As an entrepreneur, I have successfully sold two businesses but failed with the third one. Now as a freelance business financial advisor, I help other small business owners achieve success. Here are my lessons learned to help you avoid business sale pitfalls and lost money.
Mistake #1: I waited too long to sell
Waiting too long can cause many business owners to miss their window of opportunity. It takes an average of two to four years to sell a small business. Therefore, planning is key to any successful business sale. By keeping updated records, detailed business history and sales portfolio, it will make your planning pay off. You just never know when that perfect buyer may walk into your business and make you an offer you just can’t refuse.
Mistake #2: I asked too much for my business
Setting a very high asking price on your business can lead to nowhere. Expecting to get top dollar for a business that generates little or no profit is simply unrealistic. Consider your industry, similar businesses, the overall economy, and your marketplace when pricing your business to sell.
Another mistake is to price the business too low. Often business owners will value their business low because they are depressed, burned out, suffer from an illness or did not get good advice. Be objective and do your homework! Listen to advisors. Do some research about other business sales before jumping in with both feet.
Mistake #3: I sold to the wrong person
Taking the first offer may not be a good choice. This may not necessarily be your best offer. Selling your business for top dollar with little or no money down along with an extended contract may lead you to lose it all. Business sales often go bad after the new owner takes over. The new owner may lack experience or be a poor leader. A successful business owner makes it looks easy, but change that mix and disaster may follow. When this happens, the new owner ends up going out of business and leaves you holding an empty bag. It saddens me to see a business fail after years of success due to this lack of business sale judgment.
Evaluate your options and make the best selection for the long term. Ask yourself, is this the right person to buy and run your business? Or, can they quickly connect with my customer base and learn how to market effectively? When the business sale goes as planned, it creates a tremendous opportunity for both parties and the success will follow.
