By some estimates, less than 20% of businesses that go on the market for sale actually consummate a transaction.

It’s a surprising statistic that could give business owners nightmares.

While external factors, such as credit markets or the overall economy, can have some impact on this result, the most influential factors are directly under owners’ control. Most owners don’t research the selling process before they go to market. This results in common mistakes that may become apparent only during the heat of deal negotiations which ultimately may kill the deal.

Here are the 10 most common mistakes made by owners when selling their businesses:

  1. Owners do not realize there can be more than one value for their business at a given point in time. Different transition options often result in different transfer values.

  2. Owners sometimes have a number in mind they feel they need to net, without regard for what the true value of the business actually is. Few companies have a current, accurate business valuation. Over half of the time, owners are unrealistically high in their asking price, and the other half of the time, they are too low.

  3. Owners do not understand that different types of buyers may have different buying criteria. Investors are looking to the future for return on investment and growth potential. The synergistic buyer may be looking to improve the profit margin by eliminating the middleman, instituting economies in operations, or eliminating duplicate facilities or employees. Some competitors may see the business as an immediate increase in market share. The investor seldom buys what the seller thinks he or she is selling.

  4. Owners often do not have the proper advisory team in place prior to starting the business sale process. They mistakenly believe they are saving themselves money by not utilizing advisors. Most business owners who have made an ill-fated attempt to sell their own businesses wish they had used an experienced team.

  5. Owners try to sell to the wrong people. Some owners are approached by friendly competitors, suppliers, vendors, or even friends who ask to be called first when the business is up for sale. These buyers may not be financially qualified or just may not be the best buyer for the business (or even be a buyer at all). Identifying your transition goals will determine your best transition options and enable you to find the best potential buyer.

  6. Owners mistakenly assume their best buyer is local. We live in a global marketplace; cross-border and cross-ocean transactions occur regularly. Identifying the correct buyer pool is a critical step in successfully marketing the business for sale.

  7. The company is not positioned for sale. Some of the most important elements in achieving a successful sale are directly controlled by the owner. Key factors such as a lack of dependence on the owner, diversified customer base, growth opportunities, reputation, and indus­try leadership are some of the many intangible qualities buyers are looking for.

  8. They are not prepared for the due diligence process. Most potential buyers evaluate a business based on historical facts and figures, but are most interested in the future growth potential, risks, and their possible return on investment. This requires them to leave no stone unturned in analyzing the possible acquisition.

  9. Owners do not plan properly for the sale. Many owners have not calculated their Wealth Gap or how much money they will need from the sale to enable them to live the life they envision. This can lead to seller’s remorse or even prevent a deal from closing. Owners may find out too late just how little they will net after all taxes and fees are deducted. This situation can be avoided with proper planning and sufficient time.

  10. Owners are the first to mention price. One cardinal rule of negotiating is never be the first one at the table to mention price. The well-known adage “he who speaks first loses” is definitely true in the art of the deal.

Most of the mistakes listed above can be directly influenced by the owner. Fortunately, these pitfalls can be avoided altogether with the assistance of an advisory team, adequate time, and proper planning. Selling a business is a once-in-a-lifetime opportunity and probably the largest financial transaction of your life. There are no second chances; mulligans happen only on golf courses.

As the scouts say: Be prepared! 

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