 3: Not seeing the buyer’s viewpoint
Buyers are looking to identify any risks in your company. When you’re transparent and honest in all your dealings with buyers, they’ll notice and they’ll be impressed.
Warts and all, the truths about your business will be smoked out eventually, probably during due diligence. So, put yourself in buyers’ shoes from the start, understand what they need to know during each stage of the buying process, and provide all the documents and data to help them make an informed decision.
When you negotiate, be flexible and expect to make trade-offs. Aim for an agreement that’s a win-win for both of you, not a winner-takes-all in your favour.
Mistake 4: Neglecting the business while it’s on the market
What’s another sure way to make buyers scurry away? Slacking off on the job while your business is up for sale. Falling revenues destroy deals. Maintain your day-to-day operations as usual, and continue to invest in your property, equipment, and employees.
Neglecting your business can create risks for buyers and lower your business’s value. And never assume a deal is around the corner. Sales fall apart all the time, often for causes beyond your control.
Mistake 5: Failing to prepare, both the business and yourself
Getting your business ready for sale is a project in itself. Good exit strategies include reducing problems—like bad records or damaged inventory—that may pose risks for potential buyers. And given a buyer could visit your facility any time, clean up any “messes,” such as dirty offices or broken equipment.
It’s easy to get so wrapped up in the sale process that you forget to prepare yourself! Whatever your next stage of life will hold, your personal transition comes with enormous emotional and financial consequences. So, plan for the “business-sized hole” you’ll have in your life after the sale.
Follow these tips to prepare for your sale and transition.
Whether you’re selling in Toronto, in the GTA, or elsewhere in Ontario, you only sell your small business ONCE. Avoid business-selling mistakes by getting advice from a Certified Exit Planning Advisor (CEPA) and seasoned business broker, who can also help you transition into your next stage of life feeling prepared and confident.
Start turning your business selling dreams into reality! Engage the Transitions Specialists today.