Many business owners attempt to sell their businesses without professional help, believing that their intimate knowledge of the company is sufficient preparation. In most cases, this leads to costly mistakes. Here are the most common errors made by sellers who go it alone — and why they matter.
- Mispricing the business
- Without access to comparable transaction data and current market knowledge, sellers frequently price their businesses based on what they want or need rather than what the market will bear. Both overpricing and underpricing have significant costs that a reputable business broker helps you avoid.
- Breaching confidentiality
- When employees, customers, or competitors learn that a business is for sale, the consequences can be severe: talent departures, customer anxiety, and competitive exploitation of the information. Managing confidentiality requires systems and discipline that most sellers do not have without professional guidance.
- Accepting unqualified buyers
- Without a screening process, sellers share sensitive financial information and invest weeks in due diligence with buyers who lack the financial resources, industry experience, or genuine intent to complete a purchase. A broker’s screening function protects this time and energy.
- Neglecting the business during the sale
- The demands of managing a sale process often distract sellers from running their businesses effectively. Any performance decline during the sale process will be reflected in revised offers or, worse, in buyers walking away from the transaction entirely.
- Negotiating on price alone
- Deal structure — the split between upfront cash and seller financing, earn-out provisions, representations and warranties, non-compete terms — has as much effect on the seller’s net outcome as the headline purchase price. Sellers focused exclusively on price often concede unfavorable terms elsewhere.
- Not understanding tax implications
- The structure of a business sale — stock versus asset sale, allocation of purchase price among asset categories, timing of receipt of proceeds — has enormous tax implications. These should be planned in advance with appropriate professional counsel.
- Accepting the first offer received
- Desperation or impatience leads many sellers to accept the first offer they receive rather than creating a competitive process that generates multiple offers and genuine negotiating leverage. A broker creates and manages this competitive dynamic.
- Not having the right team in place
- A successful business sale requires a team: a broker, a business transaction attorney, and a CPA with specific experience in business sales. Attempting to navigate the legal and tax dimensions without appropriate professional counsel is a significant risk.
The commission paid to a business broker is typically the best-invested money in a business sale. The combination of higher sale price, better deal terms, avoided mistakes, and managed risk almost always delivers a net result that significantly exceeds the cost of the broker’s fee.
