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Selling a business is simple, right? Avoid these seven common mistakes to take the edge off

Many business owners spend years building their business to only receive a fraction of what it is worth when it comes time to sell. Although there are many more, here are seven of the most common mistakes that could impact you significantly.

  1. Inadequate preparation

Sellers who get the best deals are those who have left around 18-24 months or longer to effectively prepare, especially in relation to due diligence. Imagine selling your home, would you present it in the best possible light to get the highest possible price?  Of course!  The same is true for your business.

  1. Obsession with history instead of future opportunity

Future potential is far more important than past performance. While you need to justify historical financial results, identify and focus on the growth opportunities a potential acquirer will have, so they are excited about the future.

  1. Valuation

Never take a business to market with a price tag, it could be the most expensive mistake you’ll ever make. While an objective third-party estimate of value is essential, it’s more important to address the issues that could increase value. When you focus on future potential you’re much more likely to get maximum price for your business.

  1. Not leveraging professionals

While it might seem attractive to save the 10% or more brokerage fees, you are the expert in your business, not the expert at selling it. When you engage a team of experts they will add more than their fees in value. A good broker will handle marketing, buyer pre-qualification, showing the business and ultimate negotiations. You’ll also need your accountant, lawyer and potentially, financial advisor, involved.

If you’ve taken the time to do a proper exit plan, your exit strategy advisor will be invaluable in keeping your team of professionals on the one page, with your interests at the centre of every decision.

  1. Poor record keeping

Can you easily access the last 2-3 years’ financial results, tax returns, employee contracts, supplier contracts, leases, equipment warranties, etc.? Are they stored for easy retrieval electronically?

What marketing records do you have for leads, conversions, average dollar sale, customer lifetime value? Many businesses do not track and, more importantly, use this information to grow their business.

Do you have analytics installed on your website? Every digital, online business should have tracking installed to validate how much and what kind of traffic they are getting. You need at least six months’ analytics history, and the longer your track record the better off you will be.

What about your content, domain names, hosting records, product inventory, subscriptions or other services you buy? All listed and easy to access with passwords, logins etc.?

  1. Selling with revenues or profits heading down

If your revenue or profit is decreasing, this is not the time to go to market. Take whatever action is needed to turn the business around, or if it’s plateauing at a new level, give it time to settle. A potential acquirer will want to see a steady income stream, not one that’s heading south. Don’t make any big purchases if you can avoid them.

  1. Mentally checking out of your business

So many business owners think as soon as they put up the “For Sale” sign they can take their foot off the pedal. This is the absolute worst thing you can do. Assuming you are working “on”, not “In” the business so it’s no longer reliant on you, it’s even more important you continue to do just that – as if you have no intention of selling it.

If you kick back and just let things roll on, unless you’re earning truly passive income, you’ll find a revenue slump within a month or two, with a subsequent drop in value. With downward revenue, a potential acquirer is much less likely to pay top dollar now you’ve provided great leverage for negotiation. So many business owners forget about this.

Confidentiality is also key.  You’ll want your team to continue as though it’s business as usual, too.   While this list is by no means exhaustive, these seven mistakes can really make or break the business sale process.

About the author

Kerry Boulton is a Value-Acceleration specialist, Certified Value Builder, Certified Exit Planning Advisor and founder of The Exit Strategy Group.  Kerry works with entrepreneurs to build a valuable business and create a fulfilling, purposeful life after business.  She is also author of Million Dollar Pay Day: How to Get Rich and Get Out…Creating the Perfect Exit Strategy and Life After Business. 

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Kerry Boulton

Kerry Boulton

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