But expectations often clash with reality. Despite growing interest in selling a business, most small to mid-sized companies listed for sale never find a buyer. Research shows that only 25% to 33% of these businesses actually close a deal.
So what’s causing the gap between intention and execution? The answer often lies in avoidable missteps made during the selling process. For many first-time sellers—especially entrepreneurs and family business owners—the process is far more complex than anticipated.
Here’s a breakdown of the most common mistakes when selling a business—and how to avoid them.
Many privately held companies minimize reported profits for tax efficiency. However, this practice can hurt valuation when it’s time to sell. Buyers need to understand the business’s true earning potential.
Solution: Restate financials to reflect the company’s actual operational performance, including owner add-backs and unrecorded assets or liabilities. A comprehensive quality of earnings review can go a long way in building buyer confidence.
Sellers often set unrealistic price expectations based on emotion, anecdotal evidence, or outdated comparisons. But buyers are focused on return on investment and future cash flow.
Solution: Work with a professional advisor to determine a defensible valuation that reflects market conditions and the buyer's ability to finance the purchase from future earnings.
Buyers are rarely buying what the business is today—they're buying what it could become. Sellers too often focus on past performance rather than growth potential.
Solution: Be prepared to articulate the future upside of the business. This includes market opportunities, competitive advantages, and potential scalability.
While peers, employees, and family members may have good intentions, their advice is often emotionally driven or biased.
Solution: Engage a qualified M&A advisor, CPA, or transaction attorney who can provide objective, experience-based guidance throughout the process.
Many sellers assume that competitors, suppliers, or even employees are the most logical buyers. However, deals with these groups often fall through and risk exposing sensitive information.
Solution: Vet buyers carefully. Expand your search beyond local connections. Private equity groups, family offices, and international investors often pay premiums for well-positioned U.S. companies.
It’s a mistake to confine the sale process to a local or regional network. Many qualified buyers operate under the radar and aren’t actively advertising their interest.
Solution: Use advisors with access to a broad pool of domestic and international investors. Casting a wider net can lead to better offers.
The most attractive businesses are well-run, with strong systems, leadership teams, and growth potential. Buyers pay more for businesses that are ready to scale.
Solution: Invest time in preparing for the sale. Build bench strength, refine operations, and position the company as a strategic growth opportunity.
Financial statements alone don’t tell the full story. Buyers want to see data-backed growth plans, operational documentation, and customer metrics.
Solution: Compile a robust deal book. Include adjusted financials, organizational charts, customer insights, and strategic growth opportunities.
Many owners fail to plan for what comes next—financially and emotionally. That lack of preparation can lead to rushed decisions and less favorable deal terms.
Solution: Work with a financial planner and tax advisor before initiating a sale. Structured deals—such as earnouts or seller financing—can increase total payout and reduce tax burdens.
Sellers sometimes reveal pricing expectations too early, which can limit negotiating power or lead to lowball offers.
Solution: Let the buyer make the first offer. A strategic, well-advised negotiation approach can preserve value and create better outcomes.
Knowing how to sell a business is critical to achieving the best possible outcome. The process is complex, emotional, and often unfamiliar—especially for first-time sellers. But with the right preparation, guidance, and strategy, business owners can avoid common pitfalls and position themselves for a successful exit.
Meaden & Moore offers comprehensive support for business owners preparing to sell. From valuation to buyer vetting to financial planning, our advisors help clients build and execute strategic exit plans that protect their legacy and maximize value.