Most businesses are sold at less than their full value. Why does this happen so often? Here are 12 of the most common mistakes business owners make in selling their companies:
1Maintain expectations beyond fair market value. You’ve poured your heart and soul into your business, and now you want to capitalize on all that hard work. Unfortunately, when it comes to determining the value of your company, your friends’ opinions, standardized formulas, or your own (possibly inaccurate) valuation can lead to unrealistic expectations. You need an independent estimate of your company’s worth so you can sell at the right price. Read More
2Allow emotions to drive decisions. Your business is your life’s work, so it’s understandable that selling your business is an emotional process. However, you need to check your emotions at the door or you’ll make irrational decisions. Read More
3Go at it Lone Ranger-style. As an entrepreneur, you’re used to taking charge and doing things yourself. But when you’re ready to sell your business, you’ll want an expert at your side. Read More
4Take your eye off the finish line. It’s only human to fantasize about how you’re going to spend your time and money upon selling your business. But while you’re dreaming of all the exciting changes to come, be sure to stay grounded in your business fundamentals. Read More
5Go to market uncommitted. Many business owners put their companies on the market in hopes of fetching an extraordinary price for their company. The truth is that these windfalls are rare. Read More
6Use a business broker. Business brokers are a valuable resource for selling local retail stores or franchises, but not business enterprises. Read More
7Wait too long to sell. Naturally, you want to sell your company when it will fetch its highest value. But like selling a stock at its peak, it’s a very difficult thing to do. Read More
8Treat confidentiality lightly. You’ve decided to sell your business and you can’t wait to tell your friends and family. No problem, right? Wrong. Read More
9Sell to a competitor. While strategically it may make sense to sell to a key competitor, I have yet to meet a competitor that didn’t feel he was one sale away from putting you out of business. Read More
10Ignore the importance of CPA prepared finances. Nothing lowers your valuation more quickly than incomplete or inconsistent financial records. Read More
11Don’t clean up your room. Similar to selling a home, it’s important to present your company in the best light. Remember what your realtor told you about “first impressions”—the same is true when it comes to your business. Read More
12Keep the wrong people on the bus. Most buyers, particularly private equity groups or other sophisticated buyers, aren’t looking to buy your company so they can get a job—they’re looking for an investment. What these investors are particularly interested in is a strong leadership structure. Read More