5 Fatal Mistakes To Avoid When Selling Your Business

Most entrepreneurs like yourself are either unprepared or overconfident when selling their businesses. Not hiring experts and not setting financial goals are some of the mistakes to avoid when selling your business in the USA. These trivial mistakes can rob you of your peace of mind and the true value of your business. 

Selling a business has never been easy; not being vigilant can cost you millions! While studying various businesses, we have noticed that most owners either fail to recognize the mistake they are making or do not get the right advice from the right people at the right time. 

However, to save you from the fatal mistakes, we have brought you a guide that you can follow:

Waiting Too Long or Unwilling To Hire Your Team Of Experts  

Not hiring experts on the team, such as investment bankers, lawyers, and accountants, is one of the major mistakes to avoid when selling your business, and yet most business owners make the same mistake. Most self-made owners think that they can do all jobs by themselves. DIYs (Do It Yourself) in business sale transactions can be extremely detrimental. Experts like investment bankers are trained to conduct merger and acquisition financial transactions. They can help you get the most out of the deal. Similarly, lawyers can help you with the paperwork and spotting mistakes in the fine print. Not hiring professionals to save money is one of the perilous mistakes to avoid when selling your business. 

Not Being Aware  Of The Actual Value Of Your Company

In our blog, mistakes to avoid when selling your business, such as not knowing the company’s actual valuation, are the most dangerous mistakes. What most business owners do is they fail to look at their company’s finances from the eyes of the buyer. This, again, can prove detrimental to realizing the actual sale value of your company. Follow these steps to make the most out of this deal:

  • Get a third-party valuation of your company to realize its actual value. 
  • Develop a personal finance plan for yourself, including how much you expect from the deal. 
  • If you think your financial goals are not being met with your business’s current valuation, start developing a growth plan. 

Following these will give you an idea of how much amount makes sense to you, helping you to make the most of this deal. Other mistakes to avoid when selling your business are not considering inflation, spending levels, realistic market returns, etc., while developing your financial plan. Remember to include them.

Disengaging from the Business Sale Process

In the earlier part of the blog, we guided you in hiring a professional to help you carry out the sale process. However, this does not mean you detach yourself completely from the transaction. Investment bankers, lawyers, and other professionals are highly dexterous people who know how to do their job. But will they be as motivated as you are to sell your company? Probably no. That’s why it becomes important that you actively participate in the transaction, which will motivate them. 

Completely disengaging from the transaction will let the professional cut slack and send mixed signals to the seller. The seller will likely feel abandoned and completely cut off from the deal. This is among the fatal mistakes to avoid when selling your business if you don’t want to lose out on a good buyer. 

Not Considering The Structure Of Your Business Sale

Not going through the deal structuring of company sales is among the trivial mistakes to avoid when selling your business. It is often seen in business sales transactions that founders are generally unaware of the deal structure. There are primarily 3 types of deal structuring: 

  • Selling the assets with an asset purchase agreement: Selling assets via an Asset Purchase Agreement (APA) involves transferring specific business assets, such as equipment, inventory, and intellectual property, to a buyer. It’s advantageous for buyers seeking specific assets or avoiding assumed liabilities.
  • Selling the stock or other equity interests: Selling stock or equity interests involves transferring ownership in the business entity itself. This method shifts both assets and liabilities to the buyer, providing a comprehensive change in ownership and control.
  • Through a merger: A merger involves combining two or more entities into one, where one entity typically absorbs the other(s). This results in a transfer of assets, liabilities, and ownership to the surviving entity, offering strategic advantages like increased market share or operational synergies.

It is important that you are aware of these types of deal structures and choose the best one for yourself and your business. 

Being The Most Valuable Employee Of Your Company

Another major mistake to avoid when selling your business is not hiring the right candidate for your team. You might have the exceptional skill to drive profits and revenue. However, if your business becomes reliant on you for growth, it might negatively impact its sales. The next buyer will, most importantly, look for a strong leadership team. Make sure you have one. 

Steer Clear Of The Pitfalls Of Selling Your Business

We have listed some of the most perilous mistakes to avoid when selling your business that most business owners make. These mistakes result in not getting the fair value of the business and make the process of selling a business exhausting. We hope you liked this blog. Don’t forget to comment on the next topic you want us to write on. 

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