How to Sell a Business: 10 Common Mistakes

Selling a Business: 10 Common Mistakes

Those who founded their companies in the 70s and 80s are entering retirement age. In many cases, their children have chosen other paths, leaving them without a generational relay. This coincides with the current great liquidity, economic optimism and low interest rates, which is leading to many sales of companies in our country. The usual thing is that, if it is the first time that an entrepreneur sells his company, it is easy to make mistakes due to inexperience. Since selling a business is much more complex than it may seem, we would like to point out ten mistakes that many entrepreneurs make when selling. Avoiding them will not only allow them to complete the operation, but it will help them maximize their income.

10 common mistakes when selling a business

1 Do not make a firm assessment of the company

If the employer does not know what the company really is worth, because it is difficult to negotiate with rational arguments. It could be asking for an unreal price and therefore losing prospective buyers willing to pay a possible price.

Negotiating on a basis of desires and not the objective data often leads to the breakdown of negotiations. If we only look at our desires, and do not make the effort to understand the value we bring to the other side, we can hardly negotiate with quality.

2 Change interests or motivations during the sales process 

A previous and serene reflection on why we sell and what we want to do after the sale is fundamental. If the employer is not clear, his own emotions can betray him and harm the operation.

The buyer may notice strange things in the owners’ attitude and this will generate concern, interpret that they are not being sincere, that they are hiding information (he doesn’t know the internal struggle of feelings) and begin to distrust the operation. It triggers their perception of risk and inevitably lowers the value assigned to the company.

3 Negotiate with a single buyer

In a negotiation with a single buyer, he always finds out that he is alone. In those cases, the buyer plays with the time and the wear and tear, thus lengthening the deadlines by requesting more and more concessions.

4 Not managing the process with confidentiality

The lack of confidentiality can cause key managers to abandon the ship and create uncertainty in the market about the future of the company. After the time different actors comment “This company must have problems because it has been on sale since time without success”, undermining the perceived value of the company.

5 Facing only the process, not hiring advisors

The sale of a company is a laborious process that consumes many hours; It requires professional advisors who have experienced this type of situation many times and know how to disable the traps that the buyer tends. Entrepreneurs must focus on improving the company’s results, while monitoring the advisors and demanding that they be informed of each step they take. Without advisers it is very difficult to maintain confidentiality and to make a rigorous search process of the best possible buyer for the company.

6 Dismissing the business during the sale

Experience has shown me that if the owner only negotiates, negotiations with buyers are often irreparably broken. There can be a situation that, at a time in the process, the seller realizes that he has made a mistake and that there is no turning back and that will harm the value. Because of this, the rope is tense in the negotiation and it evidently ends up breaking.

The result is that the owner must start a new buyer search process, which implies neglecting the company even more.

7 Find the buyer in the local area

If you look for confidentiality, this is probably not the best option. Nor is it clear that prospective national buyers are the best buyers or those to whom the company can create more value, nor the ones that can pay more for it.

BANNER: REASONS FOR SALE

 

8 Do not assume that there are other minority shareholders

It is fundamental that there is an alignment of all the shareholders, thus avoiding last minute surprises that lead to the fret of the operation after the costs are incurred and so much work has been developed by all parties.

It’s a mistake to think “they’ll get into the operation when I tell the minority shareholders, they sure will be happy to sell.” We need for those people to share the things that affect us because we don’t like to be taken for granted.

9 Wanting to sell in a hurry 

Hastiness is very bad counselor. It greatly undermines the negotiating and search process of the best buyer. The other party notices the rush. On one hand, it will arouse mistrust, and on the other, you will give him margins to press in with demands.

10 Do not plan the process

An orderly sales process maximizes the value. The disorder causes them to lose pieces of value in each of the phases. When the disorder arises, so do the surprises for the buyer and these are always seen as elements of risk that make them lower their perceived value on the company.

Experience indicates that an unplanned sales process is much longer and, given the complexity of selling a company, the chances of failure skyrocket.

 

For many entrepreneurs selling a business is the most important operation of their lives, so avoiding these mistakes is of vital importance for your company and for your assets. To take the right decisions, you may need help from experienced advisors. Don’t hesitate to contact us for a strategic advisory!

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