The 6 Most Costly Mistakes to Avoid When Selling a Company
Content was originally published on Inc.com on April 13, 2017.
Over the past twenty years I’ve sold multiple companies and helped my business coaching clients sell many more. Here are the six most costly mistakes that I’ve seen entrepreneurs (including myself!) make when selling a company.
Mistake #1: Celebrating the sale before it has closed.
You need to make sure you run your business well through its final closing.
Many sales fail. Don’t let your imagination fantasize about all the great things that you’ll now that you’ve sold the company when it hasn’t closed.
Hold your emotional excitement in check until the sale is closed and the final wire transfer goes through to your account.
To make matters worse, if you’re not careful, after a sale falls through and you’ve taken your eye off the actual business, your sales and profitability may have trended down, and now your next buyer wants to pay you less.
Protect yourself by keeping your emotions under wraps. Consider working with a great business broker or investment banker to help run the sales process for you, which will give you the time and emotional distance to run your company well through the closing.
Mistake #2: Deal fatigue.
Selling your company is a marathon, not a sprint. It takes time—don’t kid yourself. It may take 12, 24, or even 36 months. Many buyers fall away. Due diligence is a pain. Set your mind that this isn’t going to be a 90-day sprint, but rather a longer process that you intend to see through to the end.
And during all this time you’ve got to keep running your company so it continues to trend upwards.
Mistake #3: Buyers who are looking for information, not a business.
Sadly, some buyers aren’t really buyers—they are simply looking for insider information on your customers, pricing strategy, or key employees.
Make sure you also have a solid nondisclosure agreement with strong non-solicitation provisions.
Also, qualify your buyers as to the following:
• Why are they looking to buy your or any business?
• Do they seem viable as a buyer?
• How will they pay?
• What are their business references who can speak to their integrity?
• If the buyer is a publicly traded company, have you researched its Securities and Exchange Commission (SEC) filings?
• Have you spoken with other companies they’ve acquired? If not, why not?
Mistake #4: Your team feeling the rumors.
Be very careful to not let your team find out about a potential sale until you are ready to talk with them.
Speak with your CFO early and getting him or her to be very careful. Later, you’ll bring your leadership team into the mix, again with clear guidelines to them to be careful about holding this information in confidence.
The bottom line is that you must protect your company from the destructive power of the rumor mill.
Mistake #5: Customers finding out too early.
Do not share customer information until late in the sale process. By this time you will know a lot more about your buyer and the buyer’s ability and commitment to close.
As noted earlier, you need clear non-solicitation and confidentiality provisions in place that your attorney has written up to protect you.
Mistake #6: Thinking that you only need to plan for the sale at the end of your business career.
Smart entrepreneurs know that the time to prepare their company for sale is now. They take steps today to reduce its reliance on any one person, including themselves. They implement systems and build their brand. They fight concentration issues in their customer base, their sales channel, or otherwise.
The time to prepare for your eventual sale is now. The best part is, even if you don’t sell you’ll build a better business in the process.
And for those of you who want to scale your company larger before you sell, I’m doing a special webinar training on the 5 steps to scale your company without sacrificing your health, family, or life to do it. Click here for more information and to register for free.