COMMON MISTAKES TO AVOID WHEN SELLING YOUR BUSINESS
In our previous posts, we have established that selling your business is a big decision that you should handle with adequate knowledge. The process of selling can be tedious and emotional, especially in an unstable economy where it may be difficult to even land with what you think is a fair price.
A lot of business owners nurture their businesses from scratch with the hope that someday, they will reap the rewards of their efforts in the form of a successful business sale.
Unfortunately, the experiences of the bulk of them aren’t what they had anticipated. Some of them end up thinking they are selling below market price or even worse, they sell the business and feel like they didn’t get paid till much later. All these frustrations can be avoided if you identify the mistakes that owners make while selling their businesses.
I will mention a few in this post, leggo!
RESEARCH
One of the most common mistakes made by business owners before selling their businesses is not doing enough research. Once you’ve decided to sell, it’s important to take the time to understand the current market conditions, what similar businesses who have recently sold had going for them (for example, type/quality of customers, relationship with suppliers, committed management team) and what to do to attract good buyers.
This may include valuing your business against these companies in the applicable market conditions to help you to set a realistic asking price, so that you don’t end up pitching an idea and not your actual business.
Quality investors buy what worked in the business and not what you think will work. Just as it is important to do market research to understand target markets, identify customers and competitors before starting a business, it is equally important to make necessary findings to manage your expectations and ask before putting up the business for sale.
MISREPRESENTATION
Another common mistake made by business owners is “misrepresenting their businesses”. Don’t get me wrong, there is absolutely nothing bad with wanting to pitch your business in the best possible way during a sales process.
However, avoid the urge to paint a picture of what is not to your buyer; whether it’s inflating revenue, hiding expenses, or portraying your operations in a better light than it actually is. Unfortunately, this can lead to serious legal trouble down the road.
While it is true that some sellers have got away with this act over time, due diligence will eventually expose some of these lies. Buyers have a right to due diligence, which means they can request access to your financial records.
If they discover that you’ve been less than truthful about your revenue, they may back out of the deal or even sue you for fraud. To avoid any legal troubles, tell your buyers the truth they deserve to know about your business.
EDUCATE RIGHTLY
Lastly, educate yourself/ask for professional help but do it in the right way. It may be true that you are an expert with developing businesses, however, you may just not be an expert at selling it.
There is a difference between getting a professional to educate you on the realities of the sale of your business than to get one that would waste your time rubbing your ego.
Employ the services of the much needed team of professionals to show your similar business sales and how they have handled parts or all of the process. These include lawyers and accountants. It will definitely cost you some money, but if you do it right, it will be worth it.
These professionals will see to it that your books are in order, help you navigate legal processes and eventually find the most suitable buyer for your business.
It is often said that when you fail to plan, then you plan to fail. Learn from other people’s mistakes and make your business sale process a seamless one.
If you have unanswered questions about business sales, that may help you make informed decisions, feel free to reach out to me on LinkedIn.
I’m always happy to help!
