Building a business takes grit. Business owners have not only invested a significant amount of cash into their operations but also incalculable amounts of sweat equity. The decision to sell isn’t easy, and it takes careful planning and determination to see it through. 

Patience is another virtue business owners need when they’re heading for an exit, as it takes between six and twelve months to sell a business. Sometimes, the business isn’t valuable enough, or it’s not exit-ready, which could keep it on the market longer than intended.

Other factors that can prevent or influence a successful exit include: 

1. Waiting Too Long to Sell

The allure of better profits, whether from business operations or the actual sale of the business, can keep owners holding on too long. While a quarter of businesses start the sale process almost three to four years ahead of time, it still takes about 1.6 years to prepare for a change of ownership. 

A few reasons to sell when the business is doing well include: 

  • Profits provide leverage for a higher sale price 
  • Positive ratios create perceived value, which helps owners secure a better exit 
  • Avoid the risk of financial disasters such as market crashes and world events 
  • Forced sales can drive down the price

When profits start to dwindle, whether it’s due to a drop in revenue or unforeseen expenses, the allure of business loans can be a slippery slope. If conditions don’t improve relatively quickly, it could lead to solvency issues, which then affect cash flow. Eventually, businesses tend to overextend their credit. 

It’s hard to wait for a good offer on a business when it’s barely able to manage the day-to-day. Selling while thriving can help increase your chances of a sale that helps you meet your next goal or adventure in life.

2. Not Knowing What Your Business Is Worth 

The sale price of the business partly depends on the value of the business. Unfortunately, 91% of company leaders delay conducting a business valuation, which can lead to missing or misleading information in the report. 

This could result in either grossly underestimating the value or overestimating it, resulting in the sale getting stuck. Not only does a professional valuation reveal the true value of the business, but it also attracts serious buyers. 

3. Failing to Prepare Financials & Documentation

One of the key components of a valuation is the financials. It paints a picture of the financial standing of the business. Financial documentation provides insights into important ratios that not only determine profitability but also solvency and liquidity. 

Without financials, buyers are unable to perform financial pressure tests or create forecasts. This places a damper on the sale as it leaves a financial gray area. Businesses also need to show credible record-keeping of other vital documents, as failure to do so can open up the business to risk. 

Non-compliance (of all sorts, including record-keeping) is one of the foundational issues buyers look out for. Incomplete records show up as red flags during a business sale, whereas clean books, clear reports, and organized contracts show transparency and credibility. 

4. Trying to Sell Without a Broker

Businesses can attempt the sale without a broker, but doing so opens them up to convoluted sales negotiations, low-quality inquiries, and incomplete paperwork. 

A business broker offers expertise in: 

  • Finding the right buyer for your business
  • Multi-channel marketing 
  • Protecting sensitive business information from potential leaks 
  • Preparing necessary documents and conducting a business valuation
  • Negotiating the sale from price to terms and conditions 
  • Ensuring a smooth, reduced-risk transition 

According to IBEX Middle Market Business Brokers, businesses should focus on three steps for a successful exit: 

  • Prioritize preliminary due diligence
  • Reduce perceived risk 
  • Engage the right professionals 

5. Overlooking Transition Planning

Change management is a core component of a smooth transition. Companies that can show a carefully formulated transition plan have a better chance of convincing the buyer that there will likely be an effective transition. 

An effective handover should ensure that key employees, clients, and operations have a solid plan and clear expectations. This is especially important for businesses that are being sold as a going concern. 

Plan Smarter, Exit Stronger 

Whether you’ve decided to embrace retirement or move on to a different business venture, common mistakes may slow down or halt your transition. By avoiding these mistakes, you may walk out with a good return on your investment and minimal disruptions to the transition. 

Partner with industry experts to leverage your business value and improve your chances of a smooth exit.