Has your business outgrown you, and do you feel like you have peaked? If so, it’s a sign you need to sell your business.
Selling your old business gives you the freedom to pursue other exciting projects. You can also use the proceeds from the business to pay debts or invest somewhere else.
However, business selling is a once lifetime event that requires you to be cautious. There are many businesses selling mistakes along the way that can impact the reward you get from the sale.
If you make such mistakes, you might get it wrong when estimating the value of your business. Besides, such mistakes could make it challenging to get the right buyer for your business.
Whether you have just received an offer for your business or staying ahead of the curve, you need to avoid such mistakes.
So, the big question is, do you know some of the common business selling mistakes and how to avoid them? If not, worry no more.
Here are the 7 common business selling mistakes and how to avoid them
1. Insufficient Preparations
In the same way, you prepare before selling a home, the same it should be with the business. You have to do a little TLC and some clean-up.
If you fail to make the right preparations, it will take too much time before finding a willing buyer. You might also end up getting it wrong with your business valuation. This could lead to you selling your business below the market rate.
You can avoid this by making the right preparations. You have to fix any questions involving excessive taxation. It would help if you also solved any pending litigation. It might be quite hard to find a willing buyer if you have too much pending litigation.
It’s also essential to ensure the books and records are straight. Before a buyer buys your business, they will have to conduct due diligence. They will want to find out about your contracts and governance records.
If they find something wrong with your books and records, they will definitely keep off. Therefore, ensure to have financial books and other records well organized.
2. Not Understanding the True Value of the Business
Before selling your business, it’s paramount you understand its true value. If you undervalue your business, you will not get a fair business price. If you also overvalue it, it might be challenging for you to get a buyer.
The main mistake most people make when valuing their business is using simple EBITDA calculations. These calculations make most buyers leave a lot of money on the table.
To get the right reward from the sale, you must value your business correctly. You can consider consulting a valuation expert to help you determine the true value of your business.
You should also create a good picture of your business’s future. This way, the buyer will be willing to pay more for sale.
3. Not Taking Advantage of Professional Help
After managing the business for a long time, most business owners believe they can handle everything by themselves. However, they forget business management and business selling process are quite different.
Business selling is a once lifetime event, and if you make a mistake, you won’t have the chance to correct it. If you don’t know the regulations dictating the sale of a business, then you are likely to get it wrong.
Besides, if you don’t have business valuation skills, you might sell your business below its actual value. Luckily you can avoid such a scenario by seeking a sell-side advisory.
A business broker will inform you of regulations and laws that dictate business selling. They will also assist you with business valuation and marketing. This way, it will be easy to get the right buyer and appropriate rewards from the sale.
4. Not Being Honest or Misrepresenting a Business in the Selling Process
When selling a business, the biggest mistake you can make is misrepresenting it to the buyer. This is likely to happen when you want to maximize the rewards from the sale.
This might raise questions about your ethics and land you in legal trouble. Besides, if buyers detect you are dishonest, they will keep off. To avoid such a scenario, ensure, to be honest as possible.
Also, ensure all financial documents and other records that would back up your truth are available.
5. Not Prequalifying Buyers
When selling your business, not all buyers who will bid are genuine. Some might not have the right financial capability to go through with the deal.
Besides, it would be unfortunate to pass sensitive information to non-interested buyers.
Engaging with such buyers would be a waste of your time and resources. You can avoid such a scenario by prequalifying buyers.
You must assess crucial information regarding the buyer that could affect the selling process. You need to check the buyer’s financial situation and credit history, among other factors.
6. Taking the First Offer
When selling your business, chances are you will get multiple offers. But if you are impatient, you might be tempted to accept the first offer, especially if it’s appealing.
However, you need to understand buyers’ values business differently. Some will look at the future growth of the business, while others might focus on current growth only.
This leads to some buyers will have better offers than others. To increase your chances of getting the best reward from the sale, ensure to compare all the offers.
From here you can choose the most suitable one.
7. Not Discussing a Transaction in Advance
After striking a deal with the buyer, the next step is usually the transaction process. If you hadn’t agreed on how the transaction process will occur in advance, disagreements could arise.
Such conflicts can delay the selling process or even lead to litigation. You can avoid all this by having a well-laid plan on how the transaction will occur.
Such a plan should include the responsibilities you will have during the transition process and how long the process shall take.
Avoid the Above Common Business Selling Mistakes
Business selling is a once-life event that leaves no room for errors. Hence you must understand the common business selling mistakes people make and how to avoid them.
Read the above guide on 7 common business selling mistakes and learn how to avoid them.
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We are a consulting firm whose focus is helping companies realize their maximum worth in the open market.
Contact us today to schedule a consultation.