The business sale process can be complex, which is part of the reason it makes sense to have expert help in the form of a merger and acquisition advisor. Legal mistakes can be very costly mistakes. A legal mistake can also bring the entire sale process to a sudden and complete halt. Let’s take a closer look at what these mistakes are so you can understand what to do to avoid them when selling your business.
Mistake 1: You Skipped the Non-Disclosure Agreement
Nothing quite invites trouble like skipping the non-disclosure agreement. If a deal falls through, then you have the NDA backing you up. This document ensures that the prospective buyer doesn’t tell the world that your business is up for sale. Never assume that a deal is going through until it actually is 100% complete. Buying or selling a business is a complex process with lots of moving parts. There is plenty of room for things to go wrong, and that is why you always need to have an NDA in place.
Mistake 2: You Don’t Work with an Attorney
If you are selling a business, you need an attorney. Just as there is no replacement for an NDA, the same holds true for working with a lawyer. It is also vital that you properly prepare your business for sale, which means getting paperwork organized and making sure you have legally checked all your boxes. Working with an experienced and proven attorney will help you ensure your business is ready for sale. If you’re not prepared for the deal, it can make buyers nervous.
Many business owners want to sell their business to fund their dream retirement, but don’t know where to start.
I’ve used these 5 Critical Questions to help my clients prepare and start increasing their business value.
Mistake 3: You Failed to Get a Letter of Intent
A letter of intent is a valuable, and necessary, legal document. Some sellers are reluctant to use it, fearing that it will slow down the momentum of the deal. However, since this letter works to protect your interest and outlines expectations, this step should not be skipped. For example, a letter of intent details the termination fee for the buyer, which ensures buyers can’t walk away without consequences simply because they are having a bad day. Importantly, a letter of intent ensures you are only dealing with serious buyers.
Many things can go wrong in the process of selling a business. The more prepared you are before you begin the process, the greater the chances are that you will not only avoid headaches, but also be successful. Long before you put your business on the market, you should begin working with a capable merger and acquisition advisor and attorney. Their input and advice will prove to be invaluable and help you avoid a range of costly and time-consuming issues.