Top 8 Mistakes to Avoid When Selling your Business in California
Are you selling your business in California? Are you wondering how to avoid not getting what you deserve for your company?
Maybe you know you could get a good price right now, or you may be ready to move on to a new business venture. It may be time for you to retire.
It’s important to do your homework and make sure you’re getting a fair price for your California company. There are some common pitfalls that business owners sometimes encounter when they’re selling.
Here’s What Selling Business Mistakes You’ll Want to Avoid
1. It’s Too Late
You may know that it’s coming. Your California business no longer intrigues you and the work is becoming stale. But you don’t want to wait until you’re burnt out to sell your business.
Your buyers will know if your business is starting to go south. Make sure you time your sale at a point when your business is still humming, even though you sense you’ll be ready to move on soon.
2. No Exit Plan
If your potential buyers are doing their jobs, they will expect you to have done yours. You’re not going to get a good price for your company if you don’t have something legitimate to show to prospective Mainstreet buyers.
Make sure your financial statements are up-to-date and accurate. You’ll also want to keep a product/business project portfolio of your sales funnel and updated stages with the proper record keeping at the ready.
When prospective small business buyer realizes that they will have plenty of information they can use to hit the ground running, they’ll be ready to offer you a good price for your California company.
3. Information Without an NDA
Selling a small company in California is critical, and you’ll want to do whatever you can to get a high price for something you’ve worked hard to build and prosper.
However, you’ll want to do your due diligence and have prospective small business buyers in California or out of state sign a non-disclosure agreement before you tell them the details. If they aren’t really serious, they can use sensitive information against you by giving it to your competitors or even using it to start their own business from scratch.
4. None Pre-Qualifying Buyers
Pre-qualifying your buyers ahead of time can prevent you from giving too much information about your company to the wrong people. You’ll want to see prospective California business buyers’ financial information, as well as their credentials and career history.
You may be able to discuss general details of your business with anyone, but it’s important to have pre-qualifying information in place along with confidentiality agreements before disclosing the details. This way, you can be sure the buyer you’re having a serious conversation with deserves your time and energy.
5. Misrepresenting Your Company
Selling your small business in California may seem like another big transaction that you’ve got to talk up to your client. Yet misrepresenting your company could cost you in the long run.
Resist the urge to exaggerate your numbers or minimize concerns. This could lead to distrust and even legal action against you.
If there are problems with your enterprise, you’ll want to discuss them with your legal counsel first, and then get the information to your prospective buyer in a responsible way.
6. Going, Solo
Selling your company is important, and even if you have tremendous confidence in both your business and your buyer, you’ll want to be certain that everything will go smoothly. There is a lot of information you’ll want to run by professionals before you exit or sell your business. You’ll want to assemble a team you can count on.
A good tax expert, for example, can make sure you mitigate your taxes as much as possible when you sell or exit your business. A qualified business lawyer can help you draw up legal contracts/documents that keep your interests in mind. And a solid business broker can help you market your business to qualified buyers.
Even if you have had some experience with financial or legal matters, you won’t want to leave the future of your enterprise to chance. Your future security depends on it!
7. Price Too High
You might think that your California business has great value, but an unrealistic selling business price tag can really turn away potential buyers. If you aren’t generating many benefits, no one will be interested in buying your business.
Setting your price too low, however, can also cause it to lose value in the eyes of your potential business buyers. Make sure you do your research and ask for a good fair price for what your buyers are willing to pay, such as new clients and resources. If necessary, get in touch with a valuation expert who can help you.
8. Transition Phase
Potential buyers will shy away from a business if they think there’s going to be an unsatisfactory transition process.
Some potential buyers will want to spend the last few months of the sale getting ready to take over the business. This may involve some shadowing, meetings, and transfer of documents.
It’s important to let your California potential buyers know that you care about your business enough to see that it will be left in good hands once it’s sold. Letting prospective buyers know how you plan to change ownership in a calm, organized way will help make acquiring the company seem more attractive.
Selling your Business Without Mistakes
You’ve worked hard, and now it’s time to see your enterprise move on to a new chapter. Selling your business in California without mistakes is a serious decision that will require some research and forethought. With the right approach and the right small business buyer, you could be on your way to new projects or retirement in no time.
Continue getting smart about your company value now. For business broker advice, contact us today.