Common Mistakes to Avoid When Selling Your Middle Market Company
Key Takeaways
- Most businesses that fail to sell have avoidable problems
- The biggest deal-killers: wrong price, messy financials, owner dependency, and due diligence surprises
- Many of these mistakes are fixable with the right preparation
- The time to address these issues is before you go to market
Selling a middle market business is one of the most complex financial transactions most entrepreneurs will ever undertake. And the number of ways a deal can go wrong is substantial.
Here are the most common mistakes — and what you can do to avoid them.
Not recasting financial statements
Most business owners have run personal expenses through the company and minimized taxable income. That's smart tax planning — but it means your reported earnings significantly understate what the business actually produces. Get your financials recast before you go to market.
Trying to sell potential
Buyers don't pay for what the business might do under new ownership. They pay for what it's doing now. If you have a genuine growth opportunity, begin executing on it before you go to market — so you have results to show, not just a slide deck.
Not understanding the legal documents
A business sale involves listing agreements, NDAs, letters of intent, and purchase agreements. Many business owners encounter these for the first time during their sale process. Know what you're signing before you sign it.
A poorly structured Letter of Intent
The LOI is non-binding on price — but it sets the framework for everything that follows. A vague or seller-unfavorable LOI creates ambiguity that gets exploited later. Have your advisor and attorney review it carefully.
Getting the real estate decision wrong
If you own your building, decide whether to include it in the sale before you go to market. This affects how the business is valued and who your buyers are.
Mishandling earnouts
Earnouts can add significant value — or create years of disputes. The difference is in how they're structured. Get the metric definition, operational covenants, and dispute resolution in writing.
Not accepting a good offer
The first offer may not be the best, but indecision is expensive. Qualified buyers move on. Run a process that generates multiple offers simultaneously so you're negotiating from strength.
Most deal-killing problems are fixable with the right preparation. Let's talk about where your business stands before you go to market.
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