You’ve built your business into a success, but now, it’s time to make a change. Selling your business isn’t easy. There are emotional, legal, financial, tax, and insurance obstacles that you need to successfully navigate or you could lose a lot of money!
It’s important to have a complete exit strategy in place, but unfortunately, this is something most business owners don’t think about until it’s too late. Be sure to get the help you need so you don’t do anything wrong!
To help you get started, here are five mistakes you should avoid when you’re selling your business.
1. The Value of Your Business is in You
If the value of your business is you, then selling it can be difficult. This value could be in your personal name or in your personal abilities, knowledge, and duties. For example, if your business requires very little marketing investment because you are so well known online and/or offline, but that notoriety is based on your personal name, not your business name, then a new owner won’t derive the same benefit from it after you leave. He or she will need to invest a lot more money into marketing to maintain a similar level of sales.
On the other hand, if your business operations are primarily dependent on your skills and knowledge, then a new owner will need to learn those same skills and acquire the same knowledge (or pay to hire or train employees to get those skills and knowledge). When you leave the business, you take a significant portion of its value with you.
Therefore, make sure you’re business isn’t dependent on you. Delegate responsibilities, train employees, and promote your business name as much as or more than your personal name. Doing so will ensure that you can seamlessly transition out of the picture when a new owner steps in.
2. You Expect More for Your Business than Anyone Will Pay
How much do you want to sell your business for? Unfortunately, the amount you want to get for it might not match what a buyer would be willing to pay. It’s essential that you get an expert to put a dollar value to your business that is realistic.
As the business owner, you have an agenda. You need to make enough money on the sale of your business to enjoy the next phase of your life, but you also know how much work you’ve put into the business over the years and want to be compensated for it. Your emotional connection to your business is likely to cause you to overvalue it.
A financial expert can remove the emotional bias and find the right sale price. It’s up to you to determine whether or not that’s a sale price you’re willing to accept. After learning the real value of your business to potential buyers, you might just find that it’s not the right time to sell your business after all.
3. You Want to Sell Your Business on Your Own
Selling a business isn’t easy, and the legal, insurance, finance, and tax hurdles you’ll have to jump through to get the deal finalized are numerous. Don’t go it alone, and don’t let a friend or family member do the deal for you. You won’t get the best deal unless you have expert help.
Most importantly, you need a team that is experienced in negotiating business sales, has a track record of quick closings, and knows how to structure your deal so you can meet your goals. Bottom-line, you need experts who will look out for your best interests, because you can bet that the buyer will have his or her own experts on hand to ensure his or her interests are met.
4. You Put the Money First
Yes, money matters. You have goals beyond the sale of your business that you want to meet. Whether it’s earning enough money to retire or to start your next business venture, you want to make a specific amount of money from the sale. However, don’t let the dollar signs cloud your judgment.
Instead, you should consider all factors of any offer you receive. For example, evaluate how the buyer will finance the purchase, plans for employees after the sale, whether or not you’ll need to continue working in a consulting manner after the sale, and so on. Not all offers are equal, so always review more than just the proposed sale amount.
5. You Don’t Have an Exit Strategy.
Before you sell your business, you need to have a succession plan, a retirement plan (or savings plan if you’re not ready to retire), and a tax strategy in place. Selling a business significantly impacts your legal, insurance, finance, and tax situations, so you need to plan ahead!
There are many factors that can affect your life after you sell your business based on when, how, and where you sell it. Create your plan now, so you’re in the best possible position when it’s time to sell.
Create Your Business Exit Plan Now
If you own a business, then it’s never too early to develop your exit strategy and put a plan in place so you and your family are comfortable after you sell it.