As a business owner, you may someday intend, or hope, to sell your business. You’re always busy either running the business or with life in general, which means selling your business is likely not at the forefront of your mind. It’s common for owners to not think of, or prioritize, exactly how they are running their business and the decisions they make that can either add or detract from the business’s value. They’re often on autopilot, too focused on hammering nails to see what they’re building, majoring on the minors. Before they know it, it’s time to sell, whether by choice or not, and they haven’t taken the necessary step back to understand what, if any, value they’ve created for themselves.

Creating a valuable business should be a top priority for every business owner, whether or not they ever intend to sell. Why? Because aside from how much money a business makes, a well operated, balanced, and documented business is not only worth more, it’s much easier and enjoyable to run. An owner should attempt to always have their business operating in such a state, not only for efficiency and maximum earnings, but you never know when a desire or reason to sell may arise. Some aspects of a business could take years to adjust. Others can be done in the shorter term.

15 Mistakes Business Owners Can Address Now for Future Success

1. Selling in a Rush

Selling your business in a rush can force you to lose leverage. There may be several reasons beyond your control that have you in a time pinch to sell. Having your business prepared for a sale at all times can help minimize any time pressure to accept sub-par terms or price. Patience can be one of the most effective negotiating tools. Allow yourself enough time to ensure you’re choosing the best buyer available. Plan, plan, plan.

2. Selling When Business is Down

The last three years of business performance are critical to a buyer’s perception of the business’s value. A continuous downslope can be hard to merit a seller’s desired value. Naturally, when anything negatively affects the business or the industry the business is in, and then you look to sell, it can come with a hefty discount. If possible, sell when business profits have been on a regular increase for perhaps 2-3 years and operations have been in a steady place. Too often owners think about selling when something bad happens and they do not get nearly as much as they hoped.

3. Attempting to Time a Sale With the Market

The stock or general economic market should have little to no bearing on when you decide to sell your business. If you’re able to sell at a perceived premium because of market health, you’re using the same sale proceeds to invest/spend that money at the same premium market price for stock, real estate, or another business. The value of a good business should have little to no fluctuation with the larger external economy, and could sometimes be worth more in a down market. Naturally there can be exceptions for businesses in industries whose revenue tends to fluctuate with the economy [restaurants, travel, leisure, etc.] but a consistent history, a good broker, and a savvy buyer can help mitigate that.

4. Having Commingled Books or Taxes

It’s not uncommon for business owners to combine business or personal funds/taxes into the same entity. This makes it very difficult, if not impossible, to separate revenue and expenses between the businesses, and for an acquirer to be comfortable with the numbers. Keep unrelated entities separate if you ever desire to sell one of them.

5. Being a Point of Contact with Customers or the Face of the Business

If your customers do business with your business because of you, the business is too dependent on you. As an owner, take yourself away from customer interactions and delegate that to a salesperson/account manager. Otherwise, a buyer will see those relationships with a low level of transferability. In the same thread, as much as some owners enjoy being the face of a business, it’s hurting the business’s value. Buyers may not see Joe Smith’s Driving School as having any value without Joe Smith.

6. Having any Single Customer or Client Make up More Than 10% of Your Revenue

If any single customer makes up 10% or more of your business’s revenue, a buyer would be worried if that customer were to leave after a sale and decrease revenue by 10% or more. It’s not always easy or possible, but add enough customers and diversify to decrease dependency on any single or small group of customers. If customer concentration is too high, a seller may only get incremental portions of revenue after a sale, conditioned on those customers remaining with the business after closing.

7. Ignoring Issues You Need to Address

You can’t ignore them away. An issue, whether externally or internally, that has been a challenge or that you see coming will arise in either a due diligence process, training period, holdback, earnout, or even a lawsuit. Be honest with yourself, your sales advisor/broker, and buyer. There may be a simple fix, reference, or term to consider prior to listing and negotiation that can save you a lot of time, money, and headache.

8. Not Allowing Enough Time to Prove any Major Changes Were Effective

It is very common for business sellers to make a major change to the business in the time leading up to a sale and assume a buyer will understand or be confident in the decision. The truth is, buyers (and lenders) want to see a history of consistency with a business’s offerings and operations to perceive value. Just because you fixed or added something to the business that improved revenue/profit six months ago, doesn’t mean it’ll immediately add a significant price jump. Conversely, don’t cut necessary expenses for long-term operations for better perceived short-term margins. It will be noticed and can decrease the value.

