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10 Common seller/ vendor mistakes

Having observed and taken part in hundreds of negotiations, here is our list of the ten most common mistakes we have seen sellers making.

1. Why are you selling your business?

Not having a good answer here can put your sale at risk from the start. This will be one of the first questions you’ll be asked. You’ll need a good answer, as a buyer, and especially their advisers, will read much into it. Obvious reasons are retirement, health, capitalisation or a career change. If the buyer isn’t comfortable with your reason, they will simply walk away.

2. Selling your business at the right time

Plan to sell when turnover and profits are at, or near, their best. It can be hard to justify a premium or great price when your turnover and profitability are slowly in decline.

Plan your sale well in advance, making sure the foundation is set e.g. taking appropriate tax advice etc. Preparation, or lack thereof, can make a significant difference to the amount of money deposited into your bank account at the end.

There is also a definite timescale to closing a deal. Don’t over ride the wave of consolidation or interest that might be happening in your sector or industry. Buyers can quickly go off the boil and move on if they feel they are not making progress or not getting accurate information efficiently. A good broker will know the right time and leverage it to your advantage.

3. Bad advice on selling your business

Advice and opinions are all around. But always question the source and motivation behind it. A valuation from your mate down the pub who knows a bloke who sold for millions, might not be the most reliable indicator of your market position.

In the pressure cooker environment of a negotiation, it is easy to take short cuts or look for opinions which support your own thinking. But keep an open mind. You might need to be objective and collaborative if you want a deal to work.

4. Over negotiating the sale of your business

I have witnessed many deals fall over because one side has pushed their advantages too far by over negotiating. It is easy for a deal to turn sour because one side feels cheated. There needs to be a balance and a meeting of the minds. You may have to work with the new owner for a period post sale. A skillful negotiator will know when to concede and when to stand firm. The key thing is to concentrate on the bigger picture, be collaborative. Win the big battles but don’t be too concerned with winning every little point.

5. Trying to sell your business yourself

Selling a business is a complex and time-consuming process. It is very easy to underestimate the process and think you can do it all. You wouldn’t be the first or last to take your eye off the ball while trying to sell, letting your business suffer – weakening your sales proposition.

Experienced buyers will automatically assume a position of advantage if they see you have no professional help, especially if they’re equipped with an army of experts. Beware.

A seasoned broker who understands what it takes to make a deal happen can control the process for your best advantage from start to completion.

Not convinced? One of the best reasons to use a broker is to act as a buffer between you and the purchaser. There will be times when you’ll want to adopt a tough negotiating position – a broker makes this possible without antagonizing the buyer. Remember, you might have to work with a new owner during a handover.

6. Being inflexible

With all the different factors and personalities involved the need to take a pragmatic view is sometimes necessary. This shows empathy for the situation and a collaborative approach is always welcome and well received.

A negotiation is often a compromise, a give and take process. If you dig your heels in too early, or overplay your hand, you might just find you get left behind.

7. Ignoring feedback

The market reacts very quickly to a good opportunity. Buyers will tell you the good, the bad and the ugly. Listen carefully, so you can, if need be, amend your offering, or make changes that might secure a sale.

8. Poor information

It is very easy to massively underestimate the amount of time and effort it will take to get a positive result. Intelligent owners realize this and do their research and take good advice early on. This gives them the chance to lay the groundwork for a sale and get their house in order.

Having accurate information to hand, particularly financial information is absolutely critical to keeping the momentum in a deal. You cannot expect a premium if you can’t quantify how you’re making money and prove it in a timely fashion. Get your house in order. Sort out the paperwork and do regular management accounts.

Time spent sorting the finances and red tape, boring as it is, will pay massive dividends throughout the process.

9. No business sale preparation

Surprisingly, many business owners go to market without the first idea of what is involved and what they want to get out of the process.

Massively underestimating the amount of time and effort it will take to get a positive result is a common pitfall.

Intelligent owners realize this and do their research, taking good advice early on. This gives them the chance to lay the groundwork for a sale and get their house in order.

Time spent sorting the finances and red tape, boring as it is, will pay massive dividends throughout the process.

10. Pricing your business for sale

The number one standout reason businesses don’t sell. The wrong price based on too high or unrealistic expectations.

Get your value strategy and expectations in line right from the start. Get a credible valuation. In fact, get several. But make sure it’s robust and will stand up to scrutiny.

Price too high, and your business won’t get taken seriously and otherwise interested buyers, with perhaps a real motivation to buy, won’t bother to investigate or review.

Ultimately, the value will be whatever a willing buyer and a willing seller can negotiate following a competitive sale process.

It’s great to have a firm idea of what you would like to achieve but keep it within reason. Don’t confuse the time you’ve put in over the years with value.

And finally wanting a million because you’ve always fancied being a millionaire won’t get you very far if you can’t substantiate it.

With sensible advice and a decent broker at the helm, you can easily navigate this storm and get a great deal.