8 pitfalls of selling your business (and how to avoid them)

This is part of the series, “Sell your business tomorrow,” which is designed to guide leaders through the critical steps required to exit their business successfully on their own terms. From building a scalable business and preparing for due diligence to understanding legal structures and optimizing tax outcomes, each installment provides practical insights and actionable strategies to ensure a smooth, profitable, and strategic exit.

For many founders, exiting a business may seem like the ultimate achievement, but getting there is no easy feat. Preparing to sell your business is a detailed and cumbersome process that can be overwhelming more often than not. It’s not uncommon for founders to unwittingly stumble over key missteps that can entirely derail their plans. Thankfully, when you’re armed with the proper knowledge and preparation, these pitfalls can be largely avoided. 

In this installment of our series, I’ll highlight some of the most common mistakes I’ve repeatedly seen founders make during the exit process and offer actionable advice on how to avoid them for a smooth and successful transition.

Procrastination has rarely done anyone a favor. In the case of selling your business, it can work against you in some of the harshest ways. Waiting too long to start preparing for a potential exit is a common mistake we frequently see. First-time founders may not be certain whether they want to sell, so they often don’t prepare. Some have early goals of selling, but they wait until they’re “ready” before considering the many steps involved.

How to avoid it: Start preparing your business for exit the moment you launch it (yes, seriously). This may sound extreme, but adopting a ‘seller’s mindset’ is a great place to operate from because it means your organization will be resilient enough to handle more than most. Ideally, this mindset shift should begin at least three years before the selling phase. Three years might seem like a long time. Still, it provides ample opportunity to build a scalable business, streamline operations, and implement systems that will appeal to potential buyers (not to mention, it passes by awfully fast).

Recommended reading: Why you should run your business like you’re selling it tomorrow

Many founders mistakenly believe that the success of the business is solely tied to their expertise and vision. However, when it comes time to sell, buyers are looking for companies that can run independently of the founder. This means having a robust team of strong leaders at the helm who collectively bring a diverse set of experience and expertise to the table.

How to Avoid It: Develop a leadership team that can run the business effectively without you. These are people whom you trust to make executive decisions, whether you’re around to approve them or not. A company with skilled leadership is significantly more attractive to buyers, as it demonstrates sustainability and reduces risk. Start delegating responsibilities early, and invest in your team’s growth to ensure they’re ready to step up when needed.

Recommended reading: Clarity beats control: designing teams that don’t rely on constant oversight

A business with unclear financial records, unorganized contracts, or disjointed operational processes will scare away buyers. Too often, founders become so caught up in the day-to-day operations that they overlook the importance of maintaining detailed, organized records and operational procedures.

How to avoid it: Ensure that your financials are transparent, accurate, and up-to-date. This includes audited financial statements, tax returns, and a detailed breakdown of the company’s expenses and assets. Standardize your operational processes, including employee policies and contracts, to ensure consistency and efficiency. This level of preparation will instill confidence in potential buyers and make the due diligence process smoother.

Recommended reading: Planning a business exit? Prioritize preparedness over potential buyers

Founders take pride in the businesses they’ve built. They know better than anyone how much work went into getting to the selling phase, and the last thing they want to do is sell themselves short. So it’s not surprising when a founder overestimates their company’s value. This can lead to setting an asking price that is either too high to attract buyers or too low to achieve a desired maximum return.

How to avoid it: Get a professional business valuation before you list your company for sale. Work with financial advisors, accountants, or business brokers who understand the market and can provide an accurate estimate based on real data. Be prepared to adjust your expectations and price accordingly to meet market realities. This doesn’t mean selling yourself short; it’s about maximizing your real-world value.

Perhaps every founder’s least favorite part: cue the legal and tax considerations of exiting. Failing to consider these crucial factors can lead to unfavorable tax consequences or complications with the legal structure of the deal.

How to avoid it: Yes, this is another complex avenue where it’s best to work with highly skilled experts. Consult with tax advisors and legal teams who specialize in business exits. Ensure that you understand the tax implications of selling your business, such as capital gains tax, and structure the deal to minimize tax liability. Take steps to protect your intellectual property and ensure the security of your contracts.

If you focus too much on what you want from the sale, whether it’s the highest price, the quickest deal, or the least amount of hassle, you risk a serious miscommunication with the buyer. Buyers are not as attached to your business as you are; they’re looking for value and the best possible deal. They will assess your business based on risk, profitability, trailing financial performance, operational efficiency, scalability, and other relevant factors.

How to avoid it: Try to put yourself in the buyer’s shoes. Easier said than done, for sure, but if you can understand what they’re looking for, you’ll be closer to a win. If you’re finding it hard to get into their head, know that above all else, the buyer wants a business with a clear path to profitability, minimal operational risk, and room for growth. Emphasize these aspects in your pitch.

Employees are often left out of the exit conversation until the deal is almost finalized. This can lead to anxiety, uncertainty, and even key employees leaving at the worst time. Your employees have helped you get this far, and they’ll inevitably have questions about what the sale means for them. Ignoring these concerns can be demotivating and potentially damaging.

How to avoid it: Communicate with your team at regular intervals to ensure everyone is on the same page. Address their concerns early on, and be transparent about the potential changes ahead. Consider implementing retention strategies, such as bonuses or equity offers, to keep top talent engaged and committed during the transition.

Selling a business is an emotional experience for many founders (and almost all of them swear it won’t be when the time comes … trust me, I’ve been there). The attachment to the company you built can cloud your judgment and decision-making, making it challenging to navigate the exit process objectively.

How to avoid it: Recognize and manage the very real emotional aspects of selling. Try to keep a clear head and stay focused on the business’s long-term health, rather than letting sentimental attachment cloud your judgment. Doing this alone can be challenging, so seek advice from trusted mentors, advisors, or business coaches who can provide a neutral perspective and guide you through the emotional highs and lows of the exit process.

Exiting a business is not for the faint of heart. But you can ensure a smoother and more successful transition when you know what to watch out for. By planning early, building a strong team, keeping your financials in order, and understanding the buyer’s perspective, you’ll set your business up for a successful exit that aligns with your goals.