4 Mistakes to Avoid when Selling a Business

Selling a small or medium sized business is not an easy matter. Most business owners contemplating selling their businesses as an exit strategy don’t have any experience doing so. As a result, when trying to sell their companies, they will probably make numerous mistakes that will not only cost them a lot of money but also increase the potential risks inherent to the sale of their businesses.

Some of the frequent mistakes are:

  1. Informing the wrong parties about their decision to sell too early. A lot of value could be destroyed if customers, employees, suppliers etc. are informed at an early stage that the business might be for sale. This creates a sens of insecurity that has a dramatic impact on moral and therefore reduces productivity. Furthermore each party starts seeking alternatives and might leave the company. For example, employees might leave, customers might find other supply sources and suppliers might renegotiate terms because of the perceived increased risk.
  2. Spending too much time with potential buyers and neglecting the business. The business could suffer if the owner is too much focused on the sale rather than on managing the business. Profits decrease and the potential buyers loose interest. It generally takes a few months for the business to change hands. During this period potential buyers are closely watching the business’ performance. Any deterioration will automatically cause the buyers to back-off or renegotiate a lower price irrespective of the causes of the decline.
  3. Showing hesitation when a good offer is presented. Seller’s Remorse is one of the biggest deal killers. Experienced buyers spend tremendous time an money evaluating a business purchase. The last thing they want is having sellers change their minds about selling right before closing. As a result, buyers watch for signs of seller’s remorse and walk way if they feel that might happen.
  4. Trying to sell very quickly or showing a desperation to sell. It’s very difficult for sellers to hide their emotions. Most experienced buyers will sense the excessive sense of urgency and will take advantage of it. As a consequence  sellers end up getting much less for their businesses. Generally, selling a business takes a long period. If the owner needs to get out fast, then selling is probably not the best exit strategy.

Because of the complexity involved in selling a business, we generaly advice business sellers to seek professional assistance in selling their businesses. If you are selling your business and cannot afford professional advice, then please take the time to study the business sale process and plan for you sale in advance.

Comments 1

  1. Business Note Buyer wrote:

    I think the last part of your post is the most important. Business owners need to prepare to sell well in advance if they want to get top dollar for their businesses. Unfortunately many neglect to have an exit plan in place and it hurts their bottom line in the end.

    Rhonda

    Posted 02 Jan 2009 at 7:40 pm

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