Top 7 Mistakes to Avoid When Selling Your Business

December 2022

Selling a business is a serious business, period. It takes many steps to ensure a successful sale. Unfortunately, common mistakes have costly consequences. This article will examine the top seven mistakes to avoid when selling a business. We will discuss the potential outcomes of each error and recommend strategies for avoiding them altogether.

#1: Not Planning Ahead

The most common mistake when selling a business is not preparing for sale. Without proper planning, buyers can take advantage and devalue the company during negotiations, a costly mistake.

Actionable checklists of tasks and clear timelines keep you organized throughout the sales process, avoiding delays. A strategic plan keeps the process moving forward toward a successful sale.

Costly consequences, like taxation, may be avoided with adequate preparation and consultation with the right professionals.

#2: Not Seeking Professional Advice

Understandably, you hope to save money by selling your business independently. But know that you will need professional services at specific points of your sale. Depending on the specifics of your industry, numerous professionals might be required, accountants, lawyers, financial advisors, and more. In the long run, a business broker may save money, provide the expert advice you need, and maximize your value to make money.

A professional business broker will access the resources needed to maximize the valuation and position your company in the market to attract qualified buyers.

#3: Forgetting Employee Considerations

When selling your business, it's essential to consider how each decision will affect your employees. The stability of your company during the sales process is paramount to its valuation. A buyer will look for a strong staff team to maintain operations throughout the transition to new ownership.
 
Review employee contracts and strengthen positions before selling. Discontented employees can destabilize your base of customers and suppliers. You want them to remain dedicated while you complete the sale process and ensure new owners will treat them well. Your advisor will help you know when to tell your staff what's happening.

 #4: Underestimating the Tax Impact

Underestimating that tax implications can be costly for business owners if they are not prepared. Taxes should not be an afterthought of the sale. Understanding tax assessment and payment should be among the top priorities for a seller so that the costs are factored into the deal.

Consult with a professional accountant early to determine what types of taxes may apply and their respective impact on both parties in the transaction. Also, knowing which tax credits may offset some costs is beneficial when negotiating terms with buyers.

#5: Poor Negotiating Tactics

Negotiating can be challenging. Poor negotiating tactics are a common pitfall for owners, and some buyers will take advantage of this weakness. Honest buyers prefer an objective 3rd party negotiator.

Business Brokers have experience in negotiating tactics and six essential skills for success:

● Communication. Clear communication, Knowing when to walk away
● Emotional Intelligence. Emotions play a role in the negotiation
● Planning and being prepared
● An accurate valuation with verifiable data to back it up
● A strategy that ends with a successful transition to a new owner
● Reflection on previous negotiations, successes, and failures helps manage current talks.

#6 Underestimating Value

A common mistake made by sellers is underestimating their value. Failure to recognize your business's true worth can lead to lost opportunities and missed sales. You need tools and objective resources to arrive at a fair deal.

The professional services of a business broker ensure market research and comparables in San Diego businesses sold and understand your company's potential financial upside. Understanding and valuing your business correctly from the start will make you better positioned for success at every step.

#7: Lack of Promotion Amongst a Vast Network of Potential Buyers

An effective plan to promote your business amongst a vast network of potential buyers leads to serious buyers who are well-qualified to purchase a business like yours.

To promote your business, consider potential target markets for your San Diego business and analyze existing trends and data. Determine which channels are most appropriate for your message, including online advertising, traditional media such as print or broadcast campaigns, or even direct mail campaigns.

Conclusion

Feeling overwhelmed by the complex and demanding process of selling your business is understandable. Who looks after day-to-day operations when an owner is distracted by the demands of selling?

The best solution to avoid these seven common pitfalls of selling a business is to hire an experienced Business Broker who will focus on meeting these demands. At the same time, you continue to run a successful business.

Contact First Choice Business Brokers San Diego for a consultation. We have buyers waiting for a business like yours!