For small business owners, selling their business can be both exciting and stressful. They might want to sell their Connecticut business, to start something new, explore other opportunities or retire. However, selling a small business needs careful planning. Many business owners make common mistakes during this process which can lead to lower profits, delays or even failed sales. Check out some of the most common mistakes small business owners make when they sell a business in Connecticut.

Don’t Do It Alone!

The seller needs to develop a team that can manage the process sucessfully. This team should consist of board members/partners, accounting professionals, legal advisors and an experienced business broker. All these members play a role in running the sales process and provide specific knowledge that is needed. A weak link in one of these advisors could result in a delayed sale or the wrong sale price.

Sharing Proprietary Information Too Soon

When a seller and a buyer start talking, it is important for the seller to keep their sensitive information safe. Along with asking the buyer to sign a non-disclosure agreement, the seller should only share important details little by little until they are sure a deal will happen, especially if the buyer is a competitor. A business broker should be the gate keeper for confidential information until the time is right.

Rushing to Sign a Deal

To protect the seller and its shareholders, a clear process should be followed to make sure that the deal offers a fair price. It is imperative to have a clear “go to market” value set by an experienced business broker in collaboration with an accountant. The business broker and attorneys should set up a proper process with attainable timelines when an offer is made in order to reach a closing time that works for all parties.

Not Including Important Details in the Letter of Intent

A letter of intent is like a plan for the deal thus it is important to cover the main points clearly. The letter should explain how the deal will happen (like if it is selling assets, selling shares or

merging) and what you will get in return (such as cash, stock, notes or future payments). It should also mention if the seller will still have some responsibility through things like guarantees or holding back some payments. Timelines should be set in this timeline that have been

pre-determined by the seller’s team and are acceptable by the buyer.

Ignoring the Impact of Deal Costs and Preferences

It is important to know who will get paid from the sale and how much is left after paying the company’s debts, the preferred stockholders, any legal or accounting costs related to the sale and tax implications.

Employee Retention

When someone buys a company, they want to keep important employees for a smooth transition. Since these employees are important to the buyer, it is crucial to keep these key employees both happy and employed. If a sale is not being held confidentially there may be a loss of employees because of the uncertainty.

Not Checking the Agreement

The seller’s lawyer should make sure the agreement matches what was agreed upon in the letter of intent. However, the lawyer may not know much about how the seller’s business actually works. The seller and their team need to look over the agreement to confirm that the claims they are making are accurate. They should also prepare a detailed disclosure schedule to guard against any future issues with those claims.

Not Addressing Post-Signing and Pre-Closing Time Period

Signing and closing at the same time can lower risks of the deal falling through and help keep things private but that is not always possible. Sometimes, to sell a business in Connecticut there needs to be time between signing and closing to get approvals from stockholders, regulators or to let the buyer get financing. It is important to manage the seller’s business and get these approvals done as fast as possible in order not to lose the deal.

Owner Commits To Staying On For Too Long

Usually, the original owner leaves within 2 weeks to a year. The buyer and the seller need to keep talking about how this relationship continues once the deal is done. They should both set

clear goals and milestones for the relationship and how it works moving forward. It can be difficult for a previous owner to see the progression of their company under another owner.

Be wary of these seller pitfalls when selling your business in Connecticut and surround yourself with an experienced team to help you make the proper decisions along the way!