3 min read

The Three Most Common Mistakes Business Sellers Make

By Sunbelt Marketing on Mar 13, 2019 12:00:00 AM

Topics: Blog

The business sale market is witnessing a bonanza. Despite this, some owners struggle to close deals. After all, value is in the eye of the beholder and sales operate according to simple principles of supply and demand. If you don’t create demand for your business it will be impossible to achieve maximum value. Here are the most common mistakes, and how to fix them.

Incomplete or Weak Financial Data
You must be able to support the asking price with clear financials. Though companies purchase for many reasons, most buyers are risk-averse and data-driven. They want to see clear numbers before committing time and effort to a new venture. Detailed, clear financial records nurture trust. So get your financials in order, and then create an easily digested report. Plan to, at a minimum, provide at least three years of tax returns and earnings statements. You must also prepare an accurate cash flow report, inventory of assets, and balance sheet. Working with a skilled business broker will help you get your financials in order.

Your business is your most valuable asset because of all you have invested in it. Sellers who built their own companies from the ground up are especially prone to overvaluation. Your business might seem like a family member, but it’s not. Buyers will look at facts like earnings and tangible assets, not how much work you’ve put in or how much you care about your business.

When you ask too much, you’ll get few interested buyers. This prevents you from creating a competitive bidding landscape, causing you to withdraw the business from the market. That raises red flags down the road, even if you correctly price the business next time. A skilled, experienced advisor can help you accurately value your business.

Emotional Decision-Making
Selling a business is both a personal and professional milestone. While emotions might run high, you cannot allow them to interfere with your decisions. Some sellers walk away the moment they dislike a buyer’s personality. Others allow themselves to get personally insulted by the offering price or the terms of the deal. This is a business, not a relationship, and you must treat it like one. You don’t have to like the buyer. You just have to like the terms.

An intermediary can help ease the effects of emotion. The right broker acts as a sounding board who can also offer a reality check. Good intermediaries cushion blows by delivering bad news, and can even negotiate on your behalf.

Selling a business is a bit like running through a field with landmines. You can make countless mistakes that blow up the deal. Especially if you’re inexperienced, these mistakes can waste time and effort, potentially eroding your resources for future deals. They may also undermine confidentiality. In some industries, a failed deal can haunt a business for years, further highlighting the need to get the deal right the first time.

To get the deal right the first time, you need a sale strategy focused on the basics: clear sale goals, a willingness to invest time in the process, preparing your business for the market, and enlisting outside help when necessary.

Sunbelt Marketing

Written by Sunbelt Marketing