Top 7 Mistakes Business Sellers Make

While starting a business is easily one of the most challenging tasks for a business owner, selling that business isn’t without stress. Too often, business sellers rush into the process or make mistakes that can cost them millions. Fortunately, Hasbrouck Heights, NJ, business broker Sun Mergers & Acquisitions has years of experience guiding business owners through the process. We’ve helped hundreds of lower mid-market and mid-market companies with exit strategies. Here are the top seven mistakes business sellers make when selling their business.

Poorly-Organized Financials

Your company may be in great shape, but you won’t get your desired sale price if your finances don’t show it. You need a minimum of three to five years of your financial documents, including income tax returns, bank statements, as well as profit and loss statements, when you sell your business. Lack of good financial records can quickly devalue your business in buyers’ eyes.

Selling at the Wrong Time

Sometimes, it’s just not the right time to sell your business. Unfortunately, many business owners may go by “feel” and “gut” to gauge when to sell. Some business sales may come because of industry shifts, while others may relate to a personal reason, such as family issues or a health crisis. However, business owners risk getting a lower valuation or lack of interest. It’s also possible your employees and organizational structure may not be ready for your exit, which can affect your company’s stability.

Lack of Confidentiality

It only takes a few words to thwart plans to sell your business. News of a potential sale could spook your customers and drive them toward your competitor’s arms if they feel your company is unstable. Employees may feel unmotivated or unsure about their future, resulting in decreased productivity and loyalty. Your competitors may decide to reposition themselves as industry leaders and dissuade potential buyers. An M&A firm will ensure confidentiality throughout the process and keep your potential deal airtight to provide the best sale price.

Setting Your Sights Too High or Low

Sometimes, business owners get too close to a business sale, not seeing the forest for the trees. They calculate their business value based on how long it took to establish the business and their “sweat equity.” These inflated ideas of value can jeopardize a sale, as the owner asks for a much higher value than their company’s worth and doesn’t find a buyer. On the other hand, an owner could also underestimate the value of their business because they haven’t done any research.

Violating Industry Regulations

When you sell your company, it can be subject to regulations from The Federal Trade Commission (FTC), the Securities Exchange Commission (SEC), and industry or state regulators. It’s up to business owners to research all of their compliance needs, or they could violate regulations, which could lead to potential liabilities.

Making a Weak Presentation

Presenting your company is essential, but business owners sometimes must focus more on the details. Without the guidance of a professional mergers and acquisition advisor, an owner may leave out important information or ignore any potential gaps in the company. Their disclosure failures can jeopardize the sale and tarnish their reputation with the buyer.

Selling Without an M&A Firm

Finally, one of the most crucial mistakes sellers make is selling their company without the assistance of an M&A firm. There are several reasons why it makes financial sense to work with an M&A advisor. An M&A firm can find potential buyers, coach sellers, prepare the company, and assist in other ways. However, the best benefit is to the owner’s bottom line, as working with an M&A advisor can yield a 6-25% rise in the final sale price, according to a University of Alabama study.

Get Your Company’s Best Value

The best way to avoid making these critical mistakes is to have a partner who can steer you through the M&A process. As a leading Hasbrouck Heights, NJ, business broker, we work exclusively with privately held small—to medium-sized companies and have closed more than 300 transactions. Contact us today to find the best way to package and market your business.