The sale of my business went smoothly for a lot of different reasons, but where not here to talk about that!
I will say a quick note: The person who acquired my business was a straight shooter, negotiated fairly, and treated me equally during my transition.
It made the process much more enjoyable.
However, that might not happen to you!
Disclaimer over, let’s dive in.
Mistake 1: Not Starting Sooner
If I could go back and do it again, I would have started “selling” my business three years before actually selling it.
I would have heavily focused on profitability (instead of scaling). I (probably) could have made 20% more on the sale if I’d done that.
Lesson Learned: Start gearing up to sell your business 2-3 years from selling it.
Mistake 2: Not Reaching Out to My Network
When I sold my agency, I used a broker.
The broker takes 10% of the final guaranteed money of the sale. The FIRST person who reached out to me and was interested through the broker (that I ultimately didn’t sell to) was a mentor of mine.
Lesson Learned: Start networking with potential buyers early, and don’t use a broker until you exhaust those options.
Mistake 3: Not Charging Interest on Sellers FInancing
When I sold my agency, I only had a small amount of seller financing (which wasn’t a massive part of the sale).
However, I didn’t negotiate an interest on the note. Again, not a huge deal, but just something to mention.
Lesson Learned: Know your options when selling. I didn’t know you could add interest to seller financing.
Mistake 4: Asset Sale vs. Stock Sale
When selling a business, the sales process is often structured as either an asset or stock sale.
Asset Sale: In an asset sale, the buyer is purchasing the business’s individual assets. This type of sale does not include liabilities unless explicitly agreed upon.
Stock Sale: Conversely, a stock sale involves the buyer purchasing the owner’s shares in the company, thereby acquiring both its assets and liabilities.
Most of the time, small businesses are sold as an asset sale.
Both options aren’t bad, but a stock sale will typically be more favorable to the seller.
Lesson Learned: Know your options when selling. I didn’t fully understand the difference until we inked the initial terms.
Mistake 5: Not Being Mentally Prepared
Selling a business takes 6-8 months; let me tell you, it’s a rollercoaster.
Throughout the process, I had a mentor sign an LOI and back out, the purchase price got slashed (but then brought back to the original LOI amount), and multiple times when I thought the deal might not go through.
Lesson Learned: Be prepared for ups and downs throughout the process.
Mistake 6: Not Being 100% Out of the Day-to-Day Operations
I was almost 100% out of the day-to-day operations when I sold my business. However, I was still leading sales (because I loved it).
It would have been a bit more “turn-key,” if I wasn’t still working inside the business.
Lesson Learned: Most buyers don’t want a founder in the business at all. Get yourself 100% out before selling.
Mistake 7: Not Focusing on the Business When Selling
When I sold the business, we had (nearly) turn-key operations. However, I did take my eye off the ball a bit to do meetings and conversations with the buyer.
Lesson Learned: If the sale falls through, you still want/need a solid business to fall back on.