Horizon M&A Advisors

5 Mistakes to Avoid When Selling Your Business

Selling your business is one of the most important decisions you will make in your lifetime. It is the culmination of years, perhaps decades, of hard work and dedication. However, the process is fraught with potential pitfalls that can cost you not only time and money but also can cause you to lose the best buyer. Being aware of mistakes and how to avoid them is crucial in ensuring a smooth transition and maximizing return. Below are five major mistakes to be avoided when selling your business.

Mistakes to avoid

Mistake 1: Not Preparing Your Business for Sale

Preparation for sale, most of which will take place long before the actual listing, is one of the biggest mistakes business owners commit. The due diligence process may be very aggressive, and your financials, operations, and legal documents have to be ready.

Checklist of Preparation

  • Clean Financial Records: Your financial statements should be clean and current. Buyers will look at your books, and inconsistencies are a flag.
  • Updated Processes: Update and document your business processes. This not only makes your business more attractive but also easier to transition.
  • Legal Compliance: Clear up any outstanding legal issues and ensure all licenses and permits are current.

Fact: According to a study by BizBuySell, those businesses that are prepared well before listing are 40% more likely to sell within the first six months.

Mistake 2: Overpricing or Under pricing Your Business

Overpricing or under pricing the business is another mistake. Overpricing can scare away potential buyers, while under pricing can cause financial loss.

Emotion vs. Reality of Markets:

Most small business owners usually tend to love their business like children, causing an emotional distortion that might create judgment errors; one should first eliminate emotions, then consider an objective analysis. For example, many business owners say:  “It must be worth more because I put 15 years of my blood, sweat, and tears into this business.”  What you did to get to the present state of business is not so important as the present state of the business itself, and how the business is positioned for future growth in revenues and earnings.

Tools/Assets

Business Valuations By Experts: Ask for a valuation from an experienced business valuer.

Similar Industry Business Studies: Research well comparable businesses like yours to monitor industry trends

Mistake 3: Lack of Confidentiality

It is important to maintain confidentiality during the sale process. If it leaks out, it can create unrest among employees, customers, and competitors.

Risks:

  • Employee Turnover: Employees may look for other opportunities if they feel that there is instability.
  • Customer Trust: Clients may lose confidence in your company’s stability and future.
  • Competitor Advantage: Competitors may use the information to their advantage, which may result in poaching clients or employees.
  • Loss of key partnerships: Your most important business partners may rethink the relationship if they feel the organization is unstable.
5 Mistakes to Avoid When Selling Your Business

Mistake 4: Selecting the Wrong Buyer

It is not about who gives the highest offer, but rather a fit in the three aspects of financial capability, vision for the company, and cultural fit.

  • Financial Capability: Ensure the buyer has the resources to complete the purchase. This involves reviewing their financial statements, funding sources, and credit history.
  • Cultural Fit: The buyer’s values and vision should align with your company’s culture. A mismatch can lead to disruptions post-sale, affecting employee morale and business continuity.
  • Long-term goals: Assess the buyer’s long-term plans for the business to ensure they align with your legacy and the company’s future growth.


Fact: 30% of business sales fail to close due to buyer financing problems. When you invest the time, effort, and resources to thoroughly vet buyers, you eliminate this risk and ensure an easier transaction process. Also, an industrious buyer can bring successful relationships and connections along with a business opportunity.

Mistake 5: Flying Solo-and Perhaps Abandoning an Adviser

Selling a business is not an activity to be attempted without professional advice. M&A advisors bring immense expertise to the table, thus avoiding common pitfalls and achieving the best possible outcome.

Value Added by Advisors:

  1. Marketing: Advisors leverage their networks and strategies to boost your business’s visibility and attract serious buyers by positioning it effectively in the market.
  2. Negotiations: Skilled negotiators secure better terms and higher prices, manage complex discussions, and mediate to ensure smooth, fair deals.
  3. Legal Insights: Advisors handle legal aspects, reducing risks by coordinating with legal professionals for contracts, compliance, and due diligence, minimizing post-sale disputes.
  4. Post-Sale Transition: Advisors facilitate smooth transitions, assisting with employee communication, client retention, and operational continuity.

It takes a team to successfully sell a business.  That team requires your in-house accounting team, your CPA, an M&A Transaction specialist attorney and may also include a financial planner or wealth advisor, a qualified retirement plan administrator, your insurance broker, and of course, your spouse.

Conclusion

Selling a business is a complex process with many potential pitfalls. By avoiding these five common mistakes-not preparing your business, mispricing, neglecting confidentiality, choosing the wrong buyer, and going it alone-you can increase your chances of a successful sale.

At Horizon M&A Advisors, we know how difficult it is to sell a business. Our experts will be by your side throughout the process to ensure you achieve the best possible outcome. Contact us today to find out how we can help you sell your business efficiently and profitably.

Remember, it’s all about the right preparation, the right pricing, and the right partners that will be able to drive your journey of selling your business. Don’t leave it up to chance, though. Get Horizon M&A advisors on board to secure a future you well deserve.

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