Some Fatal Mistakes You Can Make When Selling Your Business

Some Fatal Mistakes You Can Make When Selling Your Business

12 Fatal Mistakes You Can Make When Selling Your Business


Selling a business is not easy. Each deal has its challenges and nuances. I guess that is why I love what I do, and I also know how valuable our service is at Transworld. 


Many people think it's as easy as placing an advertisement somewhere and wait for the perfect buyer to call. I wish I could say it was that easy. Many entrepreneurs build a successful business through vision, excellent management skills and sheer hard work. But most do not have a thorough understanding of the complexities and factors that are present in the deal structuring and business selling process.   Plainly said, it’s a jungle out there! And you need a professional tour guide!   


Here are some of the pitfalls we see most commonly when trying to sell your own business.


1) Failure to maintain confidentiality
Letting the cat out of the bag early can be dangerous!  If employees know that you are selling and changes are coming, they may quit. Competitors may use this information as a selling tool. Vendors may not continue to extend favorable terms. And all buyers should have to sign confidentiality agreements to even meet with you.  


2) Failure to continue to run your business.
It is important to maintain your business at peak operating capacity.  If you try to sell your business yourself, you will have hundreds of buyers call you.  And most are tire kickers. The time wasted with these buyers takes your eye off the ball and lower profits and market value.    All buyers will eventually seek the latest P&L statement just before closing. If sales and profits are down, the buyer will seek to give you a major haircut.   After many years of working with buyers, we can avoid the tire kickers and the hairstylists!


3) Failure to use proper negotiating techniques
In many deals, poor negotiating techniques can cost you considerably in terms of selling price, terms and other opportunities.  You can’t be the bad guy, an intermediary can. Many times a deal will fail to close because of poor negotiation or communication between parties.  Plus you must deal with the third party interference from the likes of attorneys, CPAs, bankers, mothers-in-law! Pro athletes (most anyway) understand the importance of a skilled negotiator. The bottom line is you need one too.

4) Failure to secure qualified buyers
Knowing how to qualify a buyer is critical. We can help you pre-qualify each buyer to avoid a negotiation that is doomed to fail. This saves you time and money. The best buyer is one that will close not always the one with the most cash!

5) Failure to move the deal along
A good deal like fresh fish.  The longer they sit around the more they stink.  You must run your business, your lawyer and accountant have other clients to work with, but we can be there on a daily basis quarterbacking your deal to the end zone.

6) Failure to place the proper value on your business.
A business has value to a buyer because of its anticipated earnings from its established resources and a demonstrated successful track record. Proper evaluation is crucial, enhancing the chances of selling.   You need to have the right price so as not to scare off potential buyers while at the same time maximizing your eventual price. It is a proven fact that an intermediary can sell your business for more!

7) Failure to properly structure the deal.
When the seller has limited knowledge about the available alternatives for structuring the deal, he is at a definite disadvantage and probably a costly one. Items such as leveraged buy-outs, leases, royalties, earn-outs, consulting agreements, non-compete contracts can add immeasurable value and security to both buyer and seller alike.  At the same time, terms unfavorable to you could be a fatal mistake or make your headache trying to figure out if something is a scam.


8) Failure to prepare for proper due diligence
Due diligence issues are very important to the selling process. It is imperative to be prepared and organized. You must be able to defend and substantiate representations made during the selling process.  We can guide you through the due diligence jungle. If your records are still in the shoebox, you will probably not get the deal done!


9) Failure to market the sale.
If your business sale is being handled by a small brokerage or by you with limited advertising resources you will never find the best buyer at the highest selling price.   With our large network, we are able to interview hundreds of buyers and get the best ready to purchase your business. Transworld’s approach creates a mini trading floor an auction-like atmosphere that will produce buyers that know the value of your business.


10) Failure to seek the right professional assistance and consultation
There are legal, financial, marketing and other vital considerations that must be addressed in the selling process. Many decisions in the selling process should not be made without the advice of the right professionals.  The wrong professional can lead you to make bad decisions. You need the right team. 


11) Failure to properly package your business. 
A potential buyer will want information about your customer base, competition, financial history and industry characteristics, such as size, growth potential and areas of opportunity. This information must be provided in a salable format and in a way to ensure your confidentiality.  Your financials must also be recast to show your business in the proper light. Most financials are prepared to minimize taxes; we work with you and your accounting professional to recast them in a format that maximizes your business's value.


12) Failure to control the deal.
We have sold thousands of businesses. We know when to let buyers look at customer lists when to talk with employees (if ever), when to start and end due diligence when to hire the right professionals when to call the landlord and more importantly we know when to refuse access to your business and its records.  There are many opinions on how to sell and buy a business. You need a strong company in your corner.

 Again, this is a complicated process with many pitfalls. But with the right team, your goal of selling your business for the right price is just a phone call away.



Call or schedule your appointment with us today!

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