Selling Your Business? These 7 Transfer Mistakes Could Cost You | Selling a business is extremely exciting, but it’s also a huge undertaking. From finding the right buyer to getting a good price, there are a lot of variables to consider. Too many business owners discover the process is a lot more involved than they envisioned. Ready to sell your business? Avoiding these common transfer mistakes will save you in the long run.
- Not Preparing for the Sale
Before putting a business on the marketing, it’s best to get it ready to sell. Think of it like selling a home. Buyers pay more for turnkey businesses, and transitioning business ownership will go smoother if you tie up any loose ends.
Check the books for any questionable tax deductions, and it’s sometimes best to scale back deductions before selling to increase earnings. If there is any pending litigation, try to resolve it. At the very least, make sure to disclose any legal matters to potential buyers. It’s also wise to ensure the staff can manage the company without you.
- Not Hiring Professional Advisors
Taking the DIY approach to selling a business isn’t recommended. Whether a company is worth a few thousand or 7-figures, there is just too much at stake. Professional advisors who specialize in mergers and acquisitions are always a good investment.
Some advisors to consider are transactional lawyers, financial consultants, and business brokers. Each plays a unique role in selling a business. Working with all of them will is the best way to make the sale go through without a hitch.
- Not Participating in the Process
After hiring a team of experts, it’s easy for business owners to disengage themselves. However, this is often a fatal error. After all, the owner is the person who wants to sell the business more than anyone else. While others may be able to find a buyer, it’s up to the owner to make sure they can manage the company after the sale closes. Helping to select the right buyer will ensure the current owner can walk away confidently.
- Not Telling the Truth
Fudging the number a little bit may seem harmless, but it’s never a smart idea. Misrepresenting a company is immoral, and it can also land a business owner in a lot of hot water. Don’t hide any pertinent information from a prospective buyer. They need to know about any financial issues, tax problems, or pending litigation before closing the deal.
- Not Considering the Sale Structure
Business owners can structure a sale in one of three ways. Selling the assets with a purchase agreement is perhaps the most popular. Another way is to sell any stock or equity. A merger is the third way. Why does the structure matter? It determines what assets and liabilities go along with the sale. The structure can also help determine a fair selling price.
- Not Undergoing a Valuation
How much is the business actually worth? It’s surprising to learn how many business owners try to sell a company without knowing the answer. A business broker can help perform a valuation. The higher the valuation, the higher the asking price. Of course, buyers will still try to negotiate, but the seller will have more wiggle room with a proper and recent valuation in hand.
- Not Staying Quiet
It may seem appropriate to announce plans to sell a business, but it’s usually frowned upon. Current customers may wrongfully assume the business is struggling and head elsewhere. Instead, it’s better to market the sell quietly. A skilled broker will list the business without giving away too many key details. They will only provide identifiable information once a prospective buyer signs a non-disclosure agreement.
Wait for the Best Offer
Selling a business is extremely tricky, and many business owners go into the process not knowing what to expect. On average, the entire process will take at least six months. Although this may seem like a long time, preparing for the sale in advance will ensure everything goes smoothly.