Four Mistakes to Avoid When Selling a Company

Selling a business is something most owners only do once in their lifetime. Make sure you sell yours successfully by avoiding these four common mistakes.

Poor Timing: As the saying goes, “Timing is everything.”  Selling a business at the top of the market is almost impossible, but selling in an up market is certainly better than selling on the downside.

Timing is especially critical for owners who have an exit horizon of less than 3 years, because it can take years to recover from a rough year or market downturn.  It is not easy to pursue a sale prior to the planned exit date, especially if business is going well. But the proverbial “bird in the hand” can be the right move to maximize value and reduce risk. It is usually better to sell too early when times are good rather than too late when a business is past its peak.

Lack of Preparation: Exit planning is often discussed because it is so often ignored. Too many sellers come to the process woefully unprepared and end up with a discounted price and fewer options.  Financial information is lacking, agreements expired or non-existing, avoidable risks are present, etc. Time and value is lost when the owner and the company are unprepared.

Differing Goals: Many sale attempts fail because family members, shareholders, or partners did not have an aligned plan to sell the company. Stakeholder alignment is paramount prior to even considering selling.

Unrealistic Expectations: For most business owners the sale process is a rigorous journey and a successful outcome is correlated with having realistic expectations. Our experience combined with our principals' experience of selling over 150 companies has taught us that market-based expectations for timing, value and structure dramatically improves the likelihood of a successful sale. Non-market based expectations often lead to frustration, deal fatigue and a failed sale attempt.

Focus on avoiding these four mistakes and you’ll be ready to exit with confidence and move smoothly to the next chapter of life.