Like many people over the Thanksgiving holidays the enterprise value specialists at Ceibass watched a lot of football on television. They were struck by how many teams would self-destruct, or shoot themselves in the foot with penalties, dropped passes or blown coverages. It got them thinking about the common unforced errors owners make when they sell their lawn and landscape businesses.
“Selling a lawn and landscape business is a complex process, and there are several pitfalls that sellers should be aware of to ensure a smooth and successful transaction,” said Tom Fochtman, Ceibass CEO. “By being aware of and actively avoiding these pitfalls, sellers can increase their chances of a successful and profitable sale. And keep their sanity in the process.”
Here are some key pitfalls to avoid from the team at Ceibass:
- Overvaluing the Business: One of the most common mistakes is overestimating the value of the business. While it’s natural to value your hard work and investment, an unrealistic price tag can deter potential buyers and be a major letdown for the owner/seller. Rely on professional appraisals and market analysis to set a fair and attractive price.
- Neglecting Financial Records: Incomplete or disorganized financial records can be a major red flag for buyers. Ensure that all financial statements, tax returns, and other relevant financial documents are accurate, up-to-date, and readily available.
- Ignoring Legal and Regulatory Compliance: Failing to adhere to legal and regulatory requirements can lead to serious complications during the sale process. Make sure all licenses, permits, and insurance policies are current and in compliance with local, state, and federal laws.
- Poor Preparation for Sale: Not preparing the business for sale can reduce its attractiveness to potential buyers. This preparation includes investing and maintaining your equipment, ensuring operational efficiency, securing long-term client contracts, and having up-to-date systems, procedures, and technology.
- Overlooking the Importance of a Good Team: A strong and reliable team is a valuable asset. Neglecting staff training and development or having a high turnover rate will definitely be a deterrent to potential buyers.
- Handling the Sale Process Alone: Navigating the sale of a business without professional help can be risky. Engaging a business broker such as Ceibass with a strong team of financial advisors, lawyers, planners, and tax consultants is a must. Most buyers would prefer that a seller have an advisor in place. It’s too hard for buyers to close a transaction without an advisor for the seller to keep the process on track and moving forward.
- Not Considering Tax Implications: The sale of a business can have significant tax implications. Failing to plan for these can result in unexpected costs. Consult with a tax advisor to understand and plan for the tax consequences of the sale.
- Lack of Confidentiality: Breaching confidentiality about the sale can lead to unrest among employees, customers, and suppliers, which might negatively impact the business. Maintain discretion throughout the process.
- Rushing the Sale: Rushing the sale process can lead to overlooking critical details and making poor decisions. Take the time to properly prepare, market, and negotiate the sale of your business.
“Remember, most business owners will only go through this process one time in their lives, and it will be the most important business transaction you ever undertake,” added Tom. “You MUST handle the entire process properly and with the utmost diligence and care.”