Overcoming 6 common obstacles to selling your business

Selling your business can be a process filled with a lot of frustrating starts and stops. You may think you’re ready to sell, then find you aren’t as prepared to move on as you thought. You may assume you’ve found the perfect buyer, but negotiations break down and they walk. Or perhaps you find that the market won’t bear as high a price as you expected for your company. All of these issues can cause a business sale to screech to a halt.

As we work with exiting business owners, however, we’ve noticed some common stumbling blocks that can contribute to a failed—or unnecessarily stressful–business sale. We’ve also come to see that sellers who successfully manage these six key challenges are more likely to sell their companies in a timely and profitable way:

Obstacle: Remaining “irreplaceable” within your company

Well before you put your company up for sale, you should be both grooming your successor team and “institutionalizing” clients so they are used to working with company representatives other than you.

As your company goes through your sale transition, you have a much better chance of retaining clients if they are loyal to your company rather than to you personally or other specific employees. The same is true of vendors: The relationship going forward should be with your company rather than just with you.

Obstacle: Not taking time to plan your future

Leaving the company you may have built from scratch isn’t easy. That’s why it’s critically important to think now—long before you put your business up for sale—about what you’ll do after closing the transaction.

Be as specific as you can: Will you start another business? Embark on worldwide travel? Volunteer for a particular organization? We can’t stress this enough: While you’re in the middle of a sale is not the right time to realize you don’t know what you’re going to do with your life. It can negatively affect the way you make sale decisions. Bottom line: Don’t put your company on the market until your new future is clear.

Remember: You will likely have a contingency payment from your buyer that depends on your company maintaining or increasing revenues several years after your sale. This is another reason why solidifying client relationships—and making sure they don’t depend on you—is an important pre-sale task.

Obstacle: Not reviewing your personal financials in advance

Can you realistically afford to live on the proceeds from your company sale and your other investments? Work with your Wealth Advisor to determine what you’ll likely spend in “retirement” and whether your business sale price will make that possible on an after-tax basis.

If your company’s valuation isn’t high enough to meet your needs, you still have some choices—as long as you consider your options before selling your business. 

Obstacle: Not surrounding yourself with a strong advisory team

Growing your company probably wasn’t a solo effort—and selling it won’t be, either. It’s wise to assemble a good team of professionals, usually from outside your firm, to help you through the sale. That typically includes a financial advisor, corporate attorney and investment banker. A strong team will help you think clearly, avoid mistakes and keep the process moving along.

Obstacle: Keeping your successor team in the dark about the sale

Some owners may be tempted to only let their team know about the sale at the last minute. They may worry that the transition will cause key individuals to jump ship or embark on internal tugs-of-war.

In reality, the sooner you let your successor team in on the news, the better. They’re more likely to feel like they have a stake in the process and can often offer options and ideas that may be helpful. An informed team is generally a more supportive team.

Obstacle: Falling prey to “negotiation fatigue”

Dealing with a potential buyer is a major task that can be as draining as your regular work. However, you need to clear time in your schedule to prioritize it.

A sale is more like a marathon than a sprint. Know that the process could take as much as a year or two: You’ll screen potential buyers, pick a finalist, then begin a due-diligence phase that includes a confidentiality/exclusivity period. After that, you may have numerous rounds of contract negotiations before signing an actual purchase-sale agreement.

This also implies that you should embark on a sale well before you actually want to leave your firm. Buyers may fall through, leaving you to start the process over. The more time you have, the less likely you are to be bullied by the buyer’s terms.

We can be a helpful resource as you prepare to sell your business—reminding you of these common obstacles and how to overcome them.

ABOUT THE AUTHOR