Selling a business is a high-risk, high-reward initiative. I want to spend some time on the common mistakes made when selling. I hope that by reading this, you can avoid these land mines. Every situation is different. Yet, these are the most common mistakes I see owners of professional services firms making.
Avoid These 7 Costly Mistakes When Selling a Business
When selling a business, you must do it on your own terms. You started a professional services firm that you built from the ground up. Trying to sell a boutique that is not worth buying or rushing into a fast sell without knowing the buyer can lead to failed business exit strategies. That’s why you need to avoid these costly mistakes.
1. Being Uncertain About Reasons Behind Sale
First, boutique owners are unclear about what they want from the sale. If you are unsure of who you are, you will be unhappy with the sale. If you do not know where your business is headed, you will be unhappy with the sale. No amount of money will change this. After the sale is complete, there is no going back. Be sure that you know what you are doing before you start down the path of selling a business.
2. Selling an Unsellable Business
Second, sometimes boutique owners try to sell an unsellable business. Most boutiques are unsellable. It is not enough to have a successful boutique. Your professional services firm needs to be attractive to a buyer. This requires you to look at your business as an investor would.
An investor starts by listing all the reasons not to do a deal. The boutique owner starts with a list of all the reasons to do a deal. This gap often cannot be closed. Before trying to sell, be sure that you have something worth buying.
3. Looking For a Fast Sell
Third, it takes years to sell a business. Yet some owners try to sell their boutique in a matter of months. This tends to result in many failed attempts, or worse, a lot of forced sales. The process of selling a business takes about nine months. However, the process of preparing to sell takes two to three years.
A good business exit is a sale that happens on your terms. It takes time to stack every card in your favor. And, as they say, you have only one chance to make a first impression. It’s best to be ready.
4. Underinvesting in Succession Planning
Fourth, boutique owners underinvest in succession planning. This results in seller’s regret. After you sell, you will want to see your boutique do well without you. You will have many employees you care about who are still employed by the boutique. If you hand over your business to a stranger, they may destroy it.
A large bank balance will not compensate you enough for this tragedy. Spend years grooming your successor. Make sure that your successor builds on what you have already created.
5. Pursuing a Business Exit Strategy Alone
Fifth, entrepreneurs think that they can sell their business on their own. Doing so can result in tactical execution errors that can cost the owner millions. Boutique owners are usually entrepreneur founders. They are very different from hired-gun CEOs.
Founders have a high risk-tolerance level and supreme confidence in their abilities. They often approach the selling of their business as another problem that has to be solved. They assume that they can figure it out without expert advice. This is a mistake.
Exit strategies are not an area to go cheap. Hire the best advisers that money can buy. Let these advisers guide you through the process.
6. Taking Feedback After the Sale Personally
Sixth, boutique owners get attacked after the sale, and they take it personally. Those whom you are leaving behind will be jealous. They will feel cheated and underappreciated. They begin to tell a story that is not based on fact. Rather, it is a story they need to tell to make themselves look and feel good. Do not take it personally.
This is just business. You created the wealth, and you are the one to realize it. Those who helped you do this have benefited and will continue to benefit in the long run. Remember to sleep peacefully at night. The only thing that matters is what you see in the mirror.
7. Not Knowing Who is Buying the Business
Seventh, be sure to understand who the business is being sold to. And what their motives are. This is particularly important if you are on an earn-out or are rolling some equity. This prevents unwanted surprises from cropping up. Once you sell it, the buyers own the assets. They are entitled to do whatever they want with it. If you disagree with their plans, do not sell it to them.
Top 10 Business Exit Strategy Questions to Ask When Selling a Business
There are other mistakes to avoid. Every situation is different. However, these are the most common mistakes that boutique owners make. If you are considering selling a business, ask yourself these questions to make sure you are avoiding these exit strategy mistakes:
- Do you know what you want from selling your business?
- Do you know what you will do after your business is sold?
- Is your business attractive to a buyer?
- Do you have a sellable boutique?
- Do you have a handpicked successor?
- Is the successor ready to take over?
- Do you have an all-star team of advisers to help you?
- Are you prepared for the postsale criticism headed your way?
- Do you understand to whom you are selling your boutique to?
- Do you know their motives for buying?
How to Sell a Business: With Purpose and Patience
You are building a business you could run forever. You are also building a business you could sell tomorrow. If you decide to sell, you want to do so on your terms. Give yourself plenty of time to avoid these common mistakes when selling a business.
For more insights on how to develop a business exit strategy, join our mastermind community. Collective 54 is the first mastermind group for owners of professional services boutiques. Contact us today to learn more about how our community helps businesses like yours.