Selling your business is the most important transaction you will ever make. It would be a shame to spend 20 years building your business like a pro, only to exit like an amateur. By avoiding these eight common novice mistakes you’ll have a more profitable and satisfying experience.

1. Selling Because of an Unsolicited Offer To Buy

Got an offer from a competitor? Or, perhaps a Chinese company looking to buy a customer base in the U.S. These are not unusual occurrences these days. There are countless stories about a competitor coming in with a spontaneous, unexpected offer and after a little light negotiating the owner sells. Another common story is the owner tells his banker, lawyer, or accountant that he is considering selling. His well-meaning professional says, “I have another client that is interested your business. I will introduce you.” The next thing you know the business is sold. Believe me, these folks are buying your business at a big discount. If you previously were not considering this business sale, you probably have not taken some important steps to improve business value and optimize your exit. You may not have prepared for an identity and lifestyle to replace the void that will be left by the separation from your company. Wouldn’t you rather be prepared and exit on your own terms….better terms.

2. Poor Books And Records

Business owners wear many hats, but usually lack that one hat that doesn’t fit so well. More likely than not, financial record keeping is simmering on the back burner. A buyer is going to do a comprehensive look into your financial records. If they look a little scrubby, the buyer’s confidence in the business takes a nose dive while his perception of risk increases. The transaction value is often attacked well beyond the economic impact of any uncertainties in the numbers. Get a good accountant to do your books.

3. Going It Alone

The business owner may be the foremost expert in his industry, but it is likely that he’s a novice in business-for-sale know-how. Since the sale of a business is a once-in a-lifetime occurrence for most owners, mistakes at this juncture have a huge impact. He possibly can leave a lot of money on the table. For instance, is it a better deal to structure some of the transaction value as an earn-out based on post acquisition sales performance? Do you understand the difference in after tax proceeds between an asset sale and a stock sale? Your everyday bookkeeper may not, but a tax accountant surely does. Is your business attorney familiar with business transfer legal work? Would he advise you properly on Reps and Warranties that will be in the purchase agreement? Your buyer’s team will have this experience. Your team should match that experience or it may cost you way more than professional fees.

4. Skeletons In the Closet

If your company has some buried bones, the due diligence process will surely dig them up. Are there environmental issues, regulatory violations, or employment contract issues, for instance. Air out the closet and brush away the cobwebs. The best scenario would be that warts can be taken care of before the sale. If a problem is not resolvable immediately, but is fixable within a reasonable period of time, the buyer may leverage the issue to attack the price for an amount far in excess of the actual impact of the issue. The worst case scenario is that a complicated, unresolved problem is discovered late in the process and the buyer walks away.

5. Mum’s The Word

Confidentiality in the business sale process is crucial. If your competitors find out, they can cause a lot of damage to your customers. Human capital is a significant portion of your company’s value. What if your best employees get skittish and leave for greener pastures? What if bankers get nervous and decide to limit lines of credit? What if suppliers feel uneasy and demand cash on delivery that impacts your cash flow? There is a right time to communicate your sale to those who have a stake in your company, but mum’s the word until that time.

6. Contracts

Are your day-to-day contracts in place with employees, customers, contractors, suppliers, landlord? Is your office lease transferable, can it be renegotiated? If your company has patents or trademarks, are they properly licensed or registered? Are your customer agreements assignable? Contracts or Agreements can kill deals, they can also cause issues after the sale that can come back to bite you.

7. Not Understanding The Value Of Your Business

Business valuation is a tricky thing. It takes finesse and lots of experience. A professional Business Brokerage Firm /  M & A advisor is your best bet. Business valuation firms are great for appraising partner dissolution, divorce, or gift and estate tax situations. However, they tend to be very conservative and their results could vary significantly from the value your business could fetch in the competitive open market.

8. Getting Beat Up In Negotiations And Due Diligence

Your objective is to get the best price and terms. I know this is a shocker, but the buyer is trying to pay as little as possible and get contractual terms favorable to him. These goals are not compatible with yours. The buyer is going to fight hard on issues like total price, cash at close, earn outs, seller notes, reps and warranties, escrow and holdbacks, and post closing adjustments. If this is not the buyer’s first rodeo, you can get trampled during negotiations. And, before you know it, your appetizing whopper-of-a-deal turns into a nothing-burger.

Due diligence has a dual purpose for the buyer. The first is obviously to insure that he knows exactly what he is paying for. The second is to reduce purchase price. If you don’t have a good team of advisors, you could be getting the short end of the stick. There is an old proverb that says when a man with money and no experience meets a man with experience, the man with the experience walks away with the money and the man with the money walks away with some experience. Keep in mind when contemplating the sale of your business that it will likely be your first and only experience. Avoid these mistakes and make that experience a profitable one.