10 Mistakes to Avoid When Selling a Business
Selling a business comes with complexities. Keeping it simple is the best policy, and there are many mistakes people often make during the process. Here is a list of 10 common mistakes you should avoid when selling your business.
1. Assuming you know what the buyer wants.
Buying a business is a unique experience and every transaction is different. Assuming you understand the needs, wants and motivations of a buyer is a bad practice, as you may not know them at all. In fact, often a smart buyer may not reveal their motives entirely, especially if they intend to shut down part of the company at some point or flip it for a profit pretty quickly.
Ask questions. If you don’t get answers, sometimes that is okay. Your objective is to sell your business, and not making assumptions goes a long way toward making that possible.
2. Failing to understand the buyer’s objectives and if the business meets their needs.
Motives are different than objectives, and understanding what a buyer needs from your business can tell both of you quickly if this is the right deal or not. If the business does not meet their objective, the deal is likely to fall through or the buyer may not want to pay the price you are looking for.
3. Improper pre-sale planning and failing to be organized.
Before you even determine the value of your business, your books need to be recast and organized and you need to understand the value of the assets you are selling and the value of the business itself. This means planning ahead, and consulting with an accountant and a business broker before you even get started. The less organized you are, the more likely it is that your business will not sell for full price, or that potential buyers will not even make an offer in the first place.
4. Answering questions before they are asked.
Be careful to understand the question a buyer has and then be careful to provide the right answer. You may be answering a different question than the buyer is asking, and that can be good or bad. It can also increase buyer frustration. If you don’t know the answer, be honest, let the buyer know you will find out, and get back to them in a timely manner.
5. Not allowing the buyer to feel some sense of control in the decision making process.
This is not about just you. The buyer has a say in the process as well, and you need to give them some control over due diligence and other tasks. Don’t take the lead all the time. Part of selling your business is letting go of some of that control. Be sure you do so deliberately.
Avoid these mistakes selling your business. As there are lots of moving parts when selling a business, care and patience are important. If this makes sense, here are some suggestions.
6. Talking when you shouldn’t.
This may sound obvious but when you sell a business it’s more important to listen and ask questions than continually talk to try and “sell” the business. Often you gather more information from hearing the type of questions being or not being asked and the following up comments rather than by talking yourself. Remember, listen. Be quiet, and answer only the questions you are asked.
7. Failing to use common sense.
Selling a business rarely happens with the first buyer that comes along. There is a need to reveal information but only after the buyer provides enough information to show they are suitable and truly interested. Don’t reveal company secrets and too much data to every prospect who comes along. This is another reason to have a business broker working for you, one that vets potential buyers before letting them get too far in the process.
8. Poor communication and not listening.
It has been mentioned in different ways a couple of times, but while you need to listen more than you talk, you also need to communicate briefly and clearly. Failing to do so can kill any deal.
9. Giving worldly advice on subjects or matters not relevant to the transaction.
Politics, sports, religion and how best to run a business are not conversation topics to have with people you want to sell your business to. Respect the sole reason that is bringing you together with the buyer. Keep things friendly and honest, but avoid irrelevant topics and giving unsolicited advice. A deal can go wrong over the wrong political statement made at the wrong time. Don’t shoot yourself in the foot.
10. Failing to get expert advice or assistance when it is required.
If you do your own tax returns, file your own legal papers, do your own financial planning, do your own negotiations for everything, are a sales and marketing guru and have plenty of time to waste for people who don’t mind wasting your time, then selling your business without expert help may be a good option, until something goes wrong.
You need experts in every area of your business. It takes time and effort to sell a business, and yours needs to continue to be profitable during that time. Hire the help you need, and let them do their jobs. The result will be a much more successful and profitable sale.
Buying or selling a business comes with personal emotional and financial risk as well as the complexities of finance, accounting, tax, negotiation, and legal items. Having a professional business broker to help “quarterback” and manage the variables is good business. Here are some attributes to look in the intermediary that you choose.