Common Mistakes When Selling a Business

Whether you're a seasoned entrepreneur or a first-time seller, selling your business is a complex and emotional process that requires careful planning. Avoiding these 8 common mistakes will help ensure a smooth and successful transaction.

8 Mistakes You Need to Avoid When Selling Your Business

Not knowing the value of your business

Once the decision is made to sell their business, many business owners are not sure of the asking price. Although owners understand the ins and outs of operations, a business owner may not be the best judge of the value of his business. Determining the asking price involves many variables including the financials, market condition, industry trends, and more. An unrealistic asking price can deter potential buyers and prolong the selling process. Requesting a business evaluation from professional and licensed business brokers will allow you to determine the Most Probable Selling Price (MPSP) so the transaction proceeds quickly and smoothly. 

Not being prepared

Entrepreneurs who want to sell their businesses have often not spent the time required to prepare all the financial, legal and operational documents that are required. Issues such as financial discrepancies can slow down the sales process and deter potential buyers. Make sure you have all documentation ready to hand over when requested.

Underestimating the time commitment 

Many business sellers underestimate the amount of time commitment. Selling a business is a time-consuming process that involves many tasks. These need to be done while you continue the day-to-day operations. One way to avoid becoming overwhelmed is to have a business broker handle the responsibilities related to selling so you can focus on maintaining the value of the business during the sale.

Not investigating your buyer

While business owners expect potential buyers to examine their business, they should know that due diligence is a two-way street. Potential buyers need to be qualified to ensure they have the finances, experience and background to sustain and grow the business post-acquisition. Wasting time negotiating with a buyer who does not have the means to purchase the business slows down the process and frustrates everyone. Using a business broker to qualify potential buyers saves a lot of time and effort.

Emotional decision-making

When you have put in the blood, sweat and tears to grow your business, emotions can run high when you decide to sell it. Being overly emotional can cloud your judgment and interfere with negotiations. Working with a business broker will help you focus on the best interests of the business and its stakeholders.

Not maintaining confidentiality

Business owners don’t always appreciate the importance of confidentiality when selling a business. Letting word get out that a business owner is planning to sell can lead to employee, customer, or competitor unrest, and potentially harm the business's value. Using Non-Disclosure Agreements (NDAs) and disclosing information only to qualified buyers will safeguard the integrity of the sale.

Not being transparent

It’s understood that no one likes to air their dirty laundry, however prospective buyers place a premium on financial transparency. Inaccurate or incomplete financial records or hidden legal issues can erode trust and diminish the perceived value of your business. Disclosing any skeletons in the closet will go far to instill confidence in potential buyers. 

Not using professionals

Selling a business is not a one-man show – it involves legal, financial, and strategic complexities. You should be working with a team of professionals, including lawyers, accountants, and business brokers. Attempting to navigate the process alone may result in legal complications, overlooked financial aspects, and missed opportunities that lead to a lower transaction price and lengthier process.

Conclusion

By steering clear of these common mistakes, sellers can enhance their chances of maximizing the value of their business and finalizing the transaction quickly. 
Selling your business is a big deal that you need to take seriously by getting the best advice and guidance you can. Working with professional business brokers will help you secure the best deal and ensure a smooth transition. At Investiprise, we help business owners avoid ruining the last deal of their career. Contact us today to learn more and let us help you get started on the journey of selling your business!