Selling A Business
Heed the Warning: Five Common Mistakes People Make When Selling a Business in Florida
Starting a business in South Florida is a practice many people are familiar with. It’s a process that makes sense to most, and there are abundant resources available to help.
Selling a business, meanwhile, is not something many people have experience with. Even some of the more seasoned entrepreneurs haven’t sold a business before, and, unlike starting a business, there aren’t as many resources available to guide people on how to do it.
It’s no surprise, then, that many people who sell their business in Florida make a lot of the same mistakes. Some of these mistakes are made in the preparation phase. Some are made during negotiations. Some are made as the sale is closing.
No matter what these mistakes are, and when they are made, they can all have significant negative consequences on how the sale goes and what position you’re in once it closes.
Here are five of the most common mistakes people make when they sell their business, and some ways to avoid them.
1. They Don’t Prepare for the Sale
Selling a business is not like selling an item on online swap community. You can’t just write a description of your business, put a price tag on it and wait for people to contact you to start negotiations.
There is a lot of prep work you must do in advance before you even list your business for sale, or seek to find buyers. This includes:
- Properly organizing your staff so the new owner has a good team in place
- Getting all your books and financials clean and in order
- Ironing out any tax deductions that might look suspicious (and/or limiting the number of deductions you take)
Being better prepared will lead to a smoother sale and a higher price.
2. They Don’t Build Value in the Business Before the Sale
Once a business owner makes the decision to sell, they may begin to back off and slow down. This is not the time to do that. Instead, it’s the time to ramp up and generate as much revenue as possible.
The year(s) leading up to the actual sale of the business are the ones potential buyers are going to look to the most when analyzing the potential they see in the business. By ramping up revenue and creating growth, you will be increasing the value of your business.
3. They Price the Business Based on What They Want
For many business owners, the most important aspect of selling is the price they will get. As a result, they will often focus primarily on price and base it around what they’d like to get (or “need” to get) to sell.
But what you might want (or need) is not necessarily what the business is actually worth. A buyer will base their pricing decision on the current market and state of your business as well as the potential long-term value. They will most likely engage in deep analytics to arrive at their key number, and this is something you should do, too.
By thoroughly analyzing your business value, you’ll be better prepared to negotiate, and will have a more realistic outlook for the sale.
4. They Don’t Ask for Help
Over the years, most business owners learn the power and importance of delegation. When it comes time to sell their business, though, they don’t ask for help from experts. Instead, they try to do it all themselves.
This could be a big mistake. For a process as complicated and in-depth as selling a business, it would behoove most business owners to contract the services of professionals. These could include:
- Accountants
- Financial consultants
- Business transaction lawyers
- Industry experts
- Colleagues who have sold a business
Utilizing the assistance of outside professionals in certain areas is key to ensuring you have all your bases covered.
5. They Don’t Consider Structure … or Confidentiality
Another common mistake (or mistakes) many business owners make is they don’t consider the structure of their sale … and then they don’t keep quiet about it, either.
There are a few ways to structure the sale of a business. One is to sell all interest in it completely and be separated from the business entirely. Another is to retain some interest, with either an active or passive role.
From a financial standpoint, it’s important to consider whether the sale will be all cash (unlikely), part cash-part financing, and whether it will include any stock in the company going forward.
One other extremely important aspect of selling a business is maintaining confidentiality. The saying goes that, “loose lips sink ships,” and this is especially true when you’re selling a business.
It’s important to keep it quiet when you’re intending to sell the business. Employees may leave if they get wind of your plan, and customers and/or vendors may leave or be afraid to do business with you – all of which could lead to a lower value for your business.
By heeding the warning of these five common mistakes people make when they sell their business, you’ll be better prepared to get the most value in return.
Sunbelt Business Brokers of West Palm Beach provides dedicated business brokerage services for all of your buying and selling needs. Whether you are an established business owner nearing retirement and looking to sell, or an ambitious entrepreneur seeking your next investment opportunity, there is no reason to look beyond Sunbelt Business Brokers. Visit us at 800 Village Square Crossing, Suite 216 Palm Beach Gardens, FL 33410 or contact us at (561) 832-9222. View available Businesses for sale in South Florida.
