Selling a business can be a very complex process. A business is not like a house – something you can buy and move into. And it isn’t just the products or services it offers.
It is a complex puzzle of people, processes, and assets. You have to take all of these moving pieces, put them together to make sense, and then present them to potential buyers in an attractive way.
There are so many things that can go wrong when trying to sell a small business yourself. This is why it’s wise to look into these errors well before you move forward – ensuring you avoid as much trouble as you can.
What Makes Selling a Small Business So Challenging?
Approximately 50% of business owners are more than willing to sell their company independently, not fully understanding that juggling the selling process while maintaining day-to-day activities is difficult. This results in a sale that either doesn’t benefit you or a failed sale due to declining performance.
When you are selling your company, you have to be prepared to spend hours upon hours researching, planning, and strategizing. You have to be able to answer tough questions like, “What’s the right price for my business?” and “Which buyers will be interested?” You have to be able to answer all of these questions while still staying on top of your business’s operations and day-to-day activities.
Strike a balance between protecting your business’s interests and maintaining a friendly, professional environment. Keep your company’s best interests at the forefront of everything you do while still making the best effort to sell.
5 Common Mistakes to Avoid when Selling a Business
There are many essential steps involved in the sale of a business, but one of the most important is the due diligence process. If the seller does not go through the process correctly, the deal may not close or may fail. Here are five common mistakes made when selling a business.
1. Insufficient Preparation
The most common mistake is underestimating the amount of work they need to do. They assume the business will sell itself without much effort on their part. Sellers fail to recognize they need to do their homework and complete all the necessary steps to sell their company, including these:
- Create a business plan, market their business, and perform a thorough analysis of their business’s financials.
- Have an attorney review their contracts.
- Create an inventory of their business’s assets.
- Perform due diligence on their business’s performance history, and so on.
Selling a business is not to be taken lightly. So, you need to make sure you are preparing yourself and your company for the entire process.
2. Unwilling to Invest in Advisory Services for M&A
Another mistake sellers make is being unwilling to invest in the help of advisory services for mergers and acquisitions (M&A). These services can be a great asset during the selling process because they can explain everything that goes into M&A.
These services typically include various steps, such as:
- Business valuation
- Exit planning
- Financial reporting, etc.
By investing in the services of a professional advisory service, you save yourself from making costly mistakes and ensure that you are making the best decision possible for your business.
3. Not Having a Solid Valuation of Your Business
Sellers also make the mistake of not having a solid valuation of their business. This is one of the most critical steps of the selling process because you need to put a price on your business that makes you comfortable.
You need to be able to confidently say to a potential buyer, “This is what my business is worth.” Suppose you don’t have a solid valuation of your company. In that case, you limit your ability to get the best price for your company and make it harder for potential buyers to make a fair offer.
If you are unsure how to estimate your company’s worth, you can ask an accountant or a valuation expert to help you out.
4. Neglecting Your Business During the Selling Process
The most common mistake sellers make is failing to take care of their business during the selling process. They spend all their time focusing on the sale itself and neglect the business they are trying to sell. This can result in a decreased value. Therefore, make sure you are:
- Keeping your company in good working order, maintaining its assets, and ensuring it is always in good condition.
- Serving the best interests of your business.
- Allowing yourself to be a good representative of your business.
5. Failing to Negotiate with Interested Buyers
Finally, make sure you don’t fall into the trap of not negotiating with interested buyers. If you don’t negotiate, you will most likely end up with a low offer.
You want to make sure you can negotiate a fair price for your company. Once you have a price you are comfortable with, you should negotiate in a manner that is mutually beneficial to both you and the buyer.
When negotiating with a potential buyer, keep these tips in mind:
- A buyer will not pay more than the value of the business.
- The buyer should be the one to make the first offer.
- Be prepared to walk away if you don’t get the right price.
- Don’t negotiate on the first day of the sale. You don’t know if a better offer may be made in the coming days.
- If possible, negotiate in person, not over the phone.
- Have an attorney review the contract and make sure it is in your favor.
Remember, the goal of negotiation isn’t just to get the best price for your company. It’s about getting a fair price for such a significant asset.
Confidently Sell Your Business with the Help of Align Business Advisory Services
Selling a business is a long, complicated process – one that can be quite intimidating. When selling your business, make sure that you are working with a reputable, professional advisory service like Align Business Advisory Services. They are experts at helping business owners sell their business, and they can ensure that you are making the best decisions possible throughout the entire process.
Ready to get the ball rolling? Contact us today for a free consultation.