This is going to be one of the most important business deals you make. Avoiding these missteps can help you dodge potential regrets.

As an entrepreneur, no doubt you’re comfortable in the driver’s seat. You know when to step in and when to delegate, and you understand that some situations are more complex than they might appear.

Selling a business is no different, but a transaction of this size hides many stumbling blocks that can cut into your profits and the benefits to your family and employees. Without the right guidance, you might overlook obscure, but critical, steps that could lower the sale price or run up your taxes.

We’ve collected a list of five common mistakes entrepreneurs make while selling. Of course, a good team will help you avoid a dozen other missteps — a Private Wealth Advisor and financial planning team, trust & estate attorney, investment banker, mergers & acquisitions attorney, accountant and value advisor can help lay the groundwork for your personal and financial goals.

 

1. Not understanding how much you’ll get … or how much you’ll need.

Many entrepreneurs aren’t the sole owners of their business. You need to understand how much of the sale price will end up in your pocket, and you don’t want this to come as a surprise. It can be easy to lose track of the details here, especially if you’ve given equity in the past in lieu of cash payments for services or goods.

It’s also imperative to know how much money you’ll need after the business is sold. If you’ve been routing personal expenses through your business, you might have a clouded picture. When planning an exit, a smart advisor will help determine how much you need to live as well as long-term planning items.

 

2. Neglecting the sale by focusing too much on day-to-day operations.

Selling your business is an entire enterprise of its own, and it can be hard to balance when you still have a company to run. While a financial advisor alone is likely not equipped to handle the elements of successfully selling a company, a team of specialists can help you maintain momentum as you continue to oversee your business.

“It’s critical to work with a financial advisor, but you should have many spokes of the team — the trust & estate attorney, the mergers & acquisitions attorney, the investment banker, the value advisor,” says Jeff Ruderman, a wealth planning specialist at Capital Group Private Client Services. “It takes a village here.”

 

3. Waiting too long to prepare for the sale.

Remember that it can take a few years to prepare a business for sale, so start preparing early. If your records are out of date, or if you lack transition plans, you could slow the process and leave money on the table.

If you’re going to gift shares, consider doing so a year or two ahead of the sale, when your valuation will likely be lower. This can allow for a more efficient transfer of assets outside of your estate.

This is also a good time to cease running personal expenses through your business. Maintaining separate finances can enhance your business’s credibility with banks, investors and vendors, as well as offering a clearer financial picture for potential buyers, which can positively impact its valuation.

 

4. Prioritizing tax mitigation over all else.

Too often, business owners over-focus on tax mitigation and neglect other ways to build and preserve wealth.

“If you were to think beyond what one nets from the individual transaction and focus on 20 years after the sale, how do you create more wealth for your family through the sale of a business? It’s through estate planning, not just tax mitigation,” Ruderman explains.

In addition to tax mitigation, estate planning can be a highly effective tool to build and pass on wealth over the long term. For example, gifting shares to a grantor trust and paying the resulting taxes on assets outside of your estate can add value for years. Your team can help you evaluate many potential benefits.

 

5. Evaluating offers purely on a largest-value basis.

Taking the highest on-paper offer for your business might not actually be the best choice, depending on your post-sale goals. One variable to consider is how much you want your family to be involved in the next stage of the company. Accepting a lower offer with an agreement that your family members will stay in leadership roles could be worthwhile to longstanding family businesses and help preserve intergenerational wealth.

Other considerations include how your employees and customers will be treated by the new owners, or how the purchase price is structured. Your team can help you think through and articulate your goals so that you can choose an offer that helps you better achieve them.