| Selling a business is one of the most important events | | | | late. |
| that occur in a business owner's life. In many cases the | | | | * Real Estate leases. One of the biggest reasons |
| business represents the greater part of a business | | | | deals break down is due to problems with the real |
| owner's net worth. As a business broker in New | | | | estate lease. Some sellers assume that a buyer will |
| Jersey I meet with many business owners that have | | | | buy a business with 2 years left on their lease. Other |
| tried to sell their businesses on their own. In other | | | | sellers assume their landlord will write a new lease at a |
| situations owners call me prior to selling because they | | | | reasonable rate without checking with their landlord. |
| feel they need an experienced business broker. In | | | | * Potential. So many business owners think they can |
| either case I often see many mistakes that should be | | | | convince a buyer to pay more for potential. I hear all |
| corrected before going to market. The following are 10 | | | | the time from sellers that if a buyer would make a |
| common mistakes business owners make when selling | | | | couple of changes sales would explode. Buyers will |
| a business. | | | | pay based on the historical performance of a business |
| * Not planning for a post-sale future. I always suggest | | | | and they will not pay you for what they can do to |
| to my clients that they speak to their financial advisors | | | | your business. |
| prior to selling their business. They need to understand | | | | * Planning for a sale with key employees. In many |
| how much they will walk away with after taxes and is | | | | small businesses there are a few key employees that |
| it enough to retire or support their lifestyle. | | | | are necessary for a smooth transition. Because of |
| * Not meeting with a business broker. Working with a | | | | confidentiality some sellers will not discuss a sale with |
| business broker is not for everyone, but it is a great | | | | these employees. In many cases this can turn into a |
| way to get information on how to sell your business. | | | | major problem when it is time to close on the sale. |
| Most business brokers can provide you with industry | | | | * Hiding information. Some sellers believe that they can |
| specific information including valuation guidelines. It also | | | | hide some negative information on their business from |
| doesn't cost you anything. | | | | a buyer. As a business broker, I always inform my |
| * Realistic Valuation. Too many business owners either | | | | clients that there are no secrets that a buyer will not |
| over valuate or under valuate their companies. Under | | | | uncover. Due to the enormous amount of information |
| valuating will leave money on the table while over | | | | available on the internet buyers are very sophisticated |
| valuating will reduce the number of buyers looking at | | | | and will find out everything during due diligence. Why |
| your business. | | | | not disclose this information up front so you don't have |
| * Financial Record Keeping. Many business owners | | | | a let down at the end. |
| have poor financial records which will impact selling | | | | * Seller financing. Many business owners do not want |
| their business. Most serious buyers want to look at | | | | to consider seller financing and in many cases this |
| thorough financial records of a business. These | | | | could be a mistake. I covered this in depth in a previous |
| financials will be needed to justify the agreed upon | | | | article. By offering seller financing you will increase the |
| price. | | | | buyer pool which will help increase the selling price. |
| * Confidentiality. The majority of business owners who | | | | This list is not exhaustive, but it covers many of the |
| sell their businesses do not want employees, | | | | common mistakes owners make when selling their |
| customers, vendors and competition to know they are | | | | businesses. An experienced business broker should |
| up for sale. However, many do not use confidentiality | | | | help you avoid these errors. |
| agreements and do not take precautions until it is too | | | | |