The pitfalls of selling a business

In order to execute a swift business exit and get the maximum price from a buyer, a seller must avoid the common pitfalls that befall many when selling a business.

Experts from around the world have given BFS the benefit of their experience, and pointed out the things to avoid during a selling process. 

“You should never sell a business when you are desperate for money; if you do you are bound to make mistakes,” says Perine Pretorius, a South African business owner. “My advice is to have a clear vision of the future as bad planning can result in disappointment.”

Kevin Dubrosky, a Toronto-based businessman, successfully sold his window cleaning business in March 2010 for $50,000. Dubrosky advises other sellers: “Get your books in order and understand your numbers. A serious buyer, especially in this economic climate, will demand an objective perspective focused on figures. If your numbers aren’t there then the asking price will fall dramatically from your ideal price tag.”

Dubrosky continues: “As hard as it is, try to detach yourself emotionally from your business. You may love it like a child, but to your prospective buyer it is only an income-producing opportunity, so focus on its strengths in terms of ROI (return on investment) and profitability.”

A common consequence of allowing emotions to influence you during the selling process is inflated business values. There's always a danger of overvaluing the business if you assess its worth according to how much work you've put into it and the pleasure it gives you, rather than how much income it generates, or has the potential to generate.

The biggest pitfall in selling a small business, from my own personal experience, is time-wasters

Emma Scobbie, ski chalet owner

Entrepreneur and CEO Jeremy Llewellyn agrees with Dubrosky: “It’s important to be able to separate your emotions from the business sale. There will be many sleepless nights during the whole process, just be sure to get the best advisors on your side and thoroughly evaluate your part of the deal.”

Bartosz Kaczmarczyk, chairman of a Polish HR company, says: “The main problem is long due diligence processes that cost a lot and usually kill operations of the business. It is also important to note, when the transaction is international, the buyer often has no idea about the local reality of business.”

Business founder Fred Katja believes “sellers must think like a buyer. Be honest about what you sell and don’t spend too much time on people who seem to be interested but can’t afford to pay the asking price.”

Emma Scobbie, owner of a French ski chalet business, says: “The biggest pitfall in selling a small business, from my own personal experience, is time-wasters. We have dealt with numerous would-be buyers, three of whom actually made an offer and signed initial paperwork, only to then pull out as they were unable to finance the project.

“There are many people out there who want to buy a business, but with the current difficulties in borrowing and the lower maximum percentages the banks are willing to lend, for many, buying a small business remains a dream. Whilst sellers are left in the frustrating position of reducing their sale price well below value, to bring it in line with what banks are willing to lend.”

Overall, selling a business can be emotionally and physically exhausting, but thorough due diligence, patience and an ability to be objective about the business one has built, can help seal the deal and ensure the seller realises his or her asking price.