Selling your business is a huge endeavor and, as your business may represent years worth of hard work and personal sacrifices, you also want to ensure that you get the best deal possible. Unfortunately, it is very easy to make mistakes through the process, and any mistakes could cost you a lot of money. Here are some of the most common mistakes you should try to avoid:

1. Reducing Income With Excess Expenses

When tax time rolls around, it seems advantageous to write off as many business expenses as possible. That effectively lowers your income and decreases your tax burden. However, if you write off too many expenses, it makes your profits look compromised, and as a result, prospective buyers will not be willing to pay as much for your company. This is something that you need to start thinking about several years before you put your company on the market.  

2. Accepting Unsolicited Offers

Once in a while, business owners have their companies running smoothly, and out of nowhere, they receive unsolicited offers to sell. Before accepting an unsolicited offer, look it over carefully and talk with a specialist in business sales. If someone is offering to buy your company for more than it is worth, they may know something about the industry you do not—by selling you may lose that opportunity to earn.

The other risk of selling when you weren't planning to sell is personal. Selling your business takes you quickly out of your lifestyle and forces you to start something new. If you are not ready for that transition, the sale could end up feeling depressing and disempowering rather than positive.

3. Using EBITDA To Determine Sale Price

Whether you want to ensure that an unsolicited offer is fair or if you have decided to sell and need help choosing a price, you should avoid using EBITDA exclusively to determine your sale price. EBITDA is a business valuation figure that stands for "earnings before interest, taxes, depreciation and amortisation".

Essentially, this number expresses the value of a company based on its performance and separate from its burdens such as taxes and depreciation. Unfortunately, many business owners erroneously assume they can use EBITDA to determine their business's correct price tag, but in actuality, these numbers over-emphasise the value of non-liquid assets while under-emphasising the value of working capital or highly liquid assets.

For example, using the EBITDA metric may make a company with a lot of old machinery look valuable. However, if you buy that company and realise the machinery cannot do the job you need it to do (or if it becomes broken and worn down within a few years or months of you buying the company), those assets immediately become liabilities. To preserve your financial integrity, you would have been better off buying a business with less old machinery but more cash in the bank. Instead of exclusively using EBITDA, use other metrics such as gross profits or top-line revenue to determine sale price.

4. Not Reducing Inventory

The inventory you have on hand should be enough to keep your business on its feet, but no more than that. When a buyer purchases your company, they buy the inventory as part of the sale price. Unfortunately, buyers do not like to raise their price just to buy excess inventory, and if you have a glut of inventory, you may lose money.

5. Tackling It Alone

Most business owners are masters in their industries, but that doesn't mean that they have the expertise needed to profitably sell a business. Rather than trying to tackle a business sale on your own, contact a business broker. These professionals have the contacts and information you need to advertise your business, price it correctly and entice a buyer. They also know how to guide you through contractual and financial issues related to the sale.