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Selling Your Business? Don’t Make One of These Mistakes

 

The decision to sell a business is a big one. And whether it’s preceded by positive or negative circumstances, you want to make sure you’re being smart about the choices you make.

 

Avoid These 5 Mistakes

You never want to go into the sale of a business with a negative mindset. However, it’s useful to familiarize yourself with what not to do. Here are a few of the common mistakes small business owners make before and during the sale process. By avoiding them, you’ll give yourself every chance to be successful.

 

 

  • Improper Timing

 

Timing is everything. If you wait too long, you could miss your window of opportunity. If you move too quickly, you could fall victim to hasty mistakes and erroneous decision making. 

 

As those within the industry know, it takes, on average, two to four years to sell a business. So it’s not like you can decide to sell your business one week and have a deal in place the following week. There are meetings, due diligence, offers, retracted offers, counter offers, etc. And even after both sides reach an agreement, there’s usually a period of time where you have to work with the new business owner to hand off the company in an efficient and secure manner.

 

All of that to say this: Always operate with the end in mind. Whether you’re planning to sell your business in the next five years, pass it on to a successor, or keep it for decades to come, there needs to be a plan in place. 

 

 

  • Insufficient Preparation

 

This mistake goes hand in hand with the first one. In the same way that you have to be smart about timing, you also need to prepare your business before you begin the process. A failure to address the following could slow down or prevent a sale:

 

  • Taking questionable or excessive tax deductions (including too many discretionary or personal expenses).
  • Pending or threatening litigation that’s unresolved.
  • A lack of organized bookkeeping and accounting records.
  • Improperly trained employees who are incapable of running the business in your absence.

These are issues that will hold up a sale every time - and they can take months to iron out. Make sure you’re dealing with what’s “under the hood” - not just polishing up the exterior.

 

 

  • No Comparative Analysis

 

Would you ever sell your house without first conducting a market analysis to see what comps in your area are going for? 

 

Would you attempt to sell your house without first consulting with someone who understands the market and knows what they’re doing?

 

Hopefully the answer to both of those questions is a resounding no. And the same should be true when selling a business. It’s very important to hire a broker who understands the current supply and demand in the market for comparable companies. This sort of comparative analysis will help you understand whether or not it’s the right time to sell, as well as the best possible sale price to get competitive offers.

 

 

  • Disengaging From the Process

 

After hiring a broker or advisor to help sell your business, don’t make the mistake of stepping away or closing your eyes. Many sellers make this mistake and it almost always comes back to haunt them. 

 

Nobody will ever be as motivated to sell your company as you are. If you remove yourself from the process and become disengaged, things will stall and issues will emerge.

 

 

  • Accepting the Wrong Offer

 

Getting an offer for your business is exciting. And if it’s enough money to allow you to retire comfortably and live out your years doing whatever you please, it’s tempting to immediately say yes. However, this may be a mistake.

 

It’s almost always better to turn down the first offer, unless your broker agrees that it’s the perfect deal. Say no to offers that provide little or no money down or provide seller financing. You want a clean break with as little hassle and future risk as possible.

 

Sell Your Business With Confidence

Confident business owners typically end up getting a higher valuation on the sale of their business. By understanding what not to do and combining it with best practices and proven methods, you can increase your confidence and achieve better results. Are you ready?

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