5 Pitfalls to Avoid When Researching How to Sell Your Business

With the volatility in today’s small-business marketplace, you may be looking at how to sell your business. You hope the transition is a smooth and profitable process. Under an ideal circumstance, selling a business is not an easy task. Lack of sale preparation, deficient or misaligned expectations can and often do conflict with market realities. No matter the industry and sector, the key to achieving your desired outcome is efficient pre-sale planning. The most successful sellers are extremely careful. They ensure they get the pre-sale preparation right. Here are the common mistakes and how you can avoid them.

1. Starting the Sale Process with Misguided Expectations

One of the biggest mistakes business sellers make most, especially first-timers, is unrealistic expectations. Many owners tend to overvalue their companies, trying to sell them for more than асtuаl-mаrkеt-vаluе. Which then leads to disappointment when someone underprices their business.

Tempering your expectations is important. You can do that by carrying out a thorough evaluation of recent sales for similar companies in your area. If you do this technique during the preparation, you’ll gain a more practical insight when it comes to the average sale price for your business. It will also give you a good timetable on how long it typically takes to sell a business like yours as well.

Consultations with other experts and business brokers are a great idea and can be very helpful in identifying the actual value of your business sale deal.

2. Trying to DIY the Business Sale

Another common mistake sellers often make, trying to do everything on their own. It’s a known fact that very few business owners have experience or time to handle selling the company. Sales professionals, business brokers, accountants, exit planners, appraisers, and others can help to streamline the process for you. Not only does using these experts aid in ensuring that your enterprise is ready for prospective buyers, but it also helps you determine the right value and price for your business. That’s why I highly suggest one of the first things you need to do after deciding to sell your business is to pull together a talented team of advisors. You will also need a team to address the tax implication, legal, brokering, estate planning, financial planning, and other specific areas.

3. Getting the Timing Wrong

I often say, “The right thing at the wrong time is the wrong thing.” A good time to sell your business may not be determined by how you feel or when you feel it’s right. The fact that the economy has strengthened might not mean that the business succession market is ripe for every business in every industry. It’s possible that waiting to sell your business could better position it a year or even six months down the road.

It is usually tricky when trying to determine the best possible time to sell your business. Making the necessary consultation with your advisory team and identifying the outcomes you want to achieve early in the process is the best place to start. Putting yourself in a buyer’s shoes can uncover insights that impact the timing of your sale. Remember, while you are researching how to sell your business, the buyers are likely researching how to buy a business.

RELATED ARTICLE: Types of Business Buyers Likely to Purchase Your Company

4. Incorrectly Valuing Your Business

While it’s not unusual for sellers to overvalue their companies, it can be just as equally dangerous to undervalue your business. Hyper appreciating your business makes the estimate process tricky. A low valuation may leave money on the table but can also have an adverse impact on your buyers. They may assume there is a problem with the business, causing potential buyers to move on to other opportunities. Another issue you could face is a potential buyer may agree to the value, but the bank funding the purchase may not support the agreed price.

Getting the real valuation provided by a qualified appraiser is important. However, this doesn’t imply that your easy-to-use assessment tools and your insight are not a good starting point. Knowing how to sell your business is important.

RELATED ARTICLE: How is a Small Business Valued?

It pays to get the price right considering that your business is likely your most valuable asset. Business brokers and professional sales expert who offer valuation services have the expertise and understand the marketplace enough tо provide аn ассurаtе mеаѕurе оf уоur соmраnу’ѕ rеаl value.

5. Not Spending Enough Time on Preparation

You should begin the process at least six months to 1 year before you intend to sell your business. Ideally, developing a strategy starts several years in advance. Most business owners end up surprised by the amount of time and effort it actually tаkеѕ. Prореrlу рrераring your buѕіnеѕѕ fоr the mаrkеtрlасе is no quick task. Start by compiling the financial history of similar companies sold. Then determine the value of your business. Finally, set the right asking price. Doing each of these as you research how to sell your business can ensure a smooth process.

Learn in-depth examples of how to strategically think through the sale of your business for top-dollar by studying our Building a Sellable Business educational series.