Selling a business can be a daunting process and there are many pitfalls to be aware of. These include failing to prepare sufficiently and not protecting your sensitive commercial data.
It’s very important to plan for each stage of selling to give yourself the best chance of meeting your objectives. So here are five common mistakes that owners make when selling their business so you can pre-empt potential problems and present the best version of your business to the market.
1. Not preparing for a sale
It’s advisable to formulate a clear exit plan as soon as you set up or take over a business. Essentially, the more time you have to prepare the business for sale, the better the outcome can be. A good example of this is ensuring that your financial records are accurate.
Potential buyers will undertake a process of due diligence during which time their legal and financial advisors will scrutinise the information you’ve provided. If any is found to be unreliable it could lead to a lower offer being made, or the prospective purchaser withdrawing their interest.
2. Not protecting sensitive information
The initial information you release about your business is contained within a sales memorandum. It includes high-level financial data, broad details of your customer base, and information about how your business operates day-to-day.
This is extremely sensitive information, and if it fell into the wrong hands, could compromise your business’ future. You can protect this data, however, by using a non-disclosure agreement (NDA) before you release the sales memorandum. An NDA details the information that must be kept confidential, the length of time it needs to remain so, and the legal penalties if the interested party releases it.
- Previous sales and acquisitions experience
- Sector specialisms and average success rate
- Sales value expectations and growth potential
3. Using an inaccurate business valuation
Valuing your business accurately and realistically encourages interest from the most appropriate buyers and, ultimately, a faster sale. A reliable business valuation lies at the heart the process and undervaluing or overvaluing each has its drawbacks.
If the business is overvalued you won’t achieve the level of interest you’re looking for, but undervaluing it means you could lose money unnecessarily. Selling My Business are highly experienced business transfer agents and provide accurate valuations for businesses in all industries.
4. Not obtaining professional support
It’s not only at the valuation stage where professional support is needed, however. Failing to obtain the expert help you need doesn’t save money – it simply exposes the business to unnecessary risk.
Our team takes time to understand your business and your objectives from selling and can undertake negotiations on your behalf where required.
5. Poor record keeping
It’s crucial to present detailed and transparent records when selling a business, as this instils confidence in potential buyers and gains their trust. This is fundamental to a successful sale as if errors are found or information is missed, the purchaser may not wish to continue with the deal.
For more professional guidance on selling a business, please contact our team of experts at Selling My Business - we can support you from the beginning to the end of the sales process.