Posted 12-27-2022 10:07 am by
Every year, numerous businesses in the Las Vegas area get put on the market for sale. Unfortunately, many of them do not fetch the sale price the owner is hoping for, or never sell at all. There are seven mistakes frequently made by business sellers that can lead to a failed transaction or reduced sale price. These mistakes are preventable. Knowing these pitfalls in advance will increase your chances of achieving a successful sale.
Mistake #1: Poor recordkeeping. As part of the due diligence process, business buyers will inspect your financial records. If bank financing is involved, the bank will require all of your financial records as well. Not having good records will deter many potential buyers, and possibly make your business hard to finance.
Mistake #2: Selling the business when revenues are down. Businesses with revenues trending up over the past few years tend to fetch the highest valuations. It is still possible to sell a business showing a downward revenue trend, although the seller may need to accept a lower price.
Mistake #3: Failing to maintain confidentiality. Selling a business is unlike selling a house where the real estate agent can simply put up a “For Sale” sign in front of the property. A number of precautions need to take place in order to expose the listing to as many people as possible, yet prevent the company’s employees from finding out about the sale. The failure to maintain confidentiality can lead to low staff morale or even resignations from key employees.
Mistake #4: Mentally checking out during the sales process. On average, it takes 9 months to sell a business. Since the 2008 recession, the national average currently is closer to 12 months. Many business owners have unrealistic expectations of how long it takes to sell a business, and check out mentally when their business is on the market. This can lead to the business not being run well, which deters potential buyers.
Mistake #5: Making large purchases during the sales process. When the business is on the market, it is often unwise to start making large purchases, which results in an increase in expenses and drop in profitability. The most successful business sellers list their business for sale, forget about it, and continue to run the business as usual. Having to run a business and sell it at the same time is a difficult place to be emotionally for many business owners.
Mistake #6: Listing too high to begin with. When selling a house, it is common practice to start high and drop the price later if necessary. This is not the case for business sales. If the sale price of the business is dropped in any significant manner, potential buyers start wondering what is wrong with the business. It is often times a better idea to price the business just right and get multiple buyers interested, possibly resulting in a bidding war that bids the price up.
Mistake #7: Not obtaining proper guidance. There are appropriate times to save money, but skimping on good advisors during a business sale can lead to much more expensive mistakes down the road. At a minimum, business sellers should have a good CPA, attorney, and local business broker on their team to assist them in the complicated process of selling a business.
Advantage Commercial Brokers has extensive experience helping business sellers in the Las Vegas area navigate the pitfalls of selling a business. For a free business seller consultation, please contact us below.
Aaron Muller, President of Advantage Commercial Brokers, has personally sold over 200 companies for his clients as a business broker. Recognized as an Industry Expert by the Business Brokerage Press, Aaron has over 20 years of experience selling companies with sale prices ranging from $100,000 to over $50 million. Aaron is an Inc. 500 entrepreneur, having built one of America’s fastest growing private companies. Aaron owns multiple companies today, and is the #1 international bestselling author of The Lifestyle Business Owner: How to Buy a Business, Grow Your Profits, and Make It Run Without You, available on Amazon in Kindle, audiobook, and paperback. Contact Aaron at (702) 829-6373 or aaron@acbrokersinc.com for a confidential, complimentary consultation for business sellers in the Las Vegas area.
