Everyone makes mistakes. Some are easy to avoid; others can be harder to pinpoint.
With all the intricacies involved in selling a business, it’s easy to make mistakes that may cost you big in the end.
Avoiding them starts with knowing them and ends with taking the steps necessary to close the deal.
Here are five common mistakes sellers make that can put the sale in jeopardy, and some actions you can take to refrain from falling into these potential stumbling blocks.
Not Hiring a Professional
You are the expert at running your business, but you probably aren’t an expert at selling it.
It is a mistake to not invite the right business broker to the table when entering the process of selling your business.
Not only will a professional help avoid problems during the selling process, but not hiring one may significantly reduce your ability to attract prospects, overcome hurdles, negotiate and close the deal.
The cost of hiring a business broker (link to previous blog on cost) may seem high, but not doing so would inevitably take away from the end price you wish to collect, as well as cost you more time, stress, and even the failure of a sale.
Taking a Hands-off Approach
If you’ve hired a broker, your work is not done.
Disengaging from the selling process once you’ve signed a brokerage deal is a common mistake that can hinder the sale of your business.
Although a broker will bring in qualified prospects, it’s your job to turn those prospects into buyers by showing them how to successfully run and manage your business and to gain their confidence.
Showing buyers you care by staying involved can instill confidence that your business can be managed successfully.
Avoid disengagement to convince the buyer that you run a tight ship and your business is worth what you are asking for.
Setting an Unrealistic Price
Before putting your business on the market, it is important to conduct a thoughtful valuation to determine an accurate selling price.
Mistakes on pricing can lead to an unsuccessful sale.
For example:
- If the price you are asking for is too low, potential buyers may wonder what is wrong with your business
- If you are asking for an unrealistically high price, buyers will be repelled
Avoid these issues by performing a thorough evaluation.
If you hire a business broker, they will perform the valuation. If you are going it alone, engage a qualified business appraiser.
Brokers earn their fee by negotiating the sale price. So, letting them put their expertise to work to set the right price and negotiate is an easy way to avoid having to defend the price you are asking for.
Not Marketing the Sale Discretely.
Advertising to the public can cause issues that affect the outcome of a business sale.
Problems with revealing the sale to the public include:
- Customer and vendor concerns over the future of their accounts
- Reputation of business if a sale falls through
- Losing control of your message
- Scaring off current employees, management, and staff
If you are selling your business yourself, be sure to take precautions to market discretely.
A good broker keeps the sale confidential in a way that won’t cause issues with your customers, vendors, employees, and reputation. Michigan Business Brokers, for example, prides itself on its discretion during the selling process.
Not Being Honest About Your Past
Remember, your job is to gain the confidence of the seller. That means it’s your responsibility to present your business to the buyer truthfully.
If you misrepresent numbers or possible issues before the sale, chances are the seller will find out and it can cost you the sale.
You don’t have to put a spotlight on any issues, such as prior investigations or litigation, but don’t hide them so prospective buyers uncover them and lose confidence.
A broker will help you get in front of any issues or concerns in a way that does not hinder the selling process.
From Selling to Sold
Selling your business can be tricky. Mistakes can be made.
Solidify success by getting adequate support, staying engaged, and avoiding pitfalls that come with setting the wrong price, not being forthright with past issues, or failing to be discrete.
Working with a skilled qualified broker will help you to avoid significant problems and to be confident that you will be able to make a sale happen for the right price and on the right terms.
For qualified help in the sale of your business, you can get in touch with Michigan Business Broker here.