By Brian M. Smith, Co-Founder and Managing Partner
Even the strongest businesses can lose momentum, or millions in enterprise value, if they approach a sale unprepared. After advising hundreds of middle-market transactions, LCG has identified several common mistakes business owners make before entering the M&A process. The good news? Nearly all can be avoided with early awareness and proper guidance.
What Are the Most Common Mistakes Business Owners Make Before a Sale?
- Waiting too long to prepare – Many owners underestimate how long it takes to prepare for the market. Starting too late limits your ability to fix issues or time the market effectively. Don’t start preparing when you’re ready to sell. Start preparing when selling with a 3-year period is a possibility.
- Overestimating valuation – Sellers often expect a premium before understanding how buyers determine value through earnings, growth, and risk. Inflated valuation expectations are usually driven by bad information, including tales of extremely high multiples. Tactical decisions should be made based on conservative assumptions.
- Neglecting financial quality – Inaccurate, incomplete, or inconsistent financials can erode buyer confidence and delay closing.
- Ignoring tax strategy – Early tax planning can save substantial dollars post-closing.
- Relying on a single buyer – Limited outreach restricts competition and reduces leverage.
- Failing to normalize EBITDA – Owner perks and one-time expenses should be adjusted to reflect true earnings potential.
- Overlooking customer concentration – Heavy reliance on a single client or supplier increases perceived risk.
- Skipping a sell-side Quality of Earnings – This report validates your financials and positions you to defend valuation.
- Lack of documentation – Missing contracts, outdated agreements, or legal uncertainty create friction.
- Skimping on professional guidance – Experienced investment bankers, consultants, attorneys, and accountants help you prepare, build value, and protect your value throughout the process.
How Can These Mistakes Be Avoided?
Avoiding these pitfalls starts with early engagement. LCG’s investment banking and consulting teams work alongside owners to conduct readiness assessments, calibrate valuation expectations, and design marketing strategies that attract qualified buyers. The process ensures you enter negotiations from a position of strength, not uncertainty.
Conclusion
Selling a business is both emotional and strategic. Avoiding common mistakes can add meaningful value and reduce stress. With the right team in place, business owners can approach their sale process with confidence and clarity.