You know how to operate your business, and you've built it into a very successful enterprise. Congratulations! However, the time has come to move on, whether it is for a new challenge or to kick back and enjoy the fruits of your labor. No matter the reason, you are ready to sell. However, too many small business owners mistake the knowledge they have accrued running their business as giving them insight into selling that company, which is a very different process. Read on for the five most common mistakes you want to avoid when selling your small business.
Mistake No. 1 — Overpricing
You are proud of your business and what you have accomplished. When determining a listing price for your company, you must base the valuation on quantifiable criteria, not your estimation of worth or what your circle of influence estimates as the value.
This is why you need an objective third-party valuation. An outside expert understands the current market and can provide research on the sales of businesses in the industry in your area for comparison.
Finally, it is essential that you honestly represent your earnings to prospective buyers versus overstating your earnings. Presenting this information in the best possible light is fine, but don't stretch the truth.
Mistake No. 2 — Lack of preparation
Another error many make is not having all their financial documentation in order. It is one of the biggest reasons owners need help selling their business at the best value. Be sure to properly prepare the business for sale, whether that means physical improvements or dealing with staff issues, etc.
Also, even though you may be leaving the company or passing it on, that doesn't mean you should wind down your business, causing profits to fall, before you sell. Even if you aren't thinking of selling, it's a good idea to have a plan in place should an involuntary need to exit arise, like death, divorce, disability, distress or disagreement.
Mistake No. 3 — Plan for after the sale
Start by making sure you are ready to sell. You may need to wait if you aren't fully committed to moving on. Next, think long and hard about your vision for your next stage. It would help if you had a framework for what you want to do after the sale, so you aren't floundering.
During the sale process, be sure you stay connected to the business. This helps to ensure the business maintains profitability and your buyer doesn't have a reason to step away. While everyone hopes for a smooth and seamless transition, it's good to consider what transition-related issues may arise and have plans on how to address these.
Mistake No. 4 — Walking away from a good deal
A good deal may not be perfect, so it's imperative to be open to all offers, including deferred payments, seller financing or help obtaining third-party loans. You want to find multiple qualified prospects before starting serious negotiations to help you maximize your sales price. However, it's essential to recognize that, more often than not, the first offer you receive is likely to be the best offer you will get. Consider it carefully.
Mistake No. 5 — Not seeking help
Finally, don't sell your business without help. Look for and vet the necessary professionals, including accountants, brokers and lawyers, to help you manage this complicated process. In terms of a professional broker, you want to find a business advisor who can help confidentially market your business and vet potential buyers.
While you want to let the broker do their job, you still should stay involved with the sale to be aware of progress. But until you sign on the dotted line, your primary focus should be running your business to keep it healthy and viable.
There's no doubt that deciding to sell your business is an exciting and stressful time. At Transworld of South and West Texas, our advisors are some of the most sophisticated and experienced in the industry. Transworld of South and West Texas Business Advisors have the training and know-how to help. Schedule a free consultation today and learn how we can help.