The Top 10 Myths of Selling a Business: And How Planning Can get You Moving in the Right Direction

As I have stated before, selling a business can be a complex process, and there are many misconceptions that can lead to poor decision-making on the part of business owners. I’ve outlined some of more common myths below.

?1.????? It's Easy to Sell Your Business

Many believe that finding a buyer and closing a deal is straightforward. In reality, selling a business can take months or even years, requiring extensive planning and execution. Seling your business is not an event but a process. This is why planning should start years ahead of time. This will allow you to “hit the ground running” when it’s time to execute, hopefully shortening the period from listing to close.

2.????? You Can Sell Anytime

Business owners often think they can sell whenever they choose. However, timing is critical, and market conditions, economic factors, and the business's performance can significantly impact the sale. Planning helps to make your business more attractive and more sale-ready. It will also help you better understand the potential for your business so that when an offer does come along, you will know if it aligns well with your goals and objectives.

3.????? A High Asking Price Will Attract More Buyers

Some sellers assume that setting a high asking price gives them room to negotiate. In reality, overpricing can deter potential buyers and lengthen the sales process. In many cases, the best approach, especially for Middle Market businesses is to not list a price but rather let potential buyers name their price. This provides the greatest opportunity to maximize the sales price.

4.????? You Don't Need Professional Help

Many business owners believe they can handle the sale on their own. However, using professionals like M&A Advisors, accountants, and attorneys can help navigate the complexities of the sale and maximize value. You may only sell a business once in your life, so relying on other professionals to make that process smoother, while protecting you from potential pitfalls is a worthwhile investment.

5.????? All Buyers Are the Same

Some sellers think all buyers are motivated by the same factors, such as price. In truth, buyers can have varying motivations—strategic, financial, or personal—that influence how they value a business. Strategic buyers may value your business the highest because they perceive a value in adding your business to their own operations, potentially creating synergies or cost savings. Financial buyers will buy your business solely for cash flow reasons, while personal buyers may see value in the entrepreneurial life. The question you have to ask is which type of buyer is the best fit for you and your business?

6.????? The Process is Transparent

Sellers often underestimate the due diligence process and assume buyers will trust them blindly. Buyers will thoroughly verify financials, operations, and other aspects, which can surface discrepancies or issues. This process can be an emotional one for sellers because the warts of their business become all too apparent, and the original offer price will slowly get whittled down due to potential issues raised. Planning can help make this process not only more transparent, but help you get through the due diligence period in good shape.

7.????? You Should Disclose Everything

While transparency is important, oversharing or disclosing unnecessary information at the early stages can scare off potential buyers. It’s essential to balance what to disclose until serious negotiations begin. When working with an M&A Advisor, the marketing of the business needs to be strategically set up. There will always be a time for increasing disclosure, but some of these issues are best left for discussion deeper into the process when it’s been established the potential buyer has the means and interest to buy the business.

8.????? A Sellable Business is Always Profitable

Some believe that only profitable businesses can be sold. However, businesses in transition, with growth potential or other unique factors, can also attract buyers, even if they’re not currently profitable. That lack of profitability likely will impact the valuation since there is risk that a turnaround may not be successful. However, a solid business plan that backs up how the business can turnaround will support the sellability of that business..

9.????? Your Business is Worth What You Think

Many owners are emotionally attached to their businesses and overestimate its worth. Objective valuations based on market conditions and comparisons are crucial for setting realistic expectations. It’s much better if this is done at the planning stage because then an action plan to improve value can be established. As noted above, different buyers will place different values on the business based on whether there is some strategic value in the acquisition. Understanding the value of the business and more importantly, how you can improve it, is critical to maximizing value.

10.? Once You Sell, You're Done

Sellers sometimes think that once the deal is closed, their involvement ends. Some agreements require the seller to assist during a transition period, and future financial obligations or liability could also arise. Usually, this process may last over a year before everything is truly finalized. Another aspect to consider is what you will do in your post-exit life. Will you be retiring and if so, what will occupy your time during the day? If you are Gen X or Millennial, retirement may not be the next move, so planning out your post-exit goals is important to avoid emotional pitfalls before or after the close.

Conclusion

Understanding these myths can help business owners approach the selling process with a more informed and realistic outlook, ultimately leading to a more successful sale. As seen, exit planning can help owners approach the “final event” with the right mindset and with a more attractive and valuable business.