5 Errors to Avoid When Selling Your Business

Selling your company is often a one-off situation. No second opportunities, which makes it a significant decision. Contrary to selling your home for maximum value.

Every day business owners perform drastic errors when selling their company and lose thousands of dollars in the process. All their hard work and long-term gains go down the sewer. These mistakes are frequently easily avoidable.

Here are my five pointers to assist you in avoiding business sale pitfalls, frustration, and wasted money.

Mistake 1: Reasons for the Sale.

Did you decide to sell your company? Why? That's the first inquiry a potential buyer will ask.

Owners generally sell their companies for any of the following reasons:

• Retirement

• Partnership disputes

• Divorce

• Illness or death

• Becoming overworked

• Boredom

Some owners think selling the business when it is not profitable can make it harder to attract buyers. Consider the business's readiness to sell and your timing.

Many characteristics can make your organization seem more attractive, including:

• Increasing profits

• Consistent income figures

• A strong customer base

• A major contract that spans several years

Mistake 2: Asking Too Much or Too Little for the Business.

A business is generally worth a multiple of its' profit. Depending on the size of the opportunity and the industry, that can range from 2-10 times the EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). Smaller businesses (under $3M EBITDA) generally average 2x-3x, medium-sized businesses ($3M to $6M EBITDA) can bring in 3x-5x EBITDA, and large companies (+$6M EBITDA) will often see 5x-10x EBITDA.

Mistake 3: Assuming You Don't Have to Promote or Market Your Business.

Believing an agent will do all the job in advertising your sale can be fatal. You are the best promoter for your company. Who knows your firm more than you? No one is more motivated, enthusiastic, and informed about your company than you. An intermediary may be getting you some activity, but it's crucial that you maintain promoting yourself fully.

Mistake 4: Not Designing or Expecting Too Long to Sell.

Succession planning is a notable misstep. Even if you do not have a relative's replacement, you still have to think like a succession planner. The individual "succeeding" you want to be set up for success. If they perceive you have been preparing and considering this for quite some time and that it's not a fast "I've had enough" sale, your payment may be higher.

By keeping updated financial records, a detailed business history, and a client's portfolio at your fingertips at all times, it will make your preparation pay off. You never know when that perfect buyer may walk into your business and make you an offer you can't refuse.

Mistake 5: Not Deciding for the Right Individual to Take over Your Company.

Will you feel happy when you see a former employee or customer at the local supermarket months later? Or will you hide? The incorrect buyer can do wrong actions to your (now former) company. They can plunder it for profit, or produce pollution or toxins, or make inadequate or unsafe products.

Try and do the right thing for all associated parties. Check that the buyer ticks all of your boxes. Exit smartly and exit cleanly.