5 Mistakes to Avoid When Selling Your Business

Many small and mid-size business owners make major mistakes when selling their business and it costs them millions of dollars in the process. Without the proper expertise and execution, your hard work and long-term investment will be greatly diminished. These mistakes are often easily avoidable. As entrepreneurs, many dream of building their business to a big success – to reap the rewards in the form of a successful exit. But planning for and conducting the sale is not as easy as it may appear.

As a former CEO of a software company myself, I have built and sold businesses over the past 35 years including mergers and acquisitions management positions for Corporate America, as well as mergers and acquisitions advisory services for the past 15 years for my own firm, CEO Advisor, Inc.

Here are my five tips to help you avoid business sale pitfalls, missed opportunities, lost money and possibly having the perfect buyer slip through your fingers altogether.

Mistake 1: Not Planning Ahead or Waiting Too Long to Sell

Not planning in advance and especially waiting too long, can cause many business owners to miss their window of opportunity. It takes 6 months or more to sell a small to mid-size business. Planning is key to any successful business sale. You just never know when that perfect buyer will call you and is ready to make you an offer you can’t refuse – if only you were prepared!

Mistake 2: Not Finding the Right Person to Represent Your Business

For continuity purposes, the same individual in the advisory firm that helps you with the preparation for the sale should be the same person and firm that sell your business. Otherwise, this can cost you a lot of time and money in the long run. Without this continuity of knowledge of your business coupled with the needed expertise, you may see no results and have to start the process all over again. Make sure to choose – and continue to work weekly – with a very seasoned, experienced business/M&A advisor. Make sure not to get passed onto a junior person, or have a junior person work on your sale behind the scene. This will be a disjointed and very costly situation that may not result in a sale at all.

Mistake 3: Asking Too Much or Too Little for the Business

Valuing your business at a very high or unrealistic minimum price for a business can destroy your chance to secure a buyer. Expecting to get top dollar for a business that generates little profit, has low Gross Profit Margin or has slow growth is simply bad business. Consider the size and health of your industry, comparable businesses, the economy, size of your business, growth rate, Gross Profit Margin, Net Profits, strength of your products, management team, and other factors when determining your value in preparation for a sale.

Another mistake is to value the business too low. Often business owners will price their business low because they are burned out, suffer from an illness or did not get good advice. Do your homework and listen to your business/M&A advisor. Review and assess your research about other business sales and make prudent decisions to optimize your sale price and increase your odds of a successful sale.

Mistake 4: Not Being Engaged in the Sale at the Proper Time

Selling your business will take a team of a business/M&A advisor, a corporate/transaction attorney and a CPA/tax advisor. Your M&A advisor will lead and manage the process but don’t underestimate the time and focus it will take for the entire sale process.

Mistake 5: Taking the Wrong Offer or Buyer

Evaluate your options and make the best selection for the long term. Ask yourself, is this the best company to buy and operate my business? Can they quickly connect with my customer base and learn how to market effectively? When the business sale goes as planned, it creates a tremendous opportunity for both businesses. Part of the sale price may be a future Earn Out and you need to stay engaged, work with the buyer and continue your success as a team.

Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. at (949) 629-2520, by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information or to schedule a no cost initial consultation at your office.

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