The business sale process can be a complex time consuming process, which is part of the reason why it makes sense to have expert help in the form of an experience Business Broker / M&A Advisor. Legal mistakes can be very costly mistakes. A legal mistake can also bring the entire sale process to a sudden halt. Let’s take a closer look at what you can do to avoid these kinds of issues when selling a business.
Major 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 and avoid them sharing important, confidential information. Never assume that a deal is going through until it is actually 100% complete. Buying or selling a business is an unpredictable, 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 and someone who understands how to manage this complex process.
Major Mistake 2 – You Don’t Work with an Attorney
Let’s be very blunt here, if you are selling a business, then you should have an attorney who specializes in business transactions. Just as there is no replacement for an NDA, the same holds true for working with a good transactional lawyer to review the legal aspects of a transaction. It is also vital that you properly prepare your business for sale, which means getting paperwork organized and making sure that you have all legal aspects addressed upfront as well as having all your books and records in order prior to going to market. Working with an experienced and proven transactional attorney along with an experienced Business Broker / M&A Advisor will help you ensure that your business is ready for sale. If you’re not prepared for the deal, it can make buyers nervous and take a lot longer which can create lower value, all possibly jeopardizing the deal.
Major 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. Importantly, a letter of intent ensures that you are only dealing with serious buyers.
Many things can go wrong while selling a business. The more prepared you are before you begin the process, the greater the chances that you will not only avoid headaches, but also be successful in this process. Long before you put your business on the market, you should begin working with a capable Business Broker / M&A Advisor and transactional attorney. Their input and advice will prove to be invaluable and help you avoid a range of costly and time-consuming issues.
View Matt Coletta's LinkedIn profile