"Selling Your Business? Don't Make These 8 Costly Mistakes"
When selling your business, it's crucial to navigate the process wisely and avoid common mistakes. These errors often stem from a lack of planning and understanding of the psychological aspects involved. By sidestepping these eight most prevalent pitfalls, you can secure the best price for your business, maintain a positive outlook throughout the process, and prevent potential headaches.
Plan for Life After Selling:
After years of purposeful dedication to your business, it's essential to envision your life post-sale. While your plan may not need to be as elaborate as your initial business plan, it should be compelling and inspiring. Whether you aspire to travel the world, start a charity, or create a family compound, a motivating vision for your future will help keep you focused and content after business ownership.
Make Your Business Saleable:
Building a successful business is an accomplishment, but it doesn't automatically make it saleable. To transition your business to new ownership, you must ensure it has the necessary systems, procedures, and self-sufficient employees. Investing the extra effort upfront to create a streamlined operation will increase your business's value and make it more attractive to potential buyers.
Prepare Your Staff:
When selling your business, preparing your staff for the transition is crucial. Once the deal is finalized, someone else will take over your responsibilities, and your employees must be ready to maintain the business's operations without you. By providing training and support, you'll ensure the continuity of your business and enhance its value, leading to a better return on the sale price.
Choose an Advisory Transition Team:
Having a competent team of advisors is crucial when selling your business. Consider working with facilitators, investment bankers, M&A firms, business brokers, accountants, lawyers, commercial real estate agents, wealth managers, tax specialists, estate planners, and insurance advisors. Seek recommendations from colleagues or friends who have sold businesses recently, ensuring you select experienced professionals to help you navigate the sale successfully.
Understand Financial Obligations:
Selling your business involves considering financial obligations to employees, investors, and yourself. Employees may be entitled to severance pay or ongoing support, and investors expect a return on their investment. As the owner, you must be prepared to fulfill these obligations and pay taxes on any profits. Seeking professional assistance from an accountant or lawyer will help you understand and meet your financial responsibilities, facilitating a smooth transition for everyone involved.
Uncover the Buyer's Intentions:
Before selling your business, it's essential to understand the buyer's true intentions. Will they continue to grow the company, strip and sell it, or displace your employees? This knowledge will determine the value you place on your business. A buyer committed to taking the company to the next level will likely offer a higher price, while those seeking quick returns may undervalue your business. Knowing the buyer's intentions will prevent selling for less than your business is worth.
Surround Yourself With Experts:
Selling a business is a significant decision, and most people are not experts in this field. To ensure a successful sale, surround yourself with experienced advisors. These professionals will guide you through the process, understand your goals, and create a plan tailored to your needs. They will handle complex aspects such as employment law, valuations, tax minimization, estate planning, real estate, and financial management. With their expertise and negotiation skills, you can maximize the price of your business while minimizing stress.
How Much Time Should I Give Myself to Sell My Business?
When selling your business, giving yourself plenty of time is important. It’s a mistake to think that you can just put your business on the market and it will sell quickly. In reality, selling a business takes time, effort, and patience. There are many moving parts, and you must ensure everything is in order before considering selling. Also, many tax minimization strategies take time to develop if you want to minimize your taxes. Giving yourself enough time to implement these strategies and see results would be best. So, how much time should you give yourself? It depends on your situation, but a good rule of thumb is to give yourself at least 3-5 years to prepare for the sale of your business. This will give you the time to get your ducks in a row and maximize your chances of getting the best possible price for your business.
Conclusion
I reached out to a few of my friends who have successfully sold their businesses and asked them what the most costly mistake they had heard about was when attempting to sell a business. Without fail, each mentioned that not retaining the experts you need during the transaction can be very costly. They also emphasized the importance of allowing enough time for due diligence and preparing your staff (and the company) to run without you. If you’re considering selling your business in the next ten years, heed this advice so that you don’t give away a hefty portion to the CRA.
Have you gone through this process yourself? What tips would you add?
