Exiting a business is no easy feat. It’s an endeavor that requires time, patience, and finesse. But unfortunately, many owners make grave mistakes when selling their businesses. From failing to prepare for the sale to not getting enough money from the deal, these rookie blunders can cost owners dearly. So, what are the most common mistakes owners make when selling a business?

13 Mistakes Owners Make When Selling a Business

1. Not Having Accurate Financial Records

All prospective buyers want to see your current financials and a few years’ worth of historical data. If your records are inaccurate or incomplete, it could impact the sale price and even scare away potential buyers.

In addition to having accurate information, it is also important to organize it in a way that is easy to understand. Buyers want to grasp the financials of your business quickly, so take the time to ensure everything is properly organized and up-to-date.

2. Unrealistic Valuation Expectations

Another mistake is having unrealistic expectations of what your business is worth. It might be priceless to you, but buyers will only value the company based on the financials and other market factors. Potential clients will likely leave the deal if you set the bar too high.

We’ve also seen owners undervalue their businesses, so don’t sell yourself short by not considering your business’s market value and what you could get for it.

3. Not Understanding the Tax Implications

Not understanding how the sale will affect your taxes can leave you with an unwelcome surprise. Make sure you know what taxes you’ll owe on the sale and what deductions are available so you can minimize the tax impact of the transaction.

To avoid this expensive pitfall, you should work with a business consultant who can help you identify potential issues and ensure you take advantage of every available deduction. These professionals can also help you structure the sale in a way that is most beneficial to you.

4. Selling When Revenue Is Down

It may seem like a good idea to sell when your business is performing poorly, but it could actually have an adverse effect. Buyers want to know what your business can do in the future, and if revenue has been consistently declining, that won’t paint a rosy picture for them.

If possible, turn your business around before you start the selling process. This will attract more buyers and get them to pay a higher price for your business.

5. Not Maintaining Confidentiality

You want to keep all sales-related conversations confidential, so your competitors can’t gain an advantage. These conversations should only be discussed with key stakeholders and advisors, such as lawyers and accountants.

This means even the biggest supplier of your business, who you may consider a friend, should not be briefed on the sale. You risk compromising the value of your business if word gets out to competitors.

6. Underestimating the Importance of a Business Consultant

Exiting a business is a complex process, and it’s important to have experienced professionals on your side. A CPA, lawyer, and broker can help you navigate the sale successfully. They can provide invaluable advice, from structuring the deal to negotiating with potential buyers.

Having professionals in your corner will also ensure that all the legal documents are properly prepared and that nothing is overlooked during the process. Please don’t make the mistake of trying to do it all alone.

7. Not Planning for the Aftermath

Selling your business is emotional, and it’s easy to forget what comes after the deal. Make sure you plan for what you want to do next and create a budget. This will help you transition smoothly into retirement or a new venture.

Some owners also underestimate the impact of “selling” their employees. Discuss the sale with your team once the transaction is complete and make sure they understand how it will affect them. This will help you catch any surprises early.

8. Not Walking Away From a Bad Deal

You should never feel pressured to accept a deal that isn’t in your best interest. If you get an offer that is significantly lower than expected or not financially beneficial, feel free to walk away from it.

There are plenty of potential buyers, so only settle for a deal that is right for you. With the right preparation and professional advice, you can find the perfect buyer who will give you the price your business deserves.

9. Not Considering Noncash Offers

The offers you receive for your business may not be entirely in cash. Some buyers may offer part-cash, noncash, or deferred cash options. Don’t discount these options just because they don’t involve a lump sum payment upfront.

You should consult with your advisors to analyze the pros and cons of each offer and determine which one is best for your situation. You may find that the noncash, part-cash, or deferred cash offers are more beneficial in the long run.

10. Failing To Promote Your Offer

Once you’ve decided to sell your business, how you promote the offer will draw the line between a good and a great sale. Your best bet is to work with a business broker or advertise online to make sure the right people are aware of the opportunity.

You’ll be surprised at how quickly the right buyer will come if your offer is out there. So don’t sit back and wait for potential buyers to find you – take the initiative and spread the word about your business.

11. Not Pre-Qualifying Buyers

Before you enter into any negotiations, make sure you have pre-qualified buyers. Ask them to provide financial information and proof of funds so you can be sure they are serious about the purchase. This will help avoid any delays or surprises later in the process.

Getting references from previous business transactions and speaking to their advisors is also essential. This will provide insight into how they operate and what kind of environment you can expect during the sale.

12. Not Viewing the Offer From a Buyer’s Perspective

When you make an offer, take a step back and look at it from the buyer’s perspective. Is this a good deal for them? Are they getting all the information they need to make a decision?

You must provide buyers with all the necessary details about your business so they can analyze the cost-benefit and make an informed decision. If you don’t, they may walk away from the deal or offer a lower price than what your business is worth.

13. Over-Negotiating When Selling a Business

It’s natural to want the best deal when selling your business, but be careful not to over-negotiate. If you ask for more than what is reasonable, it can hurt the buyer and may even put them off.

Take your time to consider each offer carefully and determine the right balance between getting a reasonable price and maintaining a good relationship with the buyer.

When exiting a business, it is essential to have the right professional help and guidance. We strongly recommend contacting our M&A experts at ASA Ventures Group today. We understand the complexities of this process and are here to provide expert services in mergers, acquisitions, debt management, and more.