Selling a business is selling your years of hard work and dedication in giving birth to a startup to its growth and expansion. Therefore, it becomes a life-defining moment for owners.
However, the process is not relatively easy, especially during the country’s current economic situation. You need to fetch the right customer, get a good price, sell the business within a reasonable time, and have a smooth business transition to the new owner. It requires a lot of planning, preparation, negotiation, due diligence, and transitions, and owners are likely to make mistakes.
This guide will focus on 20+ mistakes that owners should avoid when selling their business.
Mistakes to avoid when selling your business
1. Lack of preparation
Insufficient preparation is the most common mistake business owners make while selling their business. Before hanging a signboard “For Sale”, make sure you ask when to sell my business and how to prepare for it.
It is necessary to keep your books updated and record your business history. If you have a legal issue while running your business, you must clear them before the company sells. Maintain a data room for storing your vital financial reports, legal documentation, supportive documents, and a detailed sales portfolio.
2. No exit strategy
Generally, businesses fail to create an exit strategy while they think of selling business. It is great to prepare a comprehensive exit strategy when you begin your business. It helps you deal with several factors like valuing a business, preparing for the transition, and dealing with the after-effects of a business sale.
3. Overlooking business appearance
Appearances matter whenever you intend to sell a property, a house, or a business. However, business owners often overlook this crucial point. If your office is ugly and cluttered, clean it up, organise your furniture, paint your walls, and make it look beautiful.
Not just physical appearance, ensure that you pay due taxes, fix record-keeping issues, and revise all other business issues before initiating a sale.
4. Do not pre-qualify potential buyers.
Naturally, buyers will prefer performing due diligence on your business, but it isn’t a one-way road. Owners need to check on the quality of potential buyers to ensure they are suitable candidates and are financially competent to purchase your company.
5. Misinterpreting business information
Owners love to represent a glowing picture of the business during the selling process. But, misinterpreting any fact, producing fudge numbers, and speaking lies regarding business operations are not good and can result in legal actions after the sale. You can ask brokers how to sell a business and document your business information accurately.
6. Deal fatigue
When looking for how to sell my business in uk, remember the process isn’t a 90-day sprint but a marathon. Buyers will fall away from your deal, suffer from due diligence, find potential customers, and resolve other business sales issues is a pain, and you need to wait longer.
7. Responding to direct approaches
Several business owners want to sell their business without waiting longer or preparing for the sale. They often respond to direct approaches and make a sale at a lower price. Therefore, we advise you to compare offers from different potential buyers before deciding.
8. Disengaging from the selling process
Common mistake business owners make is hiring a broker and taking their hands off the selling process. No one knows your business more than you, and depending on your broker is not enough. Ask them about the marketing plans, and when they bring you, potential buyers, never fail to interview and motivate them to purchase your business.
9. Avoid focusing on business sales structure.
Owners must focus on the business sales structure instead of only getting the best price. That means you must have a design that determines whether buyers will pay the total purchase price at closing or carry a loan, your involvement after the sale, how much you need to pay for different expenses, etc.
10. Not preparing early
Owners often wait until they encounter difficulties and then plan to sell their business to rescue them from more significant troubles. However, it isn’t a great strategy, as a business on sale attracts great offers from customers when they are successful in the market.
11. Celebration before closing a sale
You shouldn’t take your eyes off the business operations once you initiate a selling process. Sales can fail at any time, and if you aren’t careful during that process, you affect the sales and profitability of the business. It will further affect business value or price from future buyers.
12. Breaching confidentiality
Maintaining confidentiality while putting your business on sale is essential for a successful selling process. Let the information regarding selling your business be a secret to your employees, customers, and competitors to avoid derailing the sale.
13. Avoiding professional help
You may be an expert in running a business, but you need professionals like lawyers, accountants, tax advisors, and brokers to sell your business. Though they will cost you money, hiring them will run the selling process smoothly, and you end up selling your business at the best price.
14. Choosing the wrong solicitor
If you ask a dentist to fix your legs, is it possible? Similarly, you cannot ask a lawyer to close your books or choose the first broker you come across to help you in the selling process. Make sure they are knowledgeable, skilful, and have years of experience in selling businesses.
15. Unwillingness to consider anything but cash
Don’t stick to cash payments as potential buyers may not have hard cash at the moment, and they ask for other payment methods. Cash payments can be detrimental to business sellers from a tax perspective. Buyers may ask you for concessions like obtaining a third-party loan or deferred payments. It will also benefit you during tax filing.
16. Quoting the wrong price
You cannot ask too much from buyers and let them flee before a conversation. Additionally, if your prices are too low, you will make a loss and attract bargain buyers to make you sell your business at further lower prices.
17. Determine business values by guessing
Owners are often confident about their business worth in the market until they innumerate accurate valuations. The valuation process considers the condition of your company, its current status in the market, the value of similar companies in your locality, and several other factors.
18. Failing to promote yourself
Owners are the face of their businesses. Therefore it is necessary to promote or market yourself and let your prospective buyer find your passion and understand your managing skills. Additionally, it improves confidence in your potential buyers, and you can convince them to purchase your business.
19. Selecting wrong buyers
Business owners without professional help make mistakes in selecting buyers. It results in moving your business to the hands of someone who is not ready to manage your mission, culture and values. Therefore, take time and put effort into finding potential buyers who are trustworthy and can manage your business correctly.
20. Not looking from a buyer’s standpoint
It’s pretty natural to over prioritise strengths and underestimates weaknesses when I sell my business. That is where owners go wrong. You should have an objective view of the business and wonder the questions a buyer can ask you during the selling process.
21. Poor communication between buyers and sellers
Several problems can arise when there is poor communication between the seller and the prospective buyer. You may miss out on disclosing some vital information. Make sure both the parties are fully aware of the transaction and their obligations.
22. Failing to deal with transition issues
Once a business sale is complete, the owner’s work doesn’t end. The buyer can return to you with questions. They may need training, transfer important information, ask for warranties and promises, how to solve legal issues, and others.
You need to be an intelligent entrepreneur who knows when to sell a business, how to value your business, and what price you can quote. As the process of selling a business is tricky, it is advisable to ask for professional help from the initial stage of your business.
Selling a business is about preparing your documents, cleaning up your business mess, gathering financial reports, meeting a broker, interviewing potential buyers, etc. Therefore, take your time to sell the business while scaling it up to ask for higher values.