Deciding to sell a small business is no easy task. For many entrepreneurs, it’s something they’ve put their heart and soul into. It can be challenging to hand over the reins and separate oneself from the entity.
When you decide to sell your business, it’s best to learn from the mistakes of others so that you don’t repeat them. Here are five of the top mistakes to avoid during the business selling process.
Not Using a Broker or Representative
Don’t make the mistake of trying to handle the sale of your business on your own. Using a broker or representative is well worth the investment. A broker can help you set a price and bring forth interested leads to look at your business offering. They can also make suggestions along the way for marketing and improving the value of your business, as well as facilitate the negotiating process.
While having a broker and other representation (such as a lawyer) is integral for success, don’t choose the first one you find online. Conduct interviews and ask for recommendations and testimonials before signing with the broker who has the skills you need. Read this article for valuable tips on finding the right broker.
Not Building Up the Value of the Business
When you decide it’s time to sell your business, even if it’s just a consideration, you need to start building up the value. What can you do to make the company more attractive to buyers? Some examples include:
- cutting expenses and boosting profits to increase revenue
- paying down vendor accounts
- revitalizing your employees
- creating procedures and policies for efficiency
- refurbishing and investing in capital
The higher the value of your business, the more likely it is to sell at the price you want. It’s also wise to start thinking about the other facets of value in business: your brand awareness and loyal customer base, years of experience and expertise, etc.
Not Planning for the Long-Term
Deciding to sell a business shouldn’t be something that you choose today and trigger tomorrow. Instead, take a step back and create a long-term plan to make the business ready. It will take time to find a broker and add value, as well as figure out your next steps as the former owner.
Creating a long-term plan also gives you time to evaluate the market and set the right price. It will also help you identify the right time to sell. While selling too quickly is a poor choice, so is waiting too long.
Not Perfecting Your Pitch and Answers
One of the main questions you’ll be asked as someone selling a business is, “why?” For the record, “I’m sick of running it,” or, “it’s going to spiral downward into oblivion.” are never the right answers.
Take time to perfect your pitch and answers to frequently asked questions. Craft a response that is guarded without being misleading. For example, “I’ve brought this business as far as I can. Now it’s time for someone else to bring it to new levels.” Putting a positive spin on your answer creates confidence and makes someone more likely to put in an offer.
Setting the Wrong Price
Setting the wrong price is detrimental when selling a business. Setting the price too high can mean months of proverbial crickets– no offers, no interest, and no sale.
Alternatively, setting the price too low is also problematic. Often when a business owner wants out, they price the business far too low in hopes of a quick turnover. While undercutting the competition is a solid business strategy, sometimes you don’t want to lose all the hard work and value you’ve put into the business.
The key takeaways when selling a small business are to work with the professionals and take your time. Don’t make any impulsive decisions and find the right people to form a sales team.
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