6 Mistakes Business Owners Make When Selling Their Business
Are you building your business to sell?
For most entrepreneurs, the business is the single largest source of non-cash wealth, and at some point you’ll want to harvest that wealth by selling. Done correctly, selling your business can be life changing. Done wrong, watch out!
A botched sale will leave money on the table, and bring big headaches down the line. If you want to enjoy the moment you finally sell your company, here are 6 traps you need to avoid:
1. Not Selling Soon Enough
Did you know that most businesses up for sale will never sell? In fact, 80% of companies will never be sold. So, one of the biggest mistakes you can make is missing an opportunity to sell.
If you’re thinking about selling a company, don’t wait until you think you’ve reached your peak profit margin to sell. Investors want something with room to grow, not a finished product that’s almost past its prime.
2. Overvaluation
Do not try to value your business yourself. You’re much better off hiring someone who knows how to value a business. There tends to be a ton of personal pride involved from the owner’s perspective, so much so that it often leads to overvaluation.
While you don’t want to get lowballed, you also need to know when and where to concede on price. It all comes down to the numbers, so find someone who knows how to check them properly.
3. Letting Off the Gas Pedal After a Sale
Hardly any sale is done and finished once the initial paperwork has been signed and agreed upon. There is usually some type of monitoring period up to a year after a company has been sold.
If the company starts to go downhill after the initial sale has been agreed upon, the sale might have to be renegotiated or might even be voided completely. Continue running your business at full speed until you are 100% free of responsibility.
4. Neglecting Forecasts of Future Growth
Especially if your potential buyer is financed by a bank, future growth projections could play into the sale big-time. Don’t stop generating projections of your future growth during the “due diligence” phase mentioned above. These projections need to stay up to date and optimistic if you don’t want a buyer to back out.
5. Letting Deal Fatigue Discourage You
Use a selling a business checklist to avoid “deal fatigue”. These deals take over a year to complete in many cases, with many ups and downs as you go. Keep to your checklist and don’t let the process run you ragged. Use personal stress management techniques to mitigate the fatigue.
6. Not Vetting a Buyer
Not every buyer is operating on the up and up. Make sure yours is properly financed, with a paper trail to prove it. You don’t want to get stuck waiting for money that’s never going to come. An inept buyer could run your company into the ground and expect you to cover the losses before a deal is dead and done.
Avoid these Mistakes Like the Plague When Selling a Business
Avoid making any of the mistakes listed here if you want to complete a successful, wealth-building sale of your business. Any one of these mistakes could leave you empty-handed, so plan ahead and stay focused on the goal!
Guest Blogger Marla DiCarlo is an accomplished business consultant with more than 28 years of professional accounting experience. As CEO of Raincatcher, she helps business owners learn how to sell a business so they can get paid the maximum value for their company.”
