Top 10 Mistakes to Avoid When Selling Your Business (Part 1 of 2)
Selling a business is a big deal—financially, emotionally, and operationally. And in a competitive market like San Diego, even small mistakes can cost you tens (or hundreds) of thousands of dollars. Whether you’re planning to sell this year or just starting to think about it, avoiding these common mistakes can make a huge difference in your outcome.
Here are the 10 most common (and costly) mistakes business owners make when trying to sell—and how to avoid them.
1. Waiting Too Long to Start Planning
Selling a business to its maximum potential requires planning ahead—ideally 2 to 3 years in advance. The best advice I give to business owners is this: treat your business today as if you were planning to sell it in the next few years—even if you're not. Even if you think you’ll sell in 10 or 15 years, operating with this mindset sets you up for success.
Why? Because life is unpredictable. Health issues, economic challenges, or other unforeseen circumstances can arise at any time—and when they do, you may not have the luxury of preparing your business for sale from scratch. When your business is always kept in a “sale-ready” condition, you’re protected. You’ll be able to act quickly, confidently, and from a position of strength. Even if you never sell, this mindset drives stronger systems, better financials, and a more profitable, efficient business overall. It encourages you to implement smart decision-making, keep clean and consistent records, establish proper processes, and maintain a team that can operate independently. These improvements not only prepare your business for a potential future sale, but they also make it more enjoyable and successful to run today.
Example: A San Diego-based manufacturing company owner postponed exit planning until health issues arose. The urgency led to a hasty sale at a significantly reduced price, as there was insufficient time to optimize operations or financial records.
Actionable Advice: Initiate exit planning at least 1–2 years in advance. This timeframe allows for strategic improvements, such as enhancing profitability, streamlining operations, and organizing financial documentation, thereby maximizing the business's market value.
2. Not Knowing What Your Business Is Worth
Relying on assumptions or informal estimates can result in mispricing your business, either deterring potential buyers or leading to undervaluation. I strongly recommend that business owners take time to educate themselves on how business valuations actually work. There is no one-size-fits-all formula—valuation varies widely based on multiple factors, such as revenue, net profit, the specific industry, business model, geographic location, and even timing.
A strong first step is to research valuation methods, compare similar businesses that have recently sold in your area, and understand the multiples that apply to your industry. The more informed you are, the better equipped you'll be to engage in valuation discussions and negotiation. When you approach the process with this level of understanding, you're more likely to receive fair offers and make confident decisions that serve your long-term goals. This deeper knowledge puts you in a much stronger position when it's time to have conversations with buyers, lenders, or advisors.
Example: A retail store owner in San Diego priced her business based on a competitor's sale, overlooking differences in location and customer base. This mispricing led to prolonged market time and eventual price reductions.
Actionable Advice: Obtain a professional business valuation that considers your specific industry, market trends, and financial performance. This objective assessment ensures accurate pricing, attracting serious buyers and facilitating a smoother sale process.
3. Poor Financial Records
Poor financial records are one of the most common issues we encounter—probably 9 out of 10 small to medium-sized businesses we review have financials that are incomplete, unclear, or poorly maintained. Many business owners are not financially inclined, and they often delegate bookkeeping or accounting responsibilities to CPAs or part-time professionals, expecting everything to be in order. However, when it's time to sell, those assumptions often fall short.
Buyers place significant weight on financial documentation, especially tax returns. These are the cornerstone of any serious evaluation. If the books don’t align with the tax returns, or if personal and discretionary expenses are muddled into the financials, the business can appear less profitable than it actually is. This directly impacts valuation, often lowering the asking price substantially.
Moreover, if a buyer plans to use SBA financing—a common route for business acquisitions—the lender will examine the last several years of tax returns closely. If the returns don’t support the asking price, the deal may fall apart or the buyer may qualify for a smaller loan, shrinking your potential payout.
To maximize valuation and avoid last-minute issues, it’s essential to maintain clean, accurate bookkeeping and ensure your financials match the tax returns. If you're planning to sell in the near future, consider working with a professional to clean up your books and clarify owner adjustments so buyers and lenders see the full value of your business.
Example: A local café owner lacked clear separation between personal and business expenses, causing confusion during buyer evaluations and leading to deal withdrawals.
