The Top 10 Mistakes Owners Make When Selling Their Business

You’ve invested many years into starting and growing your business.

But, chances are, you’ve never sold a business before.

When it's time to sell your business, You’ve got one chance to get this right.

So how do you maximize your value and keep from making mistakes? 

At Stonebridge Business Brokers of BC, we’ve successfully assisted business owners in the sale of their business.

Along the way, we’ve seen business owners make common mistakes that end up costing them money, or causing the deal to fall apart.

We’ve compiled a list of the top 10 mistakes business owners make when selling to help you avoid the same pitfalls.

Let’s Have a Look. 

Top 10 Owners Make When Mistakes When Selling Their Business:

1. Not Starting Early Enough

If there is one thing we’ve heard over and over, it’s the phrase “I wish I would have prepared to sell earlier.” 

Few owners prepare to sell their business in advance. 

Why?

Preparing to sell can seem like a daunting task. It’s an emotional decision that deals with a business owners sense of identity.

But starting early accomplishes several important things:

• It gives you time to organize your financial books and records

• It allows you to adjust the way you run the business to make it more appealing to a future buyer

• It helps you understand your future tax burden and gives you the necessary time to work with an accountant to help you minimize your tax bill

In order to make the selling process smoother, you should aim to have clean books and records, an operations manual, and an organizational chart.

Talk with Stonebridge Business Brokers of BC and ask us what you can do that would better prepare you for a sale in the future.

2. Not Having a Good Support Team

The first step to preparing in advance is to assemble your team of professional advisors.

Your advisory team may be comprised of: 

• A CPA 

• An attorney

• A wealth advisor 

• A business broker

These professionals will bring a specific area of expertise that will help you minimize your tax burden when you sell your business, avoid any legal issues, plan for your future, and help you maximize the price that you get from your business sale.

3. Not Preparing for the Emotions of Selling Your Business

It may be a big step to even admit you’re beginning to think of selling.

In fact, most business owners think about selling for several years before they’re actually ready to sell their business.

You’ll go through a roller coaster of emotional highs and lows. 

And once you’ve made the decision to sell, the emotions aren’t over. 

We’ve had big burly contractors cry at the closing table. And it’s understandable. 

Starting and growing a business is something to be proud of. You worked your butt off along the way; you’ve had sleepless nights, took money out of your pocket to fund the business, and created jobs for your employees. 

Being the owner is also part of your identity. Family and friends know you as the owner of your business.

You care about employees. You’ve been there to see them get married, you know their kids.  

It can be a lot to take in. 

Our recommendation? Spend plenty of time making plans for what you’re going to do after the sale. Set goals. Finish up your bucket list.

Life doesn’t end after you sell your business. Don’t let fear keep you from accomplishing your goals.  

4. Going With the First Buyer, Not The Best Buyer

When you sell your business, it may be tempting to go with the first buyer that approaches you. After all, it can be a nice feeling to see the big number in their offer. 

But don’t jump on the first offer before you have given other buyers a chance to look at the company and give you their opinions as well, especially strategic buyers. 

The best way to find the right buyer is to work with a business broker that will market your business well so that you will have multiple buyers to choose from.

This strategy allows you to compare buyers to find the best fit and get the best price for your business. 

5. Not Disclosing Important Details

When speaking with your advisory team, be transparent and disclose important details of your company to them.

With the full picture in mind, your broker will be able to present any potential issues in the best light possible while still remaining honest with your buyer.

OUR TIP

If you try to hide an issue and your buyer uncovers it during due diligence, they will lose trust in you and have greater leverage to renegotiate the terms of the deal.

Getting ahead of issues and disclosing certain things upfront can actually help gain the buyer’s trust, even if the disclosure is negative. 

6. Negotiating Too Much or Not Enough

Being inflexible on deal terms is the quickest way to lose a deal. 

When you decide to sell your business, go in with the expectation that not everything will go your way. 

You can prevent a deal from falling apart by letting your Vancouver Business Broker know what is important to you so they can negotiate on your behalf with those things in mind. 

Experienced business brokers in BC will negotiate on your behalf to get you the deal terms that are actually important to you. 

There will be a lot of things to negotiate like price, training period and consultation, allocation, deal terms, seller financing, and earn-outs.

There will need to be some give and take on each of these points. 

7. Unrealistic Value Expectations

Pricing your business too high is the surest way to prevent offers and discourage interested and qualified buyers from starting the process with you.

At Stonebridge Business Brokers of BC, we go to great lengths to accurately value your business, so that you sell on the high side of the market, but don't risk scaring buyers away.

8. Not Preparing For New Management

Even though you might not have an employee interested in buying the business from you, work on developing your employees into management roles. 

Building out your organization chart in this way will give the buyer a much smoother transition. 

The best way to do this is to think about who you would put in charge if you were to go on vacation for two weeks. Whoever comes to mind is the person you should work on developing further.

OUR TIP

Having more people in your company that understand the business and have relationships with your employees, vendors, and customers will make buyers more confident in buying your company.

Some business owners may also choose to hire an operations manager. This can be a good investment if you have extra time to develop someone.

It will set your cash flow back a bit to add another salary for an operations manager rather than train someone internally, but it will make your company more valuable in the long run.

9. Focusing on The Sale More Than Running Your Company

One of the worst mistakes a seller can make is to mentally check out too early. 

You may be ready to move on to the next chapter of your life, but the process of selling your business is going to require your full attention. 

Since selling your business is a complex process, it is useful to have your deal team in place so that you can focus on running your company throughout the sale.

Until you sign the Purchase Agreement, train the new owner, and finish the consultation period, don’t take your foot off the gas. 

Your revenue and profit will need to stay at or above previous levels. Why? 

During the due diligence period, buyers and lenders will ask for your company’s most recent financials. This includes a year-to-date comparison with the previous year.

If there is a drop, the buyer may want to leverage this to renegotiate the price or the lender may start asking a lot of questions.

10. Waiting Too Long to Sell Their Business

Many sellers wait too long to sell, often because they procrastinate developing an exit strategy. 

By waiting, you might be forced to sell at a low rather than a high. Many sellers are forced to sell due to health reasons, a downward trend in the business, or desires to pursue other interests not related to the business.

You should also consider the economic cycles and how the market is doing. We have had sellers wait too long and miss selling their business at an economic high point, costing them millions in the sale.

You’ve invested a lifetime building your business, which is why you should maximize your company’s value when selling.

With an appropriate exit plan mapped out, you can sell at the right time - on your terms. 

Prepare Ahead of Time to Sell Your Business Successfully

You can avoid all of these mistakes by hiring the right Vancouver Business Broker.

Get the benefit of an experienced BC Business Broker who can maximize the sale price of your business and represent you in the transaction so that you don't have any "Seller's Remorse."

Contact:

CHRIS HALL

Senior Business Broker

Stonebridge Business Brokers of BC

stonebridge@businessbrokerbc.ca

604-866-2236