How quickly a business sells depends on a number of factors, including the larger economic climate. However, a booming or a poor economy isn’t the only thing that matters when an owner is determining a plan for selling their business.
The process of selling a business can take longer than many business owners expect. According to data from BizBuySell, it usually takes at least six months to sell a business.
For people who want to help the process go as smoothly as possible, there are a number of mistakes they will definitely want to avoid.
Let’s take a look at seven common business mistakes that people make once they’ve decided to sell.
1. Not Being Prepared
When someone is selling their business, there are a number of things that they will want to do to prepare before they put it up for sale. All businesses will benefit from some cleanup and TLC before being put out into the marketplace, much like a home would if it were being listed it for sale.
Some of the places owners will want to look to see if they should make changes include:
- Organization of books and records
- Threatening or pending litigation
- Questionable or excessive tax deductions
- Staffing considerations
Some of these issues aren’t quick fixes. That means that owners will want to give themselves time to prepare in advance.
2. Not Understanding Where A Company’s True Value Is
Like anything in the market, a business is worth as much as someone is willing to pay for it. One of the business mistakes people make during valuation is using a simple EBITDA calculation, which can end up leaving a lot of money on the table.
The seller has to paint a picture of the future that is compelling for the buyer. They need to understand the value that they could be taking on by purchasing a company.
3. Not Taking Advantage of Professional Help
It is a mistake to assume an owner can do everything themselves when it comes to selling a business. When a person sells their home, they most likely hire a real estate agent. Similarly, when it’s time to sell a business, owners should seek sell-side advisory.
Being an expert at running a company is different than being an expert at selling that same company. Owners want to make sure that they get the best possible price, and hiring professionals to help the outcome is definitely recommended.
4. Not Being Honest or Misrepresenting a Business in the Selling Process
A business might mean the world to its owner, but that doesn’t mean that they should stretch the truth when they’re looking for a buyer. The drive to get as much money as possible and sell a business as fast as possible is never a good reason to be dishonest during the selling process.
Not only are there ethical questions when it comes to misrepresenting a business, but it can also get sellers in legal trouble On top of that, it can backfire by pushing buyers away and making it hard to sell if people catch on that the owner is twisting the truth.
5. Pricing Incorrectly When Selling a Business
When you start thinking about how to sell your business, one of the first things you might consider is the price.
Choosing the right price is absolutely essential when sellers want to get the most value for their business. This can be one of the most difficult decisions to make in the selling process. If owners price their business too low, they can end up leaving money on the table, while pricing their business too high can mean no one is interested.
6. Not Pre-Qualifying Buyers
It is always a good idea to qualify buyers early in the process. This can help save sellers time that would otherwise be wasted on people who won’t be able to follow through with the deal. It also ensures that the people they’re dealing with are legitimately interested in purchasing the business.
This is also important because owners don’t want to risk giving away sensitive or private information about the company to people who have not been pre-qualified.
7. Not Discussing the Transition in Advance
Another mistake that is common when selling your business is to not talk about the transition process ahead of time. It’s important to understand that the seller’s responsibilities are not finished the second owners strike a deal. It’s important for them to come up with a plan for how the business will successfully and seamlessly transition to the new owner.
Most business owners have spent years if not decades building a business up. Without a transition plan, they might witness their business flounder soon after the sale. If owners want their business to thrive for a long time, they should make sure to come up with a transition plan of attack.
The transition should be discussed in advance of making the sale. If owners don’t do this, it can end up dragging the selling process out and could even lead to conflict.
Seeking Out Sell-Side Advisory help Is an Essential Part of Selling Your Business
Owners have spent countless hours and tons of energy building their business into a thriving, salable entity. Successful business owners never cut corners on their way to this point, and it’s not time for them to start doing so now. In order to ensure that their sale goes smoothly and that they reap the benefits of their hard work, it’s essential to hire sell-side advisory services.
At Madison Street Capital, the sell-side advisory team helps to create the perfect strategy for selling a business. To learn more about how their experienced team can help business owners accomplish their goals, contact them today!