THE PITFALLS OF SELLING A BUSINESS

Selling a business is a complex process with 'many a slip twixt cup and lip'. The ten most common pitfalls can be avoided with proper consideration of the following areas.

1. ignoring the need for confidentiality - accidental communication of your intentions to sell can unsettle customers, suppliers and staff as well as altering close competitors.

2. contacting only the 'most likely' one or two buyers - reduces the probability of achieving the best price and prevents the 'dynamic tension' of prospective purchasers being aware of other bidders.

3. unrealistic expectations for the sale price - seek expert advice on business valuations as it is rare for owners to be sufficiently objective or experienced to evaluate the business with any accuracy.

4. overstating profit potential - a dangerous practice as its discovery will undermine a purchaser's belief in sustainable profitability.

5. anticipating next year's profits - not recommended for the same reason as # 4.

6. concealing a major problem within the business - if still not disclosed at legal completion is likely to create a future liability on the vendors in accordance with warranty and indemnity provisions.

7. ignoring the tax implications of the deal - can result in significantly lower net proceeds (the most obvious tax plan for UK residents is to ensure that CGT taper relief is maximised)

8. not understanding the sale and purchase agreement - the legally binding document which often contains serious responsibilities on the vendors in respect of information disclosure and warranties and indemnities over the business.

9. seeking to accelerate the sale process - typically six months can elapse between starting the process and legal completion thus avoiding time pressure as an effective negotiating tool for the purchaser.

10. attempting to sell the business without expert advice - such a complex negotiation requires years of experience and relevant skills to achieve the best terms of sale.