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Business Selling Pitfalls To Avoid


The vast majority of nightmares sellers face could have easily been avoided with a bit of due diligence. Remember that failing to prepare is preparing to fail. Ideally, you’ll sell your business when your business is thriving, rather than when you’re out of money and out of gas. You’ll take your time to get your financial documents in order and you’ll iron out any internal issues that might affect the valuation of your business in the marketplace. Most brokers recommend taking two years to prepare your business for sale.

 

Here are some of the most common pitfalls to avoid…  

A Bad Attitude

Nothing spoils a sale like a bad attitude. Maybe you’re overconfident and you treat others like idiots because they don’t view your business as you do. Or maybe you exude a “Take it or leave it” attitude that is repugnant to prospective buyers. On the other hand, you want to portray a friendly, happy attitude and you want to be realistic about the strengths and weaknesses of your business.


Unwillingness To Ask For Help

Brokers can add another 15-20 percent to the sale price, so it makes sense to hire a broker at 10 percent commission. A broker not only pre-qualifies buyers, but also takes a lot of the work, stress and burden off your shoulders. Enlisting accountants, lawyers and business consultants will make the transaction much smoother. By contrast, you shouldn’t just sit back on your laurels once you’ve hired help. The more you can do to proactively market your business and instill confidence in buyers, the better your sale will be.

 

Failure To Pre-Qualify

You may be excited to have your first potential buyer on the line, but if you don’t pre-qualify, you’ll end up with a long struggle that ends with the fish slipping out of your grasp after wasting your time and effort. It’s better to pre-qualify prospects early to avoid the deal falling through later. You’ll need confidentiality agreements and financial background statements before allowing prospects to see intimate details of your business.

 

Pricing Problems  

You may be thinking of all the money you’ve invested into the business and presuming you can tack this onto the sale price, but it doesn’t always work like that. Valuation is conducted based on a number of market variables, which is why most business owners consult brokers and other business professionals before coming up with a magic number. It’s also important that you keep an open mind and remain flexible. Many sellers prefer to entertain nothing but all-cash offers, but this could end up hurting you at tax time.

 

Legal Trouble

It’s okay to paint your business in a positive light, but misrepresenting your business by exaggerating numbers, distorting data and covering up flaws can get you into hot water with the law. Additionally, you could be scaring away prospects who see through your hot air and notice the red flags about your business. Save yourself from embarrassment and trouble by speaking with an attorney or broker about everything from past failures to forecasts for the future. While you’re at it, don’t forget to have prospects sign a confidentiality agreement so no sensitive details about your company surface in the public eye.

 

 

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Resources:
Entrepreneur: 10 Mistakes To Avoid When Selling Your Business
The Vantage Group: Pitfalls To Avoid When Selling A Business


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