7 Common Mistakes made by Entrepreneurs During an Exit Strategy

Here are a few common mistakes that I have seen entrepreneurs and business owners make during the sell or acquisition of their business:

1. Provide misleading information: When they sit down with an investment banker or strategic acquirer during the first discussions, they begin to provide information that makes the business look more attractive than it really is. While it is important to increase the value of your business, it is also important to provide information that is accurate and not misleading.
2. Not knowing the numbers: Providing a banker with misleading or inaccurate numbers of expenses and personal salaries that are higher than the market rate for the position the owners fill sets the deal terms and structure in the wrong direction. Once the business is under due diligence by a buyer the figures will be discovered and the deal will have to reenter negotiations. This could cause the deal to fall apart.
3. Hiding illegal business activity: Again, all of the dirty points in your business will be discovered during the due diligence phase of an acquisition. It is much better to get the skeleton out of the closet dealt with before a buyer comes. Deals will fall apart if they are discovered later.
4. Not accepting a good offer: Holding off on a good offer in hopes that another company or buyer will make a better offer may cause the buyer to get anxious and walk away from the deal. If you have an offer that you would be happy accepting if it was the only offer you could get, then why wait?
5. Being too optimistic: While it is good for a business owner to see potential in his or her business, it is more important for that person to be realistic during an M&A deal. Having too high of expectations can cause the owner to miss out on a good opportunity.
6. Negotiating his or her own deal: Just like the example with a car salesman, it is important to not let emotions get in the way of closing a good deal with a strong offer. Let a banker or board member assist you in the negotiations of the deal terms.
7. Wait till he or she needs to sell: Waiting until an emergency or lack of commitment and capacity demands that you sell will make you a motivated seller. This means that some shark will come along and take advantage of your situation and make a profit during your loss.

Why These Mistakes Are So Costly

Each of the seven mistakes above reflects a pattern: emotional decision-making substituting for disciplined process. M&A transactions are among the most consequential financial events in an entrepreneur’s life, yet they are often pursued with far less preparation than the business itself received in its early years. Understanding the structural mechanics of an exit—and where human psychology introduces risk—gives sellers a meaningful edge.

Buyers, particularly private capital sponsors and strategic acquirers with active deal pipelines, are sophisticated repeat players. They have seen every version of optimistic projections and cleaned-up books. The information asymmetry that sellers believe they hold rarely survives a thorough due diligence process. Attempting to obscure problems only delays—and usually amplifies—the inevitable reckoning, typically in the form of price chips, escrow holdbacks, or outright deal termination.

The Danger of Going It Alone

Mistake number six—negotiating your own deal—deserves particular emphasis. Business owners are accustomed to being the most capable person in the room when it comes to their industry. That confidence, which served them well building the company, becomes a liability at the negotiating table. Deal terms extend well beyond price: representations and warranties, indemnification caps, earnout structures, non-compete scope and duration, and working-capital adjustments all carry economic consequences that can materially change effective proceeds.

Experienced sell-side advisors bring market context (what comparable transactions looked like), negotiating leverage (competitive tension among multiple bidders), and emotional insulation (they are not attached to the business the way the founder is). Exploring sell-side preparation workflows before entering the market helps sellers understand what professional representation actually looks like in practice.

The Timing Mistake: Selling Under Duress

Of all seven mistakes, selling under duress may be the most financially damaging. A motivated seller—one who must transact quickly due to health issues, a partnership dispute, a maturing loan, or simple burnout—signals weakness to every buyer who engages. Buyers probe for urgency and adjust their offers accordingly. The seller who “needs” a deal rarely achieves the valuation their business merits on fundamentals.

The antidote is planning. Entrepreneurs who begin thinking about exit alternatives two to three years before they want to transact can make strategic investments in the business—cleaning up financials, reducing customer concentration, building management depth, and growing recurring revenue—that directly improve exit multiples. Reading about when is the best time to pursue an exit strategy can help frame that planning horizon. Similarly, reviewing the top value drivers in exit valuations helps owners invest their final pre-sale years in the areas buyers actually pay for.

Preparing Before You Need To

The most successful exits are treated as a process, not an event. Sellers who invest in preparation—understanding their financial story, knowing their numbers cold, and engaging qualified advisors early—consistently achieve better outcomes than those who approach the market reactively. If you are beginning to think seriously about an ownership transition, starting the transaction preparation process with a structured framework is the most practical first step.

Frequently Asked Questions

How early should I start preparing for a business sale?

Most advisors recommend beginning serious exit preparation two to three years before you want to close a transaction. That window gives you time to address operational weaknesses, clean up financial records, and build the management depth that buyers pay premium multiples for.

What happens if problems are discovered during due diligence?

Discovery of undisclosed issues mid-diligence almost always results in one of three outcomes: a price reduction, a structured indemnification holdback, or deal termination. Disclosing issues proactively before the process begins—and ideally resolving them—consistently produces better outcomes than hoping problems go unnoticed.

Is it always a mistake to negotiate your own deal?

For most business owners, yes. The emotional investment in the business, combined with limited M&A negotiation experience, typically costs more in suboptimal deal terms than the advisory fees saved. The exception might be a very small transaction between parties with a long-standing relationship and aligned interests—but even then, legal counsel should be engaged.

How do buyers assess whether a seller is motivated to transact quickly?

Experienced buyers look for signals: unsolicited outreach directly from the owner (not a banker), compressed timelines, thin management teams with no obvious successor, and financial trends that suggest the business is past its peak. Controlling these signals—and running a properly structured process through advisors—limits the information buyers can use against you.