Deciding to sell your business is a big decision and one that you don't make very often. You weigh the pros and cons of your exit strategy, read all the articles and books on the secrets to selling your business and you begin to take a good hard look at your own business processes and controls to see if selling is even a possibility. But even after all that research, you can make one of these 4 critical mistakes that can end a deal before it even begins. 

1.  You Tell Your Team Too Early

Repeat after me, "I will be very careful to not let my team find out about a potential sale until I'm ready to talk with them."

During the due diligence process you are going to be asked a lot of questions. Your potential buyer will ask for financial reports, marketing collateral, key account information, etc. All of which your team has an intimate understanding of. So it seems reasonable to reach out to your key team members to get this information. 

Don't do it. 

Tipping off your employees too early can cause a mass exodus that can scare off your buyer really quickly. At a minimum, telling your team will cause fear and uncertainty which will lead to drama, and you don't need that.

Instead let your CFO know right away (she will catch on quick anyway when you start asking for all the financial reports) and ask for her discretion. Make it clear that you are not yet ready to tell anyone about this and that she must be very careful to hold this information in the strictest of confidence.

Then take the time to develop a plan to keep your key team members on board after the sale through financial incentives. Most savvy buyers will require employment contracts from all key staff after the sale anyway, so keep that in mind when working through the particulars of your sale. You will tell the whole company after the deal is closed (and not a minute sooner).

2.  You Share Customer Information Too Early

Repeat after me, "I will only share customer information late in the sale process."

And then only with clear non-solicitation provisions your attorney has written up signed by your buyer.

Keep this information as close to the cuff as possible, for as long as possible. If done incorrectly, a buyer could reach out to your client base, tip them off to the sale and make your business virtually worthless in the eyes of future buyers.

Make sure you have a "non-solicitation" agreement in place with your prospective buyer so that they are contractually obliged to respect your customer relationships and not to poach them.

3. You Kept All Your Eggs In One Basket

A client of ours recently decided to put their business up for sale after landing a large contract with a department store chain. In their eyes, they had doubled their sales and were more attractive to the eyes of potential buyers. What they found was the exact opposite. Potential buyers saw their customer distribution as a liability not an asset.

Beware allowing any one customer becoming more than 10% of your total business.

If you have too much concentration in a single customer, a prospective buyer will be nervous. "What if we lose this customer post purchase of the company?"To be clear, I'm not suggesting you stop selling to this customer, of course not. Instead, look for ways you can grow your other customers faster so over time you reduce your concentration issue.

The same is true for vendors or partners. Look at your business through the eyes of your potential buyer. What scares you about buying the business? What could go wrong post-purchase?

4. You Don't Have Your Financials In Order

And the final thing that scares a buyer off, is messy financials. The more you have to "explain away" some part of your financials, the more your prospective buyer will start to question their accuracy. This also includes things like no longer running your legitimate but excessive owner perks through your company. At the very least, you would want to restructure your Chart of Accounts to move these expenses to be "other" and below your operating profit shown on your P & L. This means your $56,000 of pension contributions for you and your spouse; your leased sedan; your bi-annual company board meeting in Maui expenses; etc.

Avoiding these 4 critical mistakes can help make your transition go much smoother, and help you negotiate the best deal possible for your family. Good luck on your sale!