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Avoid These 7 Mistakes When Selling Your Business

Published by Adam Hale on 04 Jun 2019

At one time or another it may have crossed your mind to sell your business and move on to something else. Maybe you’re thinking it’s time to retire or even start a different business. Many business owners under-estimate the effort it takes to sell a business with a satisfactory outcome, but over-estimate the salability and value of their business. Below are 7 common mistakes to avoid when you decide to sell your business.
  1. Over-estimate the business value. Base the selling price of your business on “fair market value” in its current form. Buyers aren’t interested in all the time and effort it took to build your business or any visions you may have for the future of the business.Business_for_sale_sign_pc_4408_-_Copy
  2. The make-up of your business. Don’t forget to account for the make-up of your business. Your business value is made up of a variety of variables. Such as real estate, equipment, intellectual property, as well as other assets. The value of these assets should be established separately and factored into the overall price.
  3. The value of a service or professional firm.  If your business is a service or professional firm, much of its value may depend on the experience and skills of your managers and employees. In this case, the price may vary according to the expected retention of key individuals.
  4. Failure to base the sale price on independent appraisals. You should obtain 2 or more independent appraisals from professionals familiar with your industry, even if you think you know the value of your business. If the appraisals conflict with your opinion, they'll provide a you with a much-needed reality check. If they confirm your opinion, they'll become a useful sales tool.
  5. Failure to hire a professional business broker to handle the sale of your business. Many owners are too personally invested or too eager to sell, to be an effective negotiator for the sale of their business. Whereas, a broker familiar with your type of business will know what issues are important to buyers and what characteristics to emphasize or de-emphasize, without becoming emotionally involved.
  6. Failure to work with the buyer to ensure a smooth transition. Nobody likes being thrust into unfamiliar circumstances without preparation. Notifying your managers, employees, and customers in advance and doing all you can to alleviate their concerns will serve your own best interests, as well as being the honorable thing to do. Discontent on the part of any of the affected parties could result in conflicts, reduced revenue for the buyer, withheld sale payments, and litigation.
  7. Being unwilling to help finance the sale. If you're unwilling to take back a note, your sale price is limited to the buyer's cash and ability to obtain outside financing. At best this could limit the number of potential buyers, and at worst it could limit your sale proceeds. On the other hand, if you finance too much of the sale price, you'll increase the risk of default.

Selling your business is too important to attempt without professional help. At Summit CPA we offer multiple resources to assist you with all of your tax and financial planning needs. Contact our office at 866-497-9761 to schedule an appointment with our advisors.   

WE SPECIALIZE IN STRATEGIC BUSINESS PLANNING                                                             

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