It is said with every major purchase there’s some kind of remorse either on the part of the buyer or the seller. This can be especially true when buying or selling a business. No matter which side of the negotiating table you sit on, there are some critical areas that could leave you with feelings of regret. Avoid these mistakes and you’ll feel better about your deals after they’re done.
SELLER MISTAKES BUYER MISTAKES
• Not researching the value of similar businesses within the industry
• Overestimating the value of the company and losing a well-qualified buyer
• Insisting on cash-only terms
Selling price
• Overpaying based on emotion
• Stretching personal resources too thin
• Maintaining sloppy financial records that potential buyers cannot trust
Accounting records
• Relying on company financials not prepared by a third-party accounting professional
• Not requesting payroll returns and other tax filings in the financial review
• Agreeing to seller-financing without proper vetting of the buyer’s creditworthiness
Financing
• Settling for a high-interest loan, or one with too short a maturity
• Selling the assets of the business when it would have been more tax-efficient to sell the corporate shares instead
Assets
• Purchasing less than all of the assets used in the business, overlooking items such as licenses, patents or important contractual arrangements
• Making a stock-purchase transaction without understanding the benefits of an asset purchase
• Neglecting to check the background of the buyer and assessing their ability to run a business
• Failing to verify the buyer’s liquid assets
Due diligence
• Not asking why the business is for sale
• Conducting too little research into the competition or overall industry trends
• Not searching for the existence of company loans and other liabilities
• Signing a non-compete agreement that is too restrictive in scope or time frame
Non-compete
• Failing to require a non-compete clause from the seller, especially in a service-industry business
• Leaving too much of the sale price dependent on the ongoing success of the company
Transition
• Having unclear expectations for seller participation in the business after the sale
• Not positioning the business to sell well in advance of the first offer
• Requesting professional help too late in the sales process
Expert help
• Not assembling a team of legal, tax, and insurance experts before agreeing to terms

 

Buying or selling a business is likely one of the most important transactions an entrepreneur faces. It is always best to seek professional help.