Avoiding Common Mistakes When Selling Your Business

Did you know that 80% of businesses listed for sale never actually sell? Many owners enter the process unprepared, leading to financial losses, drawn-out negotiations, and even regret. Establishing a well-thought-out exit strategy helps ensure that your hard-earned equity turns into a profitable and rewarding experience as you look forward to the next phase in life.

Key Takeaways

• Lack of Clear Financial Records: Disorganized finances can derail your sale before it even begins.
• Waiting Too Long: Timing is everything; delay can significantly impact value and opportunities.
• Valuation Missteps: Unrealistic expectations can alienate buyers and cost you a deal.
• Overlooking Post-Sale Plans: Begin with the end in mind and plan personally and financially to avoid regret.

Lack of Clear Financial Records

Potential buyers will quickly lose confidence if your financial records are incomplete or disorganized. Imagine buying a house without knowing the square footage or monthly utility costs—the same need for clarity is true for businesses.

Avoid this by:

• Keeping financial data current and audit-ready.
• Developing a system that works best for you in tracking historical business data. Do this not only for use in the event of a sale but also to better understand trends you may not have noticed beforehand.

Think of your financial records as the story of your business. A compelling story will attract buyers.

Waiting Too Long

Many business owners delay selling until it’s too late—perhaps due to declining health, industry changes, or burnout. This often leads to a rushed sale at a suboptimal price.

Avoid this by:

• Starting your exit planning early—ideally three to five years before your anticipated sale date.
• Regularly reviewing your industry and market trends to identify the ideal time to sell.

Timing isn’t just about market conditions; it’s also about your readiness to let go.

Valuation Missteps

Setting an unrealistic asking price is one of the fastest ways to scare off buyers. Whether it’s overly optimistic revenue projections or mismatched industry benchmarks, valuation errors can sink your sale.

If you are unsatisfied with the professional valuation, planning proactively may allow you the time needed to implement change, improving marketability.

Avoid this by:

• Getting a professional valuation to determine your business’s true worth.
• Comparing your valuation with industry averages to help ensure alignment.

Remember, buyers want a good deal, but they also want transparency and fairness.

Overlooking Post-Sale Plans

What’s next after the sale? Many business owners find themselves adrift because they didn’t plan for life after work.

Avoid this by:

• Considering your lifestyle changes and post-sale cash flow needs.
• Working with a financial advisor to confidently map out your retirement or next venture.

Selling your business isn’t just a financial transaction—it’s a personal one, too.

Proactive Steps to Take

Keep Your Financial Records Pristine: Periodic reviews and clean records will showcase your business in the best light.

Engage Experts Early: From financial advisors to tax specialists and M&A consultants, having a team of professionals will help optimize the process.

Define Your Goals: Understanding what financial freedom looks like for you is key to a successful sale.

Selling your business is a major milestone, and like any significant decision, preparation is critical. By avoiding common mistakes and planning thoughtfully, you can turn your business legacy into the foundation of your next chapter.

The opinion of the author is subject to change without notice and must be considered in conjunction with relevant regulation, as well as subsequent changes in the marketplace. Any information from outside resources has been deemed to be reliable but has not necessarily been verified. Each individual has unique circumstances to which this information may or may not be relevant. Under no circumstances will this information constitute an offer to buy or sell and it does not indicate strategy suitability for any particular investor.