Selling your business is one of the most significant decisions you will ever make. It’s a process filled with opportunities but also potential pitfalls. Having worked with countless business owners, I’ve seen how certain missteps can derail even the best-laid plans. To help you navigate this critical journey, here are the top mistakes business owners make during the sales process—and how to avoid them.
- Starting Too Late
One of the biggest mistakes is waiting too long to prepare for the sale. Many business owners underestimate the time it takes to position their business for maximum value. Without adequate preparation, you may face lower valuations, limited buyer interest, or a rushed process that leaves money on the table.
Solution: Start planning your exit at least 3–5 years in advance. This allows time to optimize financials, address operational inefficiencies, and demonstrate consistent performance to potential buyers.
- Overvaluing the Business
Emotional attachment often leads owners to overestimate the worth of their business. While your business may feel priceless, buyers will evaluate it based on financials, market trends, and future potential.
Solution: Engage a professional business valuation expert early in the process. A realistic valuation based on market data and industry benchmarks will set appropriate expectations and attract serious buyers.
- Poor Record-Keeping
Incomplete or inaccurate financial records can scare away buyers. Buyers want to see detailed, transparent documentation to assess risks and opportunities.
Solution: Ensure your financial records are accurate, up-to-date, and easily accessible. Work with your accountant or financial advisor to clean up books, reconcile discrepancies, and prepare detailed reports.
- Neglecting Confidentiality
Leaking news of a potential sale can create panic among employees, customers, and suppliers, potentially jeopardizing operations and the deal itself.
Solution: Maintain strict confidentiality throughout the sales process. Use non-disclosure agreements (NDAs) and limit discussions to trusted advisors and qualified buyers.
- Skipping Professional Advice
Attempting to sell without professional guidance can lead to undervaluation, legal missteps, or deals falling through.
Solution: Build a team of experienced advisors, including an M&A advisor, accountant, M&A lawyer, and a tax specialist. Their expertise will help you navigate complex negotiations and secure the best outcome.
- Focusing Only on Price
While the sale price is critical, it’s not the only factor to consider. Terms, contingencies, and post-sale responsibilities can significantly impact your long-term satisfaction with the deal.
Solution: Evaluate the entire deal structure, including payment terms, earnouts, and any ongoing involvement in the business. A lower upfront price with favorable terms may be more beneficial than a high offer with significant risks.
- Withholding Information
Failing to disclose key details about your business can erode trust and kill a deal during due diligence. Buyers need transparency to make informed decisions.
Solution: Be upfront about any challenges your business faces. Proactively address issues like pending lawsuits, declining revenue, or customer concentration risks. Transparency builds credibility and minimizes surprises during due diligence.
- Underestimating the Emotional Impact
Selling a business can be an emotional rollercoaster. Many owners struggle with letting go and second-guess their decision during the process.
Solution: Prepare yourself emotionally by understanding your motivations and future plans. Having a clear vision for life after the sale can make the transition easier.
- Not Considering Tax Implications
Failing to account for taxes on the sale can lead to unexpected financial burdens.
Solution: Consult a tax advisor early to understand the tax implications of the sale. Strategies like asset allocation, timing of the sale, and structuring the deal can help minimize your tax liability.
- Losing Focus on the Business
In the midst of a sale, some owners take their eye off day-to-day operations, leading to declining performance and reduced valuation.
Solution: Maintain business performance throughout the sales process. Delegate responsibilities to trusted team members and keep your operations running smoothly to sustain buyer confidence.
Selling your business is a complex process, but avoiding these common mistakes can help you achieve the outcome you deserve. At Portage M&A Advisory, we specialize in guiding business owners through every stage of the sales process. If you’re considering selling your business, let’s start a conversation. Together, we’ll ensure your transition is as seamless and rewarding as possible.
Jim Friesen, MBA, CPA, CM&AA
Founder | Partner
