4 Mistakes to Avoid When Selling Your Small Business
Growing and promoting your own business is one of the most rewarding experiences for every entrepreneur. But there might come a point when you’d want to hand your business over to a successor or start a new venture. In either case, you’ll likely consider selling your business at the best possible valuation.
But whether you want to sell your online business or brick-and-mortar store, it’s easier said than done. Selling your small business isn’t just about finalizing a deal with the first buyer you meet. Also, it isn’t as simple as listing your business on a business-for-sale marketplace.
You need to start preparing well in advance and make sure your business is in proper financial health. From pre-qualifying your buyers to ensuring proper transition – selling a small business involves various steps.
Also, you need to maintain confidentiality before and while finalizing the deal, as well as earn the trust of prospective buyers. It’s just as essential to determine the right valuation for your business.
If you’re new to the world of entrepreneurship, putting your business up for sale would seem like a daunting task. In this blog, we’ll highlight a few common mistakes you should watch out for during this process. Let’s get started.
1. Selling When You’re Not Ready
Between a house that’s ridden with structural flaws and plumbing issues, and one that’s been recently revamped, which one would a prospective buyer select? It’s the same for small businesses.
If you put your business out on the marketplace without adequate preparation, you’ll fail to attract too many buyers. Instead, it’s a good idea to analyze your business operations and identify any issues that might turn prospects away.
To begin with, make sure your website is fast, secure, user-friendly, and easily navigable. If you’re running an online store, make sure the inventory is up-to-date. Also, take suitable measures to optimize your website for search engines. Add a few customer testimonials and case studies to make a stellar impression on a prospective buyer. This is particularly crucial when you’re selling an online business.
Next, check your financial statements and make sure the records are updated and accurate. Watch out for any accounting or calculation errors that might act as red flags. This is particularly crucial because most small businesses often rely on accounting software for financial record-keeping.
It’s wiser to hire a third-party accountant to get your finances in order. Make sure you have your tax returns, balance sheets, profit-and-loss statements, etc. handy for prospective buyers. Likewise, you need to review all your legal documentation and patents to ensure those are up-to-date.
Likewise, you should keep an eye out for other issues, including staffing problems and litigations. Make sure you have skilled employees for various business processes who are suitably compensated for their services.
It’s also worth determining whether your business has reached a stage where it can attract prospective buyers. Evaluate your balance sheets and income statement to get a clear idea of the profitability. Additionally, you should have a firm understanding of your reasons for selling the business.
2. Doing It All On Your Own
Of course, you’re great at building your business and escalating it to greater heights. But this doesn’t mean you’re going to ace the process of selling it on your own. This is because selling a business, whether it’s online or offline, requires a different skill-set and an objective point-of-view.
It’s a good idea to hire an online business broker to take care of the entire process. From analyzing your business records and determining the valuation to optimizing your business listing and vetting potential buyers – a business broker takes care of every step.
Additionally, a broker will provide you with the right assistance to get all the legal paperwork done. Likewise, they can connect you with a plethora of interested buyers. It is, however, crucial to select a reputed and trusted broker who has prior experience in handling businesses like yours.
Also, it’s wiser to explore a couple of brokers and check their reviews before zeroing in on one. Dig deeper into their working process and find out whether they use a customized approach for every business.
You could also consider hiring an experienced valuation expert to determine the optimal price tag for your business. Additionally, you might need an army of lawyers, accountants, web developers, and other professionals to get your business ready for sale.
3. Relying Too Much on the Broker
Yes. A business broker is going to take most of the load of selling your business off your shoulders. However, this doesn’t mean you should just hand things over to the broker and wait for leads to start pouring in. Instead, you should imbibe a hands-on approach and remain thoroughly involved in the process.
Figure out all the needed plans for your business then contact a business broker. Coordinate with the broker to find out how they’re going to value your business and list it on various marketplaces. Also, ask them for tips on what you can do to make a striking impression on prospects. Ask for suggestions on how you can discreetly promote find leads in your network.
4. Not Prioritizing Confidentiality
The last thing you want is to get the word out about selling your business before closing a deal. It could have catastrophic repercussions, including increased employee turnover and reduced customer trust. Also, your vendors might be unwilling to partner with you anymore.
That’s why you should take the right steps to maintain confidentiality. Make sure all professionals involved in the process, including brokers, lawyers, accountants, etc., sign non-disclosure agreements. Also, continue to focus on sales, conversion, and employee welfare as you’d normally do.
Did you make any other critical mistakes while selling your small business? Share your experience in the comments section below.
Cover Image from Unsplash
About the Author
Bibhuranjan Editorial Officer, technofaq.org I'm an avid tech enthusiast at heart. I like to mug up on new and exciting developments on science and tech and have a deep love for PC gaming. Other hobbies include writing blog posts, music and DIY projects.
