Do you want to sell your small business? Or you are already in the process of selling your small business? If any of the criteria above best describes you, then read on as I share with you seven common mistakes you must avoid when selling a small business.
Selling a small business is a process every entrepreneur wants to experience but unfortunately, only few will build a business that will worth selling. There are several reasons why you would want to consider selling your small business either now or in the future but I won't go into the details here. I have already written an in-depth article highlighting why entrepreneurs sell their small businesses.
But in this article, I will be dealing strictly with seven common mistakes you must avoid when selling a small business. If you are still interested in learning this now; then follow me as I share with you below common business mistakes you must avoid when selling a small business.
Selling a Small Business: Seven common mistakes entrepreneurs make and how to avoid it
1. Impatience
Impatience is usually a common mistake most entrepreneurs make when selling a business. They want to exit the business and the want to do it fast. Being impatience can affect your deal negatively because your potential buyers need time to go over the deal and if you add pressure on them to sign the deal; they will smell a rat.
When selling a small business, it's advisable you keep calm and hide your nervousness or impatience. Even if you are under pressure to sell; don't act desperate as this could scare away prospects.
"Patience; this is the greatest business asset. Wait for the right time to make your moves." - J. Paul Getty
2. Indecisiveness
Are you sure you want to sell your small business? How much do you want to sell? Who have you decided to sell to? These are questions you must put to rest before putting up your business for sale. If you don't find the answers to the questions above ahead of time, you are only avoiding a stumbling block that will get back at you in the heat of the process.
One untold fact in the process of selling a business is that there's going to be behind the scene politicking; whether you like it or not. After putting up your small business for sale, there might be a couple of prospects; which will invariably result to a bidding frenzy and behind the scene lobbying.
"The best thing to invest in your business is your time. To schedule, plan and use time effectively, know your turf and know your objectives. Assess the obstacles and opportunities, then devise your strategies." - The Mafia Manager
If the above situation arises, then you must be prepared to take a stand and decide who gets the deal. You must also be clear and strict on your terms and conditions; you must stick to your agreement. No one wants to deal with an indecisive seller; an indecisive buyer is rather preferred. If you have a reputation for changing your stance when under pressure; then let your most trusted business team member oversee the deal.
"Before making an important decision, get as much as you can of the best information available and review it carefully, analyze it and draw up worst case scenarios. Add up the plus or minus factors, discuss it with your team and do what your guts tell you to do." - The Mafia Manager
3. Not doing a personality checkup
"It takes 20 years to build a reputation and only five Minutes to ruin it. If you think about that, you will do things differently." - Warren Buffett
Are you a person of integrity? Do you keep to your words? Do you have a strong positive personal brand? These three questions must be answered before you even put up your small business for sale. In an article I wrote previously, I stressed the need to invest in your own personal branding. I also explained that your personality can be a leverage for you in the world of business.
I have seen entrepreneurs raise billions of dollars in capital simply because they are trustworthy; meaning they have business integrity. I have also seen small businesses sold for millions and even billions of dollars because of the reputation of the entrepreneur behind that business.
So before putting up your small business for sale, make sure you conduct a thorough personality checkup because your buyers will definitely do. Does your personal name reflect a positive or negative image? Do you have friends and associate who are reputable? Can your business partners vouch for you? How easily can you get an endorsement from someone of high reputation?
These are some of the questions that must be answered during your personality checkup. As a piece of advice, if you know you have a bad reputation; don't be the lead dog in the sale of your business. Instead, let your selling team be led by someone of high reputation; it will get you a fair deal.
"The most important thing in your business relationships is your reputation for honesty. If you can genuinely and sincerely fake honesty, you will be a success. Never doubt it." - The Mafia Manager
4. Showing potential buyers the weakness of your business
When negotiating a deal to sell your small business; be strategic. Know your objectives and capitalize on your business strengths. To sell your business successfully and get a fair deal, you must emphasize your business strength or competitive advantage occasionally; not its weaknesses.
Hide your business weaknesses but be prepared to defend it should in case the buyers hits on it. If possible, tactically divert your buyer's attention away from your business weaknesses. There's nothing wrong with this act; it's strictly business.
You have done your calculations so it's left for your buyers to do theirs. If they fail to spot your business weakness, then it's to their own detriment. You just make sure you keep it that way; it's business.
5. Inadequate Legal checkup
Inadequate legal checkup is a common mistake made by most entrepreneurs when selling a business. You must strive to avoid this mistake because it's deadly. One thing with this mistake is that it can earn you a lawsuit, financial losses or loss of certain rights.
To make sure you don't end up committing this blunder, I will advice you hire an external attorney or legal practitioner to go through your legal framework; it will save you in the long run.
6. Shallow paper work or auditing
Before ever listing your business for sale; you must make sure you have thoroughly gone through the paper work. You shouldn't bother with paper work preparation; I think the accounting department should handle that. But you must sit and review this paper works thoroughly with your accountants. You may even go a step by bringing external auditors to pick holes in your paper work.
It is better external auditors pick holes in your financial statements or paper work than your buyers. As a last note, you should try to have some numbers, business ratios and business statistics off hand. This will prove to buyers that you know your business in and out.
"Know your numbers' is a fundamental precept of business." - Bill Gates
7. Letting the cat out of the bag too early
Until the final papers are signed and business assets transferred; don't spill the beans. Not to your friends, not to your employees and not even to your family. Only trusted men, who will add value to sweeten the deal should be made aware; you core business team as well should be involved in the deal.
Don't spill the beans; don't let the cat out of the bag. Don't, don't, don't. The result of revealing the deal before it is concluded might be more than you anticipated. Revealing that your business is on sale may lead to demoralization of your employees because they will be more concern about their welfare than your business.
Spilling the beans may also earn you some unnecessary competition, unsolicited publicity and media misinterpretation. Or worst still, you might end up with several lawsuits dangling on your neck. So once again I repeat, never let the cat out of the bag until the deal is sealed.
As a final note, I believe you will find these points I have made useful. So when preparing your business for sale; be sure to avoid these common mistakes and I will see you at the top.
And just before i drop my pen, if you really want to learn How to Start a Business from scratch; please feel free to visit our blog. In addition, you can also get quality information on How to Become a Millionaire in less than a year.
