Selling a business can be complicated and it is easy to make some mistakes that can result in losing a lot of money.
This simple checklist will set out the 7 mistakes to avoid when selling your business.
- Not being fully prepared
This is a common mistake with many small business owners. Selling is not just as simple as posting a for sale sign and waiting for the buyers to turn up. There are many factors that affect the final price at which the business will eventually be sold. Financial, legal, HR and contract information will all need to be provided to the solicitors acting for a potential buyer. Gathering all of this can extend the sale by months so it is best to prepare well ahead of going to the market.
- Unwillingness to use professionals
Many entrepreneurs are talented individuals, confident in their own ability. After all, they have just built the business. However not many people get to sell a business in their lifetime and there is a definite advantage to having experts on board. I have seen great results by individuals who appoint a small team of professionals to help them sell. It’s a good idea to get your accountant and solicitor engaged early and working with you as part of your team. They need to be involved well before the sale is announced. Your accountant can help advise on the business valuation and what steps could be taken to help improve it. Both professionals will have seen many sale/purchase agreements and will know the type of problem that arises during the sales process that can be easily be avoided with a bit of planning. It also essential to know what exactly you are selling. An asset sale is quite different from a share sale.
- Poor Marketing
The biggest mistake, without doubt, when selling is not getting enough offers. Typically, we see a business owner approach someone in the same industry who they know might be interested. Most deals are done this way but the problem is that there is no competition to drive up the value for the seller. It is essential to market your business properly and not just within your own industry sector. Business sales experts, BCMS claim that if sufficient competition is introduced early into the process you will get a range of offers, with the highest offer being twice the value of the lowest. That’s massive!
- Getting locked into a bad broker
We see this a lot, particularly with smaller business sales. It looks and feels like entrapment! The broker starts out by agreeing to the business owners high value and markets the business for that amount accordingly. No offers are received and the broker starts the process of lowering the expectations of the seller. Eventually it becomes clear that the business cannot be sold but its too late, the seller has signed a contract tying him in for a period of time. Be careful. Check out the broker. Ask for references and call them to see just how good they are before signing AND only sign a contract that offers a get out clause after a period of no success.
- Taking a hands-off approach
Once you have hired a broker your work is only just starting. You are entering a phase where you need to produce a wealth of information, attend meetings and presentations AND keep the day job going. It’s really important that you continue to drive results and motivate your team while going through the sales process that can take 6 to 12 months. It can be a disruptive process and that means extra hours.
- Not addressing transition issues
To enhance the value of your business to the buyer you may have to stay on after the sale is completed. This de-risks the deal for the buyer and can lead to a better price. So, be prepared to address this issue before meeting with prospective buyers.
- Breaching confidentiality
It is important that you do not accidentally breach any confidentiality issues. Your customers and staff can behave unpredictably if this happens. Working with a good broker will help you prevent such an occurrence.
Whichever approach you take to selling your business, using these tips will help you to sell your business for the maximum value. Click here for more information on Selling Your Business