Selling Your Business: Avoiding The Top 5 Mistakes That Hinder a Successful Sale
It’s the start of a New Year. Is this the year you take the big step and start on the journey to sell your small business or financial advisor practice? If it is – or even if you’re just getting ready to get ready – did you know a startling 70%-80% of such sales fail to materialize successfully?
Let's dive into the five most common reasons behind this high failure rate, shedding light on key areas that demand your attention to ensure a business sale success.
Unrealistic Expectations for Sale Price: One of the primary stumbling blocks is harboring unrealistic expectations regarding the sale price. Owners often overvalue their businesses, leading to prolonged negotiations or outright deal collapses. To avoid this, conduct a thorough market analysis and seek professional advice for a realistic valuation. Conduct a SWOT analysis of your business (strengths, weaknesses, opportunities, threats). Understanding your business's true worth sets the stage for a more favorable and successful negotiation process.
Business Records Not Up to Date and in Disarray: A messy trail of disorganized and outdated business records can quickly turn away potential buyers. Take proactive steps to organize your financial records, ensuring they are accurate, up to date, and readily accessible. Streamlining this information not only expedites the due diligence process but also instills confidence in potential buyers, making your business more appealing on the market.
Inconsistent History of Profitability: Buyers are attracted to businesses with a consistent and positive financial track record. An inconsistent history of profitability raises red flags and can deter potential investors. Identify any anomalies in your financial performance, address them, and highlight stable revenue streams and growth prospects. Presenting a reliable and positive financial history enhances the perceived value of your business.
Note: if your profitability record is not great, it may take longer for you to fix up the business to sell it. If you don’t want to take the time to improve your bottom line, you may need to accept a lower sale price or different terms for a sale.
Inflexible Negotiating During Due Diligence Process: The due diligence process is a critical phase in any business sale, and rigid negotiation stances can jeopardize the deal. Be open, transparent, and flexible during this phase. Address concerns promptly, collaborate with potential buyers, and consider compromises where necessary. A cooperative approach fosters a positive environment, increasing the likelihood of a successful transaction.
Lack of Planning: Lack of planning is a common downfall in business sales. Start planning your exit strategy well in advance, developing a comprehensive transition plan. Document key processes, client relationships, and operational procedures to ensure a seamless handover of responsibilities. A well-thought-out plan not only demonstrates your commitment to a smooth transition but also makes your business more attractive to potential buyers.
In the intricate world of business sales, success lies in meticulous planning, realistic expectations, and a proactive approach. By addressing these five common pitfalls—unrealistic pricing, disorganized records, inconsistent profitability, inflexible negotiation, and lack of planning—you position your business for a smoother and more successful transition. Take the initiative now to enhance the marketability of your business and increase the chances of finding the right buyer who recognizes the value you've built.
These five trouble areas are all issues a well-qualified business coach can support you to overcome. It’s imperative you choose a trusted advisor who is on your side and not just someone who wants to sell your business and make a profit (most business brokers).
If you want guidance from a fee-only and trusted coach who has been there and got the t-shirt (I sold my business in 2022), set up a complimentary Get Acquainted call with me. We’ll discuss your goals, expectations, and current situation so you have a better idea of what you can do to avoid the five most common pitfalls when it comes to selling a business.