The mistakes owners make when selling a business
These are the things that go wrong, in the order they tend to happen, from the first conversation to the day after closing. Each one has a fix, and most of the fixes come down to order.
The costliest mistakes in selling a business are decisions made in the wrong order. Owners tell someone before they know the value, or go to market before a year of preparation. Others apply an American EBITDA multiple to owner operated earnings, or sign a letter of intent that leaves the structure and working capital for later.
Telling someone before knowing anything
The owner books a meeting, which is the first step at most brokerages and advisory firms, and tells a stranger they are thinking of selling. They leave with little they can act on, and from then on one more person knows.
Find out where you stand first. The free Quick AI valuation gives an anonymous early range from your website and revenue band, and you can decide whom to tell once you have it. It tells you what businesses of your industry and size usually sell for, the part an online valuation calculator gets right.
Deciding to sell and going to market the same season
Buyers price the last two or three years of statements. The lifetime capital gains exemption, which shelters $1,275,000 of gain in 2026, also requires the shares to pass tests over the 24 months before the sale.
An owner who decides in the spring and goes to market in the summer sells the business as it was. That owner may also forfeit the exemption that two years of planning would have secured.
Give the sale a year of lead time, and spend it on preparing the business for sale.
Applying the wrong multiple
An owner reads that businesses in their industry sell for six times earnings and applies that to their own profit. The figure came from American companies ten times the size, priced on EBITDA, which is earnings before interest, tax, depreciation and amortisation. The owner then holds out for a price that every buyer here declines.
The profit they used was also struck before adding back their own salary. Ask which earnings figure a multiple applies to, and at what size of business. SDE or EBITDA explains the difference, and the ranges Canadian buyers pay by industry give the local figure.
Listing it by name
The owner lists the business by name, or with enough detail for the trade to work out whose it is. The listing reaches staff and competitors before it reaches a buyer. Staff start looking elsewhere and customers hedge, and the buyer who eventually arrives sees the result in the numbers.
Show buyers an anonymous profile first, and release the name to one buyer at a time after a non-disclosure agreement and your approval. Selling a business privately walks through the steps.
Taking the first offer because it is the only one
The owner accepts the one letter that arrived. One offer is a number and two are a market, and the buyer who wrote unprompted priced the letter knowing it was the only one on the table. Two more buyers approached quietly over a month would have confirmed even a good first offer or improved it.
If a letter has arrived, what to do with an offer for your business takes it question by question.
Reading the price and skipping the terms
Take two offers of $3 million. One pays cash at closing for the shares, and the other buys the assets with $1 million on an earnout the buyer controls. After tax and after time they can differ by more than $1 million, and the owner who read only the headline picks the wrong one.
Compare offers on what reaches your account, after tax and after time. The pieces on earnouts, vendor financing and working capital each trace one way money leaves the headline, and the Net proceeds tool works the sum from the headline down.
Signing the letter of intent with the decisions deferred
The letter of intent is the point of maximum leverage, because after it there is one buyer and a deadline. An owner who signs one with the structure and the earnout terms left for the purchase agreement, along with the working capital target, negotiates them later from the weaker side.
Settle every term you can before signing. Reading a letter of intent goes through it clause by clause. Terms left open there are a common reason a business sale falls through later, the working capital target and the holdback most of all.
Letting the business coast during the sale
A sale is a second job for the six to ten months it usually takes, and the first job suffers. Revenue dips in the months before closing, and the buyer, who watches the monthly figures during diligence, lowers the price.
Keep running the business exactly as you did before the sale began. That is one of the strongest arguments for having someone else run the sale.
Collecting the receivables and emptying the shelves
An owner who is leaving takes the cash out by chasing every invoice and letting the stock run down. The working capital on the closing date then comes in below the target agreed with the buyer, and the shortfall comes off the price. The owner has moved money from one pocket to the other and then handed it back.
Keep collecting and buying at the usual pace until closing. How the working capital target is set explains the adjustment.
Leaving the day after closing
The owner hands over the keys and leaves. Staff and customers need to see the old owner working for the new one before they trust the buyer, and the buyer needs that handover too.
Almost every deal includes a transition period, and it carries real weight. Serve it in full, because the owner who honours it is the one whose earnout gets paid and whose note gets serviced. What happens to your employees covers what the staff need to see in those months.
The ten mistakes at a glance
| Mistake | What it costs | The fix |
|---|---|---|
| Telling someone before knowing the value | One more person knows, and the owner has learned little | Get an anonymous range first |
| Going to market the same season | A price on last year’s numbers, and possibly the capital gains exemption | Allow a year of preparation |
| Applying the wrong multiple | A price expectation that every buyer declines | Apply a Canadian range to the right earnings figure |
| Listing by name | Staff leave and customers hedge before a buyer arrives | Show an anonymous profile and release the name after an NDA |
| Taking the only offer | A price set for an owner holding one letter | Approach two more buyers quietly over a month |
| Reading the price and skipping the terms | A gap of more than $1 million between equal headlines | Compare what reaches your account after tax |
| Signing the letter of intent with decisions deferred | Key terms negotiated from the weaker side | Settle the structure and earnout terms before signing |
| Letting the business coast | A lower price once the buyer sees the monthly dip | Run the business as before until closing |
| Collecting receivables and running down stock | A working capital shortfall taken off the price | Keep collecting and buying at the usual pace |
| Leaving the day after closing | Earnout and note payments put at risk | Serve the full transition period |
What they have in common
Nearly all of these are decisions made in the wrong order. The owner tells people before knowing the value, and signs before settling the terms. Following the sale process in the right order prevents most of them.
Questions owners ask
- What is the biggest mistake when selling a business?
- The biggest is going to market before finding out what the business is worth and what a year of preparation would change. Most other mistakes follow from it, including the wrong price or buyer, and a tax exemption lost because the 24 month clock started too late.
- Why do so many business sales fall through?
- Most fall through in due diligence, when the buyer finds something the documents left out. Statements that disagree with the tax returns and a lease about to expire are common causes. So are a customer who brings in most of the revenue and financing the buyer had assumed rather than arranged. Nearly all of these are visible a year in advance.
- Should I keep running the business normally during the sale?
- Keep running it exactly as before. Buyers watch the monthly figures during diligence and reprice on any dip. Collecting receivables hard or running down inventory before closing moves money out of the business, and the working capital adjustment takes it back off the price.