A large proportion of the companies that change ownership each year in Germany are transferred due to the owner’s age.
However, other factors—such as strategic considerations or conflicts among shareholders—also play a role in the sale of a business. While a large number of these transactions are successful to the satisfaction of both parties, a significant number fail. As varied as the starting points for the sale may be, the mistakes that ultimately lead to failure are similar across all industries.
1. Mistake in a Business Sale: Not Enough Time
The most significant shortcoming that business sales often face from the very beginning is a lack of time. Transactions take about a year from finding a buyer to signing the contract—but many business owners do not factor this timeframe into their plans.
Furthermore, an upcoming transaction is a full-time job for the business owner—one that cannot be delegated, as they must always be available for discussions and negotiations and ready to provide information. Even consultants—professionals in M&A—estimate that supporting the project requires up to 200 man-days—which illustrates the workload. Failed attempts must be factored in, as must various rounds of negotiations.
If the goal is to find the ideal time to sell the company from a valuation perspective, a twelve-month lead time is not sufficient. Choosing the optimal timing for the sale requires forward-looking planning spanning several years.
During this phase, the company should be brought into the best possible condition, and the sale should take place free from personal or financial pressure to act—ideally during a period of overall economic upswing.
However, particularly in cases of succession due to retirement, the exact opposite is often true: The business owner enjoys the good times and considers a sale as soon as the business becomes difficult. If this timing coincides with an economic downturn, the consequences for the company’s value are disastrous.
2. Mistakes in Selling a Business: Lack of Professionalism
A lack of professionalism is just as problematic as a lack of time or poor timing. It becomes evident, at the very latest, when a professional offer—the most important sales tool—is put on the table. Professional buyers and serious prospective buyers will only accept an offer if it is comprehensive, transparent, clear, and fact-based.
Top buyers review many offers and are therefore able to compare them; they expect sellers to also disclose negative factors, justify the sale, and explain specific details. Many business owners quickly scare off the best prospective buyers with unprofessional offers.
A rational price is always an integral part of the offer. It makes sense for business owners to stay within the range suggested by valuation methods and not exceed it.
3. Mistakes in Selling a Business: Wrong Motivation
Excessively high price expectations often correspond to a lack of willingness to part with one’s life’s work at all. The wrong motivation for selling significantly hinders the transaction. Only a positive approach creates the space to sell from a position of strength—and thus opens up a wide range of options and ensures the sustainable continuation of the business under a successor.
4. Mistakes in Selling a Business: Limited Market Outreach
Trying to find a buyer quickly and discreetly among acquaintances is the fourth major mistake entrepreneurs often make. After all, only by reaching as many potential buyers as possible can one negotiate from a position of strength. A large pool of interested parties can only be found through public outreach; today, online databases are the medium of choice for this. The intention to sell should be communicated as broadly as possible while remaining targeted, penetrating the market just as thoroughly as the entrepreneur does in their core business. Giving up after a few failed attempts is out of the question.
5. Mistake in Selling a Business: Inconsistency
Consistency is the top priority when selling a business—including when it comes to the practical matter of updating the listing. Once a business is on the market, the listing details must always be kept up to date; many businesses forget this and ultimately miss out on opportunities during negotiations.
During these parallel discussions, sellers should act consistently, remain steadfast, move quickly, and limit negotiations to a maximum of three rounds. Whether in negotiations, the search for a buyer, or planning—inconsistency jeopardizes many promising starts in the transaction market.
