10 Mistakes Business Owners Make When Selling Their Company

Selling a company is a complex process and seemingly small missteps can create problems  later in the transaction. Some of the most common mistakes I see include going to market before the business is ready, setting unrealistic expectations about value, presenting disorganized financials, limiting buyer exposure, choosing an offer based only on price, and underestimating due diligence. Avoiding them starts with realistic expectations, good information, and a disciplined M&A process. 

Selling a business is very different from running one, and most owners only do it once. You may have spent decades learning your company, your customers, and your industry, but a sale introduces an entirely new set of questions around valuation, buyers, confidentiality, financing, negotiations, due diligence, taxes, and transition planning.

At NorthStar, we built our Transaction Navigator™ around those moving parts. The 10-stage process gives owners a defined path from the first Exploration Meeting through closing, with systems and tools designed to keep the transaction organized along the way.

Here are 10 mistakes I’ve seen create unnecessary problems for sellers and what business owners should understand before going to market.

Going to Market Before the Business Is Ready

A business can be profitable and still not be ready to sell. Customer concentration, owner dependence, management gaps, legal issues, or other weaknesses may become much more important once buyers begin looking closely at the company.

“If a business isn’t ready to go to market... we’re going to advise the business owner, you shouldn’t move forward.” — Kim Bentson

Sometimes the better decision is to address those issues first and return to the market in a stronger position.

Setting Unrealistic Expectations About Business Value

Most owners already have some idea of what their company should be worth. The problem is that the market may arrive at a different number.

NorthStar’s Valuation & Sellability Assessment (VSA™) considers market value along with factors affecting the company’s attractiveness and sellability. Starting with realistic expectations can prevent valuation disagreements from becoming a problem later in the process.

Bringing Disorganized Financials to Buyers

Buyers will spend significant time reviewing revenue, expenses, earnings, tax returns, owner compensation, and other financial information. If the records are inconsistent or difficult to understand, confidence can fall quickly.

Clean financials do more than make due diligence easier. They help buyers understand what the company actually earns and what they are being asked to buy.

Making the Business Too Dependent on the Owner

If every important customer relationship, decision, and process runs through the owner, a buyer has to consider what happens after that owner leaves.

Building management depth, documenting processes, and distributing important relationships can make the company easier to transfer and reduce concerns about post-closing performance.

Exposing the Business to Too Few Buyers

Receiving an offer does not necessarily mean you know what the broader market would pay.

NorthStar puts significant emphasis on generating buyer exposure. The firm reports a network of more than 10,000 active buyers and an average of 223 buyers per listing. More qualified buyers can create competition and give the seller more options when offers arrive.

Making It Difficult for Buyers to Evaluate the Business

Serious buyers may be reviewing many acquisition opportunities at the same time. Missing information, slow responses, or weak marketing materials can make a good business unnecessarily difficult to evaluate.

NorthStar’s Acquisition Accelerator is designed to give qualified buyers organized access to information through tools such as the Confidential Information Memorandum, financial materials, and a video presentation and owner interview.

Choosing an Offer Based Only on Purchase Price

The biggest number on the page is not always the strongest offer. Financing, payment terms, deal structure, contingencies, transition expectations, and certainty of close can all change what an offer actually means to the seller.

NorthStar uses its Offer Evaluator to compare proposals on an apples-to-apples basis while considering the terms that matter most to the individual owner.

Underestimating Due Diligence

An accepted letter of intent can feel like the deal is nearly finished. In reality, a great deal of work may still be ahead.

NorthStar notes that more than 70% of attempted acquisitions fail during due diligence. Its Transaction Log uses a 125-point closing checklist to manage the financial, legal, operational, financing, and other details required to move from LOI to closing.

“Every single business and business owner is unique. We’re playing on the same field with the same sidelines every time, but every game is different.” — Jeremy Furtick

Trying to Handle the Entire Business Sale Yourself

You still have a company to run while the transaction is happening. At the same time, the sale may require an M&A advisor, transaction attorney, CPA, tax advisor, wealth manager, lender, and other professionals.

That is why building the right Transaction Team is its own stage within NorthStar’s Transaction Navigator™. Each advisor has a specific job, while the owner can remain focused on the business.

Forgetting About What Happens After Closing

Closing day may transfer ownership, but it does not necessarily end the seller’s responsibilities. Training, employee and customer introductions, consulting periods, and other transition obligations may continue afterward.

Those expectations should be discussed and documented before closing so both sides understand what the first days and months under new ownership will look like.

Prepare Your Business for a Better Sale Process

NorthStar reports 353 successful closings, more than $750 million in total transaction value, and sale prices averaging 98% of asking price. Its approach is built around preparing the business, reaching qualified buyers, managing the transaction carefully, and addressing problems before they become deal-killers.

If you’re thinking seriously about selling your company, NorthStar can start with an Exploration Meeting and VSA™ to help you understand where the business stands and what taking it to market could look like.