Most entrepreneurs won’t ever get too many opportunities to sell a business. So you’ll surely agree it’s something you would want to do well. And to help you achieve just that aim, here’s a list of some common mistakes you should try to avoid when selling a small business.
Lack of preparation
All the evidence suggests this is the most frequent mistake a business seller is likely to make. Note that owners of domestic real estate take the trouble to smarten up their home before putting it on the market because they know it will command a better asking price. And exactly the same applies when preparing a business listing. You should look carefully at the key aspects of your business, but always from the perspective of a potential buyer.
An interested buyer will expect to see: up to date financials giving evidence of profitability, well-maintained equipment and business premises which meet contemporary standards, the installation of properly resourced digital technologies applicable to your sector, an efficient management team, and very much more besides.
Failure to engage professionals
Using professionals to sell your business puts your sale strategy on the front foot from the outset. This move sends a signal that you are serious about selling, and clearly implies you have a small business which is worth buying. But the advantages go well beyond that.
Employing a business broker, for instance, means your business will be directly marketed to keen buyers, while a professional (and sector-appropriate) valuation will be a true reflection of the worth of your enterprise—and much harder for any buyer’s professional team to challenge when negotiating a deal!
Meanwhile, a good lawyer who knows your field of business will be invaluable when drawing up sales contracts, and will also ensure your company stands compliant with all relevant legislation and trading regulations.
In addition, you may need to call upon other sector-specific professionals during the sale procedure (e.g. accountants and financial consultants), and you can be sure a good professional team will be a real asset when deal-negotiating time finally comes around.
And remember that without a professional team of your own, you might be called upon to answer some difficult technical questions posed by the buyer’s own due diligence team.
Failure to stay engaged with the sale
Too many sellers turn the whole process over to a business broker and then just wait for the phone to ring. But even though a professional broker will put lots of effort into getting you a deal, it’s unwise to stay too hands-off. The best approach is to give your broker enough space to work while also engaging in regular proactive update conversations.
Not only will this mean you stay informed about marketing progress, it will also be an opportunity to trade further information and ideas with your broker. The outcome will be a more nuanced presentation of your business which is likely to lead to a quicker sale.
The enhanced understanding your broker gains may also result in a significantly higher offer than you would receive just by letting the sale process roll on and on until it’s finally done.
Misrepresenting the facts about your business
As a business owner, you may have a variety of reasons why you wish to sell. But in every case, the seller is legally entitled to rely upon everything you say when answering questions or describing your business.
While that’s reason enough to appoint your own professional advisers, it’s smart to realize that the buyer’s team will also ask for evidence to support whatever you say. And given that they handle such transactions on a regular basis, these professionals will be able to spot any false claims in an instant.
So the clear advice is: nothing is easier to explain than the truth. Even bad news will gain you respect, whereas (at best) fake information will lose you a sale.
Failure to pre-qualify potential buyers
One major advantage of a professional team is they can pre-qualify interested buyers. For you, that removes the risk of a deal falling through once you realize someone keen to purchase can’t raise the finance, or is ineligible to trade, etc. Moreover, it avoids the maddening possibility that you’ll end up turning away and losing potentially serious offers which come in late, only to then discover the first buyer you were relying upon can’t deliver!
Author: Bruce Hakutizwi, Director of North America for BusinessesForSale.com, the world’s largest online marketplace for buying and selling small and medium size businesses.