Making the decision to sell your business is not something to take lightly. In fact, the vast majority of business owners will spend countless hours, days, weeks, months, or even years weighing all of the pros and cons of selling before they finally come to a conclusion on what is best for their situation. However, just because you have determined that you want to sell your business does not mean the work is over just yet. To help yourself avoid these pitfalls, following are a few of the common mistakes that business owners make when they are selling their business.
1. Not Having a Thoughtfully Planned Exit Strategy
While you want to put a lot of thought and research into your decision to sell your business, the reality is that you can spend too long planning and waiting to make a move. By working with a professional to develop an exit strategy that takes numerous factors into consideration, you have a better chance of avoiding unexpected problems and selling your business at the most opportune time.
2. Not Hiring a Broker / Advisor
Business owners generally are great at running their business, not selling it. Often business owners that attempt to sell without an Advisor “take their eyes off the ball”. The focus becomes selling the business, and the business suffers. Several studies have shown that on average using an Advisor results in a 10 to 12% higher selling price. An Advisor can market your business confidentially, screen buyers, assist in negotiation, help buyers obtain financing, draft agreements, manage due diligence and facilitate the deal through closing.
3. Not Knowing Fair Market Value
Price is the most important factor in determining how long a business stays on the market. An Advisor and his or her team can help determine the fair market value by analyzing the cash flow, valuing the assets and studying the market comps of similar sold businesses. Having this knowledge before assigning a price can lead to a faster, smoother sale as well as being better positioned to defend the price.