Selling your business is a major decision that can transform your personal and professional life.
Whether you’re planning to sell to retire, invest in a new project, or simply reap the rewards of your years of work, this process needs to be prepared carefully.
Unfortunately, many mistakes can jeopardize the success of the sale and reduce the value you could get from it.
In this article, we explore the five most common mistakes to avoid and how to work around them to optimize your sale.
1. Not anticipating the sale
Why anticipation is essential
The most common mistake made by sellers is not to prepare sufficiently in advance for the sale of their business. Many believe that this step can be carried out quickly once the decision has been made. In reality, preparing a sale can take several months or even years. Insufficient anticipation can not only devalue your business, but also make the process more complex.
Consequences of poor preparation
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Incomplete documentation: Potential buyers will ask for a large number of documents (financial statements, contracts, statement of assets, etc.). If these elements are not ready, it can slow down negotiations or create doubts.
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Missed opportunities: Without a clear strategy, you risk missing out on ideal buyers.
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Loss of value: A non-optimized business will be less attractive, reducing its market value.
How to anticipate effectively
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Plan ahead : Ideally, start preparing 2 to 3 years before the expected sale date.
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Do an internal audit : Review your finances, processes, and assets to identify areas for improvement.
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Set clear goals : Determine your financial and personal expectations for the sale.
2. Underestimating the value of your business
Why Valuation Is Critical
Underestimating or overvaluing the value of your business can lead to major problems during negotiations. A valuation that is too low could cause you to lose hundreds of thousands, or even millions of euros. Conversely, a valuation that is too high can scare off potential buyers.
Common mistakes in valuation
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Rely solely on current earnings: The value of your business is not limited to its current profits. Growth prospects, customers and intangible assets play a crucial role.
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Ignoring market standards: Each industry has specific methods for assessing the value of a company (e.g., EBITDA multiples).
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Do not include intangible elements: Reputation, brand, and the quality of customer or supplier relationships are assets that should not be neglected.
How to avoid this error
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Hire a valuation expert : Specialist consultants and auditors can provide you with a realistic and objective estimate.
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Compare with other divestitures : Analyze recent sales of similar companies in your industry.
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Consider market trends : A growing industry can warrant a higher valuation.
3. Neglecting tax aspects
The tax implications of the sale
Taxation often accounts for a significant portion of the sums received at the time of sale. Poorly preparing for this aspect can lead to high tax burdens and significantly reduce the net amount you will receive.
Common Mistakes
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Ignoring advantageous tax regimes: Some schemes allow you to reduce capital gains tax.
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Poorly structuring the transaction: The way in which the sale is carried out (transfer of assets or shares) has a direct impact on taxation.
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Do not anticipate the consequences on your personal assets.
Solutions to optimize taxation
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Consult a tax expert : A wealth management advisor or tax lawyer can guide you in choosing the most advantageous legal structures.
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Plan a gift before disposal : In some cases, transferring part of your shares before the sale can reduce overall taxation.
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Take advantage of exemptions : Some tax schemes favour retiring entrepreneurs.
4. Lack of confidentiality in negotiations
The risks of an information leak
The sale of a company is a sensitive operation that must be carried out discreetly. An information leak can have serious consequences, including:
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The loss of customers or suppliers.
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Employee demotivation.
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A loss of confidence from financial partners.
Mistakes to avoid
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Talking to your employees or partners about selling too early.
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Do not use confidentiality agreements (NDAs) with potential buyers.
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Allowing sensitive information to flow unchecked.
How to maintain privacy
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Use an intermediary : An assignment advisory firm can act as a screen between you and buyers.
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Have NDAs signed : All stakeholders must commit to confidentiality.
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Control communications : Reserve sensitive information for advanced negotiations.
5. Don’t surround yourself with experts
Why experts are indispensable
The sale of a business is a complex operation that requires a variety of skills: legal, tax, financial and strategic. Trying to manage everything on your own is risky and can lead to costly mistakes.
The consequences of this error
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Poorly drafted contracts that expose them to litigation.
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A loss of value due to a lack of knowledge of the valuation mechanisms.
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Poorly optimised taxation.
Experts to be mobilized
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A specialized lawyer : To draft and examine contracts.
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A chartered accountant : To prepare financial statements and analyze tax impacts.
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A transfer consultant : To negotiate with buyers and structure the transaction.
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A wealth management advisor : To plan for the post-sale.
How to choose your experts
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Choose professionals with proven experience in your sector.
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Check their references and negotiate clear and transparent fees.