3 Biggest Mistakes When Selling a Business

Many bumps, hurdles, and problems can arise throughout the process of selling a business. Some of these are unavoidable, whether it be a slow down for regulatory approval, unexpected dip in the market, or sudden shift in the industry at large. But other, far more common mistakes are the byproduct of poor planning, rushed timing, or hubris—and these sale-ruining blunders can be avoided.
 

Here are three of the biggest, most common mistakes to avoid:

Mistake #1: Not Running a Competitive Sale Process

Too often, owners of businesses will discuss the selling of their business to someone they know, feeling a sense of security and control in keeping the process “in-house.” Unfortunately, that same sense of familiarity removes the urgency and call to action to close the sale, causing a great deal of frustration while costing the seller time and money. 

Be proactive, not reactive. Initiating a competitive sale process, even if one of the potential buyers is a trusted friend/acquaintance, helps to drive up the price, improve the deal terms and expedite the closing of the transaction. Ask yourself, if you had the opportunity to buy a business without competition, would you offer top value? Competition between interested parties pushes price, terms, and control in favor of the seller—ultimately giving a business owner a greater sense of accomplishment and the knowledge they received market value or greater for their business

Mistake #2: Not Beginning Comprehensive Preparation Soon Enough

Successfully selling a business takes a lot of time, work, and collected information. It is not something that can be done on the fly, rushed through, or in off hours. Putting in the legwork up front can often mean the difference between a successful deal and having a transaction flounder or fall apart. 

Creating a careful strategy supported by upfront due-diligence means putting together the data analysis, marketing materials, and company positioning documentation before the sale process even begins. Organization and research are key, and having audited financial statements or a Quality of Earnings report (“QoE”) and detailed projections for the business will save time and money on the back end. Good preparation can take years, so begin early, when a company sale still seems like something on the horizon. If you have all your company’s records, financials, permits and other data ready to present when final bids and Letters of Intent are on the line, the peace-of-mind and sense of control it brings will be well worth the up-front effort. 

Mistake #3: Underestimating the Time and Resources Required

Many business owners believe that they are smart and disciplined enough to sell their business on their own. Of the fraction of them who aren’t kidding themselves, only a rarified few might have the time and luxury to pull away from running the business itself to initiate and manage a sale without negatively affecting their operation. 

To achieve optimal results, a sale process takes 6-12 months to complete, dependent upon the preparedness of the Company – and that is with an advisor like Dunn Rush & Co. managing the process aggressively. The sale process is another full-time job for the CFO and CEO of the Company. You need an advisor to get you top dollar for your business and to ensure you have the time to keep running your business effectively during the process. 

Some owners try to limit internal resources available to the sale process to the detriment of comprehensive preparation and organized data. While still others seek to minimize costs by not utilizing external resources like their accountants and lawyers until it’s too late. Don’t do this. Just as preparation should begin well in advance of a sale, you should include your core advisors and management team in your plans from the beginning, utilizing internal and external resources to provide you with the best shot of success.

The Takeaway

All of these mistakes, and most other pitfalls you may face when selling your company, are avoidable by securing seasoned experts to help navigate the transaction. The right team, with the right preparation, will give you and your business the best shot at achieving your personal and financial goals. 

What sets Dunn Rush & Co. apart from our competitors is that before joining our team, every one of our managing directors has been on the client side of selling a business as CEO, CTO, or CFO of a mid-market company. Because of this, we are uniquely positioned to manage both the logistical and emotional process that our clients are going through, providing the insight and analysis you will need along the way. This enables our advisory team to free the owner/operator from getting consumed by the process at the expense of the business itself—allowing our clients to remain focused on running their business throughout the process and maintain the solid financial performance necessary to get the optimal transaction over the goal line.