In case you haven’t heard, America is currently in the midst of a historic wave of entrepreneurial spirit. An all-time record number of new businesses we formed in the US in 2021, with more than 5.4 million new startup applications being filed.
While this is good news for new entrepreneurs, it is also good news for existing business owners that might be looking to sell up, as selling a small business could be smoother and fairly compensated. But don’t rush for the exit doors just yet! Make sure to avoid these crucial small business selling mistakes before you cash out and go.
1. Not Considering Pre-Pack Administration
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If your business is heading into administration, it is important not to panic. You can still find potential business buyers and sell your company in a way that protects jobs and your reputation.
The best way to do this is by entering pre-pack administration, which allows you to sell parts of your business while still being able to perform work. You can find more info here on the pre-pack administration process.
2. Not Using a Broker
Your business is your life’s work, which is why listing businesses for sale can feel like an intensely personal process. However, you should not try to go it alone. Always hire a broker who can properly represent your business and fight to get you a fair business price that you deserve for all of your hard work.
3. Selling to the Wrong Person
In the rush to cash out and exit, you might be tempted to sell to the first person with a decent offer. However, this is a mistake that could have lasting consequences.
If you fail to vet your buyer as part of your business sale preparation, you risk your business falling into untrustworthy hands. This could negatively impact not only your employees but also your reputation.
4. Not Doing the Legwork
Selling your business is about so much more than simply hiring a broker and sailing off into the sunset. There is always considerable legwork for owners, regardless of how involved you wish to be.
You will need to provide comprehensive information on the structure of your business, your assets, your balance sheet, and your debts. Failure to do this could result in legal trouble if buyers believe you are misrepresenting your company.
5. Asking the Wrong Price
When selling a major asset like a business, the right number is everything. It is important that you set an asking price that is both fair and indicative of what you have built.
You do not need to offer your business at bargain-basement prices if you are going into administration. Work carefully with your broker to assess the true value and potential of your business. This way, you can get the price you deserve.
6. Breaching Confidentiality
As a final note, do not forget the importance of post-sale confidentiality. As part of any business sale, you will likely need to sign an NDA that protects certain aspects of the deal and might even protect the identity of the buyer.
When you agree to confidentiality terms, breaking them in any way will have serious consequences.
No More Small Business Selling Mistakes
Small business selling mistakes are easy to avoid and will ensure that your next venture gets off to a great start.
For more tips on how to sell your business (and start a new one) the right way, we have got you covered. Consult our daily-updated Business guides to learn more.