Selling your business is likely to be one of the most significant (and lucrative) things you ever do. In fact, for many, it’s a life-defining moment, consolidating years of hard work and passion.
Naturally, there’s plenty you can do to ensure the process of selling your business goes smoothly and you walk away with everything you hoped for, however, the journey to the closing of your business sale is also littered with potential potholes.
Here, we take a look at the ten most common mistakes of selling your business and how to avoid making them.
(1) Poor preparation
This is possibly the most common mistake when selling your business, and perhaps the most foolhardy. Poor or insufficient preparation will definitely put you out of pocket and may even lead to the breakdown of a sale completely – a nightmare if you need to sell urgently.
However, this mistake can be easily avoided by drafting up a clear sales plan and calendar, ensuring documents are up-to-date and easily to hand, and preparing any other critical areas of your business. Ideally, preparation for selling your business should begin at least two years in advance of your proposed date of sale.
(2) No exit plan
An exit plan is a crucial part of your preparation when selling your business. In fact, many business advisors will suggest that you should be preparing a comprehensive exit strategy as soon as you begin your venture.
This will help you deal with a variety of factors, including how to value a business; how to prepare for the transition; and perhaps most importantly, how to deal with the aftermath of the sale on both a personal and professional level.
(3) Neglecting the day-to-day
Firstly, it’s worth noting that selling your business will unavoidably take up much of your attention. The sheer amount of work involved can be quite overwhelming, however, you simply cannot let this impact your day-to-day business tasks.
Put simply, if your business begins to suffer because your mind is elsewhere, then so will your saleability and subsequent profit. This is one of the reasons to ensure you have two years or more to prepare the sale, giving you the chance to work on your sales plan at your own pace.
(4) Lacklustre marketing
Whether running your business or selling it, marketing is crucial to generating the required exposure to attract interested parties. If you don’t take this aspect of selling your business seriously, then you stand to lose profit through lack of competition.
Make sure you use a reputable sales portal such as Daltons Business and take advantage of all the tools it has to offer. Ensure you write an appealing business description and use high quality images to begin with. Additionally, take advantage of social media to spread the word and generate excitement between potential buyers.
(5) Locking yourself in with a bad broker
If you decide to use a professional to broker the sale, then beware. Not only will they take a hefty chunk of your profit, but you must also ensure you are getting the real deal. Not all brokers were created equal, and some simply use sales channels that are also open to you for free.
Additionally, most brokers will require you to sign an agreement that stops you from advertising elsewhere for the duration of the agreement. This means that if you do choose poorly, you are locked in for the duration, so make sure that you choose well, ideally on recommendation from a peer.
(6) Failing to prequalify buyers
Ensuring you prequalify any prospective buyers will save you plenty of headaches going forward. Often, sellers are wary of this step as it has the potential to scare off interested parties. However, in reality a professionally approached pre-qualification can in fact draw buyers in by signing documents to keep both parties safe.
Ensure you implement a non-disclosure agreement at the very least to protect your confidential information as you move through the sales process. This way, should the sale fall through, you will not have to worry about your industry secrets falling into the wrong hands.
(7) Incorrect valuation method
Valuing any type of business is a tricky thing. There are a variety of factors at play which can impact on the final valuation, and a number of risk must be navigated in order to ensure your concern is priced neither too high, nor too low. Ensure you identify the correct method of valuation in order to get an accurate number on your business.
This may take into account the business potential, the costs of setting up a similar business from scratch, or even what kind of profits a potential buyer can take away each year. Choose wisely as in the end, it’s your profit that is at stake.
(8) Making yourself indispensable
As they grow, many businesses understandably lean on leaders for success. Of course, it’s very tempting to make yourself utterly indispensable when it comes to your passion; after all, everyone likes to feel wanted. However, this is a big no-no when it comes to the sale of your business.
Basically, if your SME falls to its knees the moment you leave, who will want to buy it? If you find that you have been fulfilling this role when you think about selling, then begin to transition yourself out of the business. Pass on responsibilities and ensure other staff members can take up the torch in your absence. This way, selling your business will not only be attractive to potential buyers, but will also be more sustainable generally.
(9) Selling to the the wrong person
Money isn’t everything, and nowhere is this truer than during a business sale. Naturally, you want to make as much profit as possible but at what cost? For example, if you have good relationships with your staff and you know one particular buyer is likely to streamline and cut jobs, will you still want to let them take the business from you?
Additionally, if you plan to operate in the same industry, do you really want to sell your business to your main competitors? Avoid this mistake by ensuring that you and the buyer are clear in your intentions and that you don’t prize cold hard cash over everything else.
(10) Forgetting the transition
With so much to remember when selling a business, it’s easy to forget to hand over the keys at the end of the process. The transition at the end of the sale is when you’ll also need to hand over any documentation and sign plenty of paperwork.
Make sure you are prepared for this by having everything required easily to hand. Additionally, pass on any business-specific advice to the new owner to help them with their own transition period.
This piece was written by Daltons Business[rb_inline_related]
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