9. Not Knowing the Total Costs of a Sale with Taxes and Fees

The sale of a business can be taxing in more than one way. Once you’ve had an advisor conduct a realistic valuation on your business, consult your tax professional and financial advisor regarding your tax and larger financial responsibilities. Before making major financial decisions on your future, know what your business might be worth. Decisions could prove irrelevant if you don’t know the facts. Don’t let incorrect assumptions about taxes, fees, or your business’s value lead to poor retirement planning or business decisions.

10. Assuming You Know How a Sale Will Go

The sale of a business rarely goes how everyone expects it to. You may get a price you hope for, but the process itself often takes longer than expected, along with aspects that weren’t expected but are usually surmountable. Having a good combination of optimism, flexibility, and perspective will get you to a close. If you’ve hired a good sales advisor, they should be helping you foresee and overcome any challenges, providing you with information and options to make the best decisions for yourself.

11. Telling Everyone You Want to Sell

99% of the time don’t tell anyone! Except your spouse, certain family, and trusted advisors. Telling people such as customers, employees, or vendors opens them, and you, up to a world of uncertainty, pessimism, anxiety, and problems that are usually not merited. Issues are often more quickly overcome once a deal is done. Having the wrong people know about a potential sale can hurt your buyer and thus the business’s value. There can be specific cases when it makes sense, or may even be required, to tell people outside your ‘circle of trust’, but ensure you fully understand those reasons and the pros and cons.

12. Assuming You Can Start a Similar Business After You Sell

It may be obvious to some, but sometimes sellers don’t realize they cannot open a similar or same business after a sale. If you sell a business in an industry, a buyer will require a non-compete in that industry or geographic market. A common period is five-10 years. Keep in mind this can apply to any customer, vendor, or even employee overlap, depending on the circumstance. If your plan was to restart after a sale, revisit the plan.

13. Being Dependent on One or Few Suppliers or Service Providers

There can be exceptions to this with long term, transferable, or new contracts put in place. Since such contracts are not as common, having one or a few suppliers is not desirable and risky for buyers. If possible, ensure there’s a quick and solid backup plan if that supplier were to disappear. Regardless of how much you’re making, if you’re simply a retailer for a unique product or service, if someone else can use the same supplier in the same market, your business may have little to no value. The competitive risk for a product or service with a low barrier to entry may be too great.

14. Attempting To Do It On Your Own

Selling your own business yourself could make sense if it's small, the money is not a concern to you, and you're doing it with someone you know and trust very well. Even that can be riddled with problems and has low success. Using an advisor/broker will help ensure you’re getting a maximum price from a large buyer network. There are many potential terms, issues, and problems that can arise when selling a business. Even seasoned professionals don’t always get it right. Use an experienced advisor to protect yourself and get the most value.

15. Not Hiring Professionals That Specialize in Business Sales/M&A

I’ve seen many either real estate or commercial brokers attempt to sell businesses unsuccessfully. There are some that do both, but ask enough of the right questions to ensure they’re well versed in business sales. Business sales have a world of differences and complexities from real estate sales, which is why the fee is higher. I’ve also never seen a generalist attorney that didn’t specialize in business sales help close a transaction. Although I’m sure it’s happened at some point, there are many unique legal norms, terms, and language that needs to be known in business transactions. Ensure your counsel is versed in business sales for maximum value and a smooth process.

Now you know some major critical mistakes to avoid when selling and running your business. Applying solutions and avoiding these mistakes will not only make your business more valuable later but also help you run a smoother and more sound operation now, regardless of when or if you sell. Don’t sell in a rush or when business is down. Don’t be a main point of contact for the business or ignore problems. Ensure your customers are diverse and do not be dependent on a single supplier. The sooner changes are made and the longer such changes can be portrayed as effective, the better. Lastly, hire professionals that are experienced and focused on business sales. Your future self will thank you.

Article contributed by Matt McDonald. Visit Matt's website to learn more: www.businesssalesadvisor.com