Making the decision to sell your business is one of the most important choices that you will have to make as a business owner. Selling prematurely can lead to unexpected surprises in due diligence, lower valuation by prospective buyers, and even an inability to close the sale. Here are eight signs that your business may not be ready to be sold. If you are planning to sell and one or more of these apply to you, dedicate some time to resolving these issues — it will make all the difference.
You May Not be Ready to Sell Your Business if:
- All of the information necessary to run your business is in your head. Your business should be able to run without you. This involves streamlining, automating, and documenting your processes.
- Your financial documents are not in order. Inaccuracies in financial statements are a red flag to potential buyers. There can be no cutting of corners when it comes to the business’s financial statements. Get your documents in order well before you ever plan to list your business for sale.
- Pre-sale due diligence has not been performed. Once you have accepted an offer, the buyer will perform due diligence, which will uncover any issues your business has. If the first time you learn about problems is when the buyer discovers them, the buyer will have an advantage in negotiating the price — or the deal may fall apart altogether.
- You have not hired the right team of professionals. When you are preparing to sell your business, you should have a team consisting of a CPA, an attorney, and an M&A advisor.
- You have not looked at your business from a buyer’s perspective. If you have not considered how an outsider will value your business, take a step back and do so. Removing the rose-colored glasses will let you see your business the way a buyer will see it and will allow you to address any issues and make much-needed changes, which will improve the value of your business.
- You don’t have a succession plan. This is the process of preparing your business for a transition in leadership. Will all of the key employees stay in their jobs after the sale? Will the current executives have the same role? How will a new owner transition into the business? Planning these steps before you begin the sales process will make the entire procedure smoother.
- You have not calculated how much money you need to retire or continue your current lifestyle after the business sells. Knowing exactly how much you need to make from the sale will let you know what the gap is between your current valuation and the desired sale price. Then you can focus on either improving the value of your business or reducing your financial need in order to fill the gap.
- You don’t have a plan for your time after you sell your business. Many business owners, especially those looking to retire, don’t spend much time thinking about the significant changes in lifestyle they will experience after they sell their business. They quickly run out of things to do and realize they were not emotionally ready to live the retired lifestyle. Taking the time to plan your life after the business sells will give you peace of mind.