Common Mistakes to Avoid When Selling Your Business

At Eden Exchange, we’re well-versed in selling a business. And with decades of experience helping others to sell their businesses, we’ve seen a range of mistakes and pitfalls that people fall into.

Selling your business is a complex process. You may need to go through a lot of due diligence and you want to make sure you find the right buyer too. After years of working on and building your business, you’re likely thinking about who takes it on and whether they have the skills and ability to continue your legacy and ensure it reaches its potential.

While there are many common mistakes, there are, fortunately, easy ways to avoid them. We’re going to explain the most common mistakes that we see and offer solutions to help you avoid them below.

1. Lack of Preparation

The journey to selling your business can be long and drawn out, or it may be a snap decision. No one can tell you when the right time to sell your business is, and sometimes, you just know. But once you decide to sell, it’s paramount that you get yourself prepared to do so.

For some people, the preparation for selling was done when they started the business. Creating an exit strategy is one of the easiest ways to ensure that selling your business is simple. An exit strategy contains all the steps you have planned to take when moving on, and if you’ve kept it up to date, will likely be seamless to implement.

However, not everyone has an exit strategy, so there is some preparation you will need to do to get your business seller ready. This includes:

• Financial prep: This means making sure all financial records are complete and up to date, completing tax statements, profit and loss statements, and any other financial statements, and identifying any risks or liabilities.
• Conducting legal due diligence and compliance: Generally, businesses will need some kind of license to operate, so making sure this is up to date is key. On top of this, you should take a look at all contracts and agreements and wrap up any disputes and legal issues.
• Streamline your operation: Many business buyers want to find a business opportunity that is operationally efficient. It makes taking over much simpler and also makes your business opportunity much more attractive. So, we suggest ensuring you’re being as efficient as possible in all aspects of your business. Document any standard operating procedures if you haven’t already to ensure consistency and root out any operational inefficiencies and implement better strategies to replace them.
• Strengthen customer relationships: It probably seems a little counterintuitive to be shoring up your customer base as you plan to leave, but by expanding your clientele and bringing in new customers, you can help mitigate any customer concentration risks. For example, if you have been operating within a very small niche that relies on a few loyal customers, see what you can do to bring in more customers to prove to a buyer that your business has a steady client base.

2. Overvaluing or Undervaluing Your Business

One of the first things you will need to do when planning to sell your business is to get it valued. You may choose to do it yourself, but an independent valuer, like a business broker, will be able to value your business without any bias. This means you get the best price while still making sure your business is attractive to buyers.

When valuing a business yourself, you’re likely to make mistakes. As you're close to the business and have seen it built from nothing, you’re at risk of overvaluing aspects, or in fact undervaluing them if you see weaknesses in your business model.

One of the best ways to ensure you’ve got a fair asking price is to seek outside help. A professional business valuer or broker will offer guidance on setting an attractive price that doesn’t leave money on the table.

In addition, they will use things like the current market trends in your industry and comparable sales that they have worked on, ensuring that what they’re asking for will result in a quick sale.

If you still want to value your business yourself, then make sure you consider all aspects and use the previously mentioned indicators to set a reasonable price.

3. Timing

Like all markets, the business selling market has peaks and troughs, which means there are good times to sell and bad times to sell. We would always suggest looking at the market to see when businesses have sold for the best prices to time it right––and obviously, avoid selling during periods of an economic downturn if possible!

While it is always best to wait for growth in the market to sell, there is also a personal element to the timing of a business sale. During our time guiding and advising people in the sale of businesses, we have seen many people make the tough decision to sell, and it is always a highly personal decision.

You may be choosing to retire, changing industries, or leaving your position due to declining health––whatever the reason, you need to make sure it is the right time for you too. Regardless of the market, if you’re not ready to sell your business quite yet, you’re likely to put up emotional and psychological roadblocks to stop yourself from getting the best out of the process.

Before selling, ensure that you’re ready for the transition.

4. Neglecting Marketing

Marketing isn’t everyone’s favourite thing. In fact, some people actively dislike marketing their business. But when you’re selling, it is essential that you market your business well and get exposure so that active buyers will actually see it.

One of the best ways to get the message out that you are selling is by using an online platform like Eden Exchange. We have a network of thousands of active buyers, and once you list your business, the network will be able to see it for as long as it takes to sell. This means that thousands of people looking for a business opportunity, just like yours, will have access to your listing.

In addition to using an online platform like Eden Exchange, we recommend working with a business broker. They can get the word out for you, will likely already have some leads that they know of and who are looking to buy businesses exactly like yours, and they can help take the stress out of selling for you.

Don’t shy away from getting professional help when selling your business. The professionals know exactly what to do to make the transition smooth and easy. So, for a hassle-free process, they are your best bet.

5. Lack of Confidentiality

Confidentiality is key when selling a business. You’re going to be sharing a lot of sensitive information with potential buyers, and not keeping things secure can do massive harm to your business.

To begin with, you may even consider keeping the sale of your business confidential. This can ensure that employees don’t become anxious and competitors can’t get their hands on insider information. You may consider selling your business without listing your name or working with a trusted business broker who deals with only a few leads.

If you choose to work with Eden Exchange, you will find many aspects of our service make confidentiality easy. We offer personalised NDAs that you can use throughout the business selling process, and our platform has a safe and secure space for document sharing. This means you can transfer information with potential leads to ensure nothing sensitive gets out.

In addition, online platforms like Eden Exchange use an algorithm to match you up with the most qualified business leads to make the lead-verifying process much easier. It means you’re spending more time working with serious buyers and less time sifting through hundreds of potential buyers.

6. Not Working With Professionals

While we understand that working with a business broker is a personal decision because they’re not for everyone, this doesn’t mean you should avoid all professional help. With the number of contracts and legal documents you will need to have prepared when selling your business, you will benefit greatly from the help of a solicitor.

You should also consider working with an accountant or financial advisor to ensure that all financial statements are correct and that your finances look as good as possible before the sale. A financial advisor may also guide you on the best time to sell to take advantage of the tax incentives available.

7. Not Planning for Life After the Sale of a Business

After the sale of your business has gone through, you’re likely to find yourself needing some time to relax. It can be a stressful time, and you’ll likely need time to recharge afterwards. 

However, once the initial stages of relaxing are over, you will be in a different financial position, and your entire lifestyle will suddenly change. This means you need to have a plan in place to ensure you’re financially stable after the sale of your business and that you don’t get too bored!!

Consider new ventures, hobbies to try out, or vacations to take now you have the time. You could even consider negotiating a consultancy role in the sale of your business so that you don’t step back from it completely.

Final Thoughts

While plenty of people make mistakes when selling a business, there are ways to avoid them. We have covered the most common mistakes we have seen during our years in the industry, but with some outside help and guidance, you will avoid them!

If you want support in the sale of your business, then why not book a meeting with one of our Business Sales Managers? We’re a full-service business buying and selling platform working with clients around the world to facilitate business transactions daily. Our innovative platform is easy to use and has all you will ever need to sell your business today.

Who we are

Eden Exchange is an integrated multi-channel platform, simplifying business buying and selling. We match, refer and connect business buyers, sellers & brokers in an ecosystem that facilitates frictionless franchise, business and finance transactions. Visit www.EdenExchange.com and connect with our engaged and multidimensional transaction network today.