Actionable Advice: Maintain meticulous financial records, including profit and loss statements, balance sheets, and tax returns—and ensure that these documents are consistent and aligned. Mismatches between internal financials and tax filings can quickly erode buyer trust. Engage a certified public accountant (CPA) or a qualified financial advisor to help clean up your books and verify that what’s on the tax returns accurately reflects your business’s true performance. Clean, consistent.
4. Choosing the Wrong Broker
While many business owners seek help from brokers to navigate the sale process, choosing the wrong broker can do more harm than good. One important thing to understand is that many people who call themselves business brokers are not truly certified or experienced in the field. Unlike real estate professionals who must undergo rigorous exams and certifications, becoming a business broker in many places simply requires holding a real estate license. There is no standardized certification or required training for business brokerage, which means anyone with a license can call themselves a broker.
In my experience, many business brokers lack hands-on experience running a business, financial expertise, or even a clear understanding of how to properly value and position a business for sale. As with anything in life, it’s important to be selective. Make sure the broker you choose has relevant experience, a track record of successful deals in your industry, and the knowledge to guide you through complex negotiations.
One of the best pieces of advice I’ve ever received from a mentor is this: "You do business with people you like." Chemistry and trust matter. If you don’t feel comfortable with the broker, if there’s a lack of transparency, or if something feels off—trust your instincts. Meet with the broker in person. It still surprises me how many sellers never meet their broker until buyers are brought to the table. If you're going to trust someone to help sell your business—possibly worth millions of dollars—you should absolutely know who that person is.
Choose wisely, and don’t be afraid to walk away from red flags. Your business deserves the right representation.
Example: A San Diego business owner worked with a broker who had little experience in their industry and lacked the necessary financial background. The broker overvalued the business, failed to attract qualified buyers, and mishandled negotiations. As a result, the business sat on the market for over a year and ultimately sold for less than its actual value—after the seller had already moved on emotionally and operationally.
Actionable Advice: Before selecting a broker, do your homework. Ask for references, review their past deals, and make sure they have specific experience in your industry. Don’t be afraid to interview multiple brokers and trust your gut—chemistry, transparency, and trust are just as important as qualifications. Most importantly, meet with your broker in person before making any commitments. A good broker should be your strategic partner, not just someone looking to close a deal.
5. Telling Employees or Customers Too Early
Premature disclosure of a pending sale can create uncertainty, leading to employee turnover and customer attrition. It's very important to maintain confidentiality with employees because at the end of the day, a buyer isn’t just buying the assets or cash flow—they are buying the business as a whole, including the team that keeps it running.
When buyers purchase a business, they want an operation that is stable, profitable, and functional. The team is extremely valuable because they have experience, knowledge, and they are the ones who keep everything operating smoothly.
When you inform employees ahead of time about a possible sale, you create unnecessary risk. Employees may start to fear for their livelihood or future career, assuming the business is struggling or fearing changes with a new owner. In some cases, key employees might even feel entitled to own the business themselves, which can cause friction and disruption internally.
Premature disclosure can also create additional stress throughout the organization, damaging morale and productivity. And if for any reason the sale does not go through, you are left with an uncomfortable situation: the employees know you were planning to sell, and trust may be permanently affected.
Furthermore, employees may worry about whether they’ll be kept on by the new owner, whether the culture will change, or whether the business will be absorbed into a larger company. This uncertainty can drive talented people to start looking for new jobs—before anything has even changed.
Because of these risks, it's crucial to have a clear, strategic communication plan. Do not reveal the sale prematurely. When the time comes, explain the situation calmly and thoroughly, answering potential questions before fear has a chance to take hold. Provide reassurance, and highlight the opportunities for stability and growth under new ownership.
Example: A San Diego gym owner informed staff about the sale early in the process. Rumors spread quickly, key trainers resigned, and membership cancellations spiked. As a result, the gym’s financial performance dropped right before the sale was finalized, forcing a renegotiation at a lower price.
Actionable Advice: Maintain confidentiality until the sale is very close to completion or fully finalized. Develop a thoughtful communication plan to address employees' concerns directly and honestly. Deliver the news with clear answers about the future to maintain morale and confidence during the transition.
Want to know what other mistakes might cost you thousands—or your whole deal?
Part 2 of this series is coming soon. We'll cover mistakes around buyer screening, pricing, and post-sale planning.
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