6 Mistakes Founders Should Avoid Making Before Selling their Business

Selling a company is rarely straightforward, and even experienced founders can make avoidable missteps which can have a knock-on effect on valuation, leverage, or deal certainty. Here are some of the most common ones which all company owners should be aware of as they make plans for an exit.

We’ve previously discussed the tell-tale signs that it’s the optimal time to sell, and you should start making your company deal-ready as soon as these signs start to align. 

Many company owners underestimate what’s involved in the M&A process, and the sheer amount of prep required. Bear in mind that financial records may need cleaning up, customer contracts may be disorganized, internal reporting may lack consistency, and important legal documentation around shares and intellectual property may still be incomplete. 

The company as it stands may also be too dependant on you and/or other senior executives. If every major customer relationship, strategic decision, or operational process relies on a few select people, buyers will often perceive this as risk. You may need time to make the company transition-ready by developing a more robust leadership team, formalising key relationships and ensuring that knowledge is embedded within the wider business.

Selling a company encompasses a great deal of legal, financial, tax, and strategic complexity. As the company owner, you should remain deeply engaged while allowing the right experts (corporate lawyers, accountants, experienced tech industry dealmakers) to steer you through the high-pressure M&A process.

Not having the right team around you can slow or even derail the whole process. When it comes to selecting an M&A advisory firm, you should assess the depth of their experience in your tech sector, and whether they have well-established relationships with a network of strategic and financial acquirers. You can read more about the criteria for choosing an M&A advisor here. 

A major mistake is becoming emotionally attached to one particular potential buyer too early in the process. A buyer may quickly recognise they’ve been singled out as a “favourite”, which will shift the balance of power in their favour, and can lead to lower valuations, weaker deal terms, and time-consuming renegotiations later on.

To avoid this and maintain your leverage, you should cultivate competitive tension by speaking with multiple potential buyers (this is where an M&A advisory firm with a large network can be invaluable). You should also avoid granting exclusivity to one player for so long that it slackens transaction momentum. 

While an exclusivity period is normal and expected, it immediately gives a buyer substantial negotiating leverage since you’ll be temporarily unable to pursue alternative offers. Some buyers intentionally use exclusivity periods to slow the process down or renegotiate valuation after the founder has become psychologically committed to the transaction. 

It’s therefore important to take a hard-headed approach during this phase, pushing for momentum and avoiding giving buyers unlimited time to reassess the deal. Again, guidance from an experienced M&A advisor can make a real difference here.

It’s all too easy for a founder to become excessively distracted by a headline valuation, and overlook the structure of the transaction itself. The fact is that two deals with identical valuations can produce dramatically different financial outcomes, with earnouts, escrow holdbacks, working capital adjustments, rollover equity and employment agreements all shaping how much money a founder actually receives and how much risk remains after closing. 

A savvy company owner should evaluate not only the purchase price, but also how much is paid upfront, what conditions apply to future payments, and whether post-close targets are realistically achievable.

Between legal negotiations, management presentations, diligence requests, financial reviews and frequent communication with advisors, it can become very easy for a company owner to “mentally exit” their business long before the transaction actually concludes.

This can negatively impact sales targets, client and customer relationships, and team morale, undercutting the very metrics which made your business an appealing acquisition target in the first place. 

Remember that if revenue softens, growth slows, or operational issues emerge, buyers may leverage these changes to renegotiate valuation, push for additional protections, or delay the transaction altogether. This may be entirely justified on their part, since a business which loses momentum during this period can look materially different from the company the buyer originally agreed to acquire. It’s therefore important to maintain focus on day-to-day operations over the many months that a transaction can require.

There’s no getting away from the fact that the M&A process can be psychologically “full on”, particularly during the due diligence phase when a potential buyer will interrogate every aspect of your company. All the work you’ve put into creating your business will be put under the microscope, and reacting emotionally to such scrutiny can undercut your position in negotiations.

That’s why it’s crucial to not take diligence personally. In practice this means answering questions in a pragmatic way, avoiding the temptation to make impulsive and over-generous concessions, and remaining calm and process-focused. Having an experienced M&A advisory firm in your corner can help reduce the emotional pressure that naturally comes with a transaction process, and provide the strategic perspective needed to avoid reactive decision-making.

Are you considering selling your company? We’re here to guide you through every step of the process, so reach out directly to our managing partner, Dr Jan Eiben, to get the ball rolling.

You can also keep up with the latest acquisition trends by downloading our free M&A market reports. These reveal what’s really impacting major sectors such as Enterprise Software, IT & Business Services, and Healthtech, telling you what buyers are looking for and discussing significant deals. Remember to subscribe so that you’re notified whenever our newest reports are published.

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