5 Mistakes Owners Make When Selling a Business

A lower-middle market sale often takes six months to a year from first conversation to closing. A lot can go wrong in that time, and most of it can be prevented.

1. Going to market unprepared

The biggest mistake is treating a sale as a sudden decision rather than a planned exit. When a business goes to market without clean financials, documented processes or a team that can run without the owner, buyers price in the risk of fixing those gaps themselves.

A simple illustration: a business with $1.5M of EBITDA that might trade at 6x ($9M) could trade at 4.5x ($6.75M) if the buyer has to do the cleanup. That is $2.25M left on the table. The numbers are hypothetical, but the pattern is not.

The fix: start preparing 18 to 24 months before you want to close. Work through the seller readiness checklist.

2. Misreading what drives your value

Many owners focus on revenue. Buyers focus on the quality and risk of your earnings. You can have strong revenue and still get a low multiple if margins are thin, revenue sits with two customers, or you are the only person who can run the company.

Years spent chasing top-line growth, without building the things buyers pay for, can leave a business trading at the bottom of its range instead of the top.

The fix: read What Is My Business Actually Worth? and build toward the factors that move the multiple.

3. Signing a letter of intent you do not fully understand

A letter of intent is usually described as non-binding, but in practice it anchors the deal. Once you sign, you are typically in an exclusivity period, you have set price expectations and you have agreed to the broad structure. Walking terms back later is hard.

If diligence then turns up problems, real or not, the buyer may try to lower the price. By then you are deep in the process, emotionally committed and without other buyers at the table.

The fix: before signing, understand exactly what is binding, how long exclusivity lasts and what conditions let the buyer walk away. Have an experienced M&A attorney review it.

4. Being surprised by taxes at closing

An owner agrees to a price, does the math, and starts planning. Then the CPA explains the tax impact and the number looks very different.

Asset and stock sales are taxed very differently. How the price is allocated between goodwill, equipment, a non-compete and inventory changes your effective rate. Timing and structure matter, and most of the planning has to happen well before closing.

The fix: read The Tax Trap, then bring in a CPA with transaction experience 12 to 18 months before you expect to close.

5. Letting the sale distract from running the business

A sale process is consuming: buyer meetings, diligence requests, calls with attorneys and accountants. It is easy to spend most of your attention on the deal while the business runs itself.

Then a quarter comes in soft, a key customer leaves or an employee resigns, and the buyer has a real reason to renegotiate, extend diligence or walk.

The fix: have your team carry more of the day-to-day before the process starts, and let your deal team (advisor, attorney, CPA) absorb as much of the transaction work as possible.