Mistakes to Avoid When Selling Your Business

Selling your business is not something you do suddenly. The further ahead you think, the more successful a sale has the potential to be. Here are the biggest mistakes sellers make when putting a business on the market.

Not Knowing the Company’s Value
A mere 5% of companies placed on the market each year sell. There’s often a significant gap between seller hopes and the actual selling price. Unreasonably high-value expectations can tank a sale before it begins. So consider using a comparable company analysis (CCA) to get a more realistic understanding of your company’s worth. This approach compares your business to similar entities so you can estimate how much a buyer might be willing to pay.

Financials That Are a Mess
Buyers are more interested in the return they can get for their investment than any other figure. When your financials are poorly organized, it becomes difficult for a buyer to discern what’s going on with your company. Perform monthly bookkeeping and have a CPA organize your financials to ensure they’re ready to go when the time comes.

Making the Business Too Owner-Dependent
A business that’s excessively dependent on its owner is a major risk to a buyer, since the business may fail when the owner is no longer at the helm. Begin delegating key responsibilities to your team, and work to recruit and retain an expert staff of managers. The company must be able to run in your absence. Micromanaging erodes value over the long-term because it destroys the independence and competence of the people you hire.

Doing it Yourself
You know how to run your business, but how many company sales have you overseen? If you adopt a DIY approach to your company’s sale, you’ll almost certainly leave money on the table—assuming you’re even able to sell at all. You need to work with an expert team that specializes in M&A, lest you find yourself in an imbalanced negotiation session trying to level the playing field when the buyer brings in lots of experts. A business broker an help you attract multiple buyers by creating a competitive bidding landscape. Your advisor can also help you value your business, decide on fair terms, and manage the rigors of negotiating the deal.

Choosing the Wrong Time to Sell
Buyers want to invest in a growing company—not a business you’re trying to escape because of plummeting values. A positive growth trend encourages optimism that may get the buyer to spend more.

It’s similarly important to sell during a time when market conditions are favorable. Even successful, highly profitable businesses may not sell as quickly or for the highest possible price when the market is tanking. While broad market trends are important, trends in your niche are even more important. Work with an advisor who knows your niche.

Ultimately, buyers want successful businesses that are safe investments. Viewing things from their perspective is the most important key to unlocking a lucrative sale.