Thinking of selling your business? Previously, we’ve written about the process of selling and how you can maximize the amount you receive in the transaction. In this article, we’ll focus on some easy mistakes to avoid when selling your business.
Exiting your business can be a tricky endeavour; especially if you’re looking to get the best price within a reasonable time frame. Above all else, information will be your ally during the process. Many of the frustrations and challenges sellers face in today’s market can be summarized by a lack of quality information about potential pitfalls and how to overcome them.
There are also several common mistakes entrepreneurs face during the selling process. To help you avoid these banana peels, here are the top mistakes to avoid when selling your business:
Lean on Professional Help
While you may be an expert in every aspect of running your business, you’re not an expert in how to sell it. Enlist the services of lawyers, brokers and accountants during the process to ensure you’ve covered all the bases. Take the broker, for example. Sure, they’ll cost money up front but they’re usually capable of adding 10-20 per cent to the sale price. A lawyer can help you navigate the legalities of the sale, including several you likely haven’t even accounted for. An accountant will help you get your books in order before selling – which is one of the first things a potential buyer will ask for during their due diligence.
Pre-Qualify Potential Buyers
Buyers will naturally want to perform due diligence on your business. This process isn’t a one-way street. You should perform your own pre-qualification checks on potential buyers to ensure they’re both a good fit and financially capable of buying the business. Request pre-qualification documents such as financial records and confidentiality agreements before you release any critical information about your operation. This will prevent wasted time on both sides and ensure all potential buyers are adequately vetted.
Avoid Misrepresenting Your Business
There’s nothing wrong with wanting to present a glowing picture of your business during the selling process. However, it’s important not to misrepresent any facts to potential buyers. Avoid the temptation to fudge numbers, be overconfident in projections or tell any lies relating to your operations. While some sellers have undoubtedly got away with it over the years, due diligence will uncover some of these lies. Any that slip through the net could become basis for legal action after the sale.
Don’t Breach Confidentiality
Be extremely careful with publicizing your business is for sale. During this period, it needs to be business as usual for your operation. Confidentiality during the process is key. A business broker will be skilled in marketing your business to potential buyers while also ensuring the transaction is appraised quietly. If customers and staff know your business in on the market it can adversely affect sales and morale at a pivotal time.
Ensure a Transition Plan is in Place
Many businesses are left floored when an important staff member departs. Far too much organizational knowledge can be held within the brains of key staff, and nowhere is this more apparent than the business owner. One of your first moves when you decide to sell is to ensure all processes are noted down and explained so that anyone can pick up the threads and ensure smooth operational consistency.
Find Out More
Small Business BC offers one-on-one consultations with business brokers, lawyers and accountants as part of our Talk to an Expert series. Discuss the issues surrounding the sale of your business with an expert and ensure you receive the best possible return on your investment.