Overcome Six Common Obstacles When Selling Your Business

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

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

Obstacle 1: Remaining “irreplaceable” within your company

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

As your company goes through the sale transition, you’ve got a much better chance of retaining clients if they are loyal to your company rather than to you personally or to other specific employees. The same is true of vendors, as the relationship going forward should be with your company and not just with you.

Obstacle 2: Not taking time to plan your future

Leaving the company you may have built from scratch isn’t easy. That’s why we believe it’s critically important to think now—long before you put your business up for sale—about what you’ll do after closing the big 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: Being in the midst of a sale is not the right time to realize you don’t know what you want to do with your life. It can negatively affect the way you make sale decisions. The bottom line is not to 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 for 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 3: Not reviewing your personal financials in advance

Can you realistically afford to live on the proceeds from your company sale and other investments? Work with your Corient 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 available as long as you consider your options before selling your business. 

Obstacle 4: Not surrounding yourself with a strong advisory team

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

Obstacle 5: Keeping your successor team in the dark about the sale

Some owners may be tempted only to inform their team about the sale at the last minute. They may worry that the transition will cause key individuals to lose engagement and productivity, 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 that 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 6: 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. After all, you’ll screen potential buyers, pick a finalist and then begin a due diligence phase that includes a confidentiality/exclusivity period. Following those steps, you may also have numerous rounds of contract negotiations before signing an actual purchase-sale agreement.

This implies that you should embark on a sale process well before you actually want to divest of your firm. Buyers may fall through, leaving you to start the process over. The more time you have, the less likely you will 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 sharing best practices to overcome them.