Making the decision to sell a business

When you are looking to make the decision to sell a business, it is important that you are completely committed to making the exit before you enter the market. That means that you need to get all of the right people on the bus. So, if there is more than one person involved in the ownership or decision making of the company you need to make the decision unanimously.

The reason for this is because when you enter the market, you need to have the commitment that you will sell when it is time to sell. A company is set up with a board of directors, shareholders and a management team. Each of these roles are important because they have a key decision making point somewhere along the path. If those members are not all on board with the deal when the time comes for them to perform they could be detrimental to the success of the transaction.

If a buyer spends the time and money to investigate your company and perform the due diligence necessary to make the acquisition, and then you back out because you are just not ready to let go, then you may lose interest years later when you really are ready to sell. You don’t want to burn those bridges that you will need to cross later. It is also important that you prepare your company to sell by getting all of the skeletons out of the closet and that there are no issues that will scare away an investor.

When a company begins the due diligence phase, all of the little issues the owners thought they would be able to hide come out. One example is a client who had a few key employees that were living in the country illegally. The company’s legal advisors recommended they keep the matters secret in hopes that the issues would be resolved prior to a sell, but they weren’t.

Once the acquiring firm found the issues it backed away from the deal and never looked back. If the company would have worked out the issue prior to going to market, or even brought the matters to our attention we could have helped resolve the problem.

Why Full Stakeholder Alignment Is Non-Negotiable

Many business owners underestimate how many distinct parties must actively support a sale. Beyond the principal owner, a typical middle-market transaction draws in co-founders, minority shareholders, family members with informal authority, and a board with fiduciary duties. Any one of these voices can derail a deal mid-stream—and mid-stream is the worst possible time.

A useful discipline before signing a listing agreement is to hold a formal “commitment meeting” with every stakeholder who holds a vote or meaningful influence. The agenda should answer three questions: Are we all committed to selling? What price range is acceptable to each of us? What timeline works? Documenting the answers—even informally—creates a reference point that prevents revisionist memory once an offer arrives.

Preparing the Business: Closing the Closet Before Opening the Door

Resolving issues before going to market is not just good housekeeping—it is a valuation strategy. Buyers conducting due diligence will surface every material risk, and each one discovered becomes leverage for a price reduction or a deal-killer. Issues resolved beforehand simply do not appear in the diligence report.

Common pre-market items to address include:

• Legal and regulatory compliance — employment eligibility, licensing, permits, and any pending or threatened litigation.
• Financial statement quality — normalizing owner compensation, removing personal expenses run through the business, and reconciling any gaps between tax returns and management accounts.
• Customer and vendor concentration — if one customer represents a dominant share of revenue, buyers will apply a risk discount. Diversifying before listing protects value.
• Key-person dependency — demonstrating that the business runs without the owner’s daily involvement broadens the buyer pool and supports higher multiples.

Owners who address these items early often discover that the preparation process itself increases the company’s value—a welcome side effect of discipline.

Timing the Decision: Market Conditions and Personal Readiness

The best time to sell is when both personal readiness and market conditions align. Sellers who enter the market prematurely—before they have emotionally accepted the exit—frequently introduce friction at precisely the moments a deal requires momentum: accepting an LOI, releasing sensitive financials in a virtual data room, or signing a purchase agreement. Conversely, waiting too long often means selling into deteriorating EBITDA trends or a tighter credit environment.

Reviewing your business’s trailing three years of revenue and margin growth alongside your personal financial plan can help pinpoint the right window. Working with an advisor who handles sell-side preparation can sharpen that analysis considerably, because advisors see market pricing in real time while owners typically see it only once.

Building the Right Internal and External Team

A successful exit requires a coordinated internal team—management, finance, and legal—plus experienced external advisors: an investment banker to manage the process and buyer outreach, a transaction attorney to negotiate and document the deal, and a tax advisor to structure the transaction tax-efficiently from the outset. Assembling this team before going to market, rather than reactively as milestones arise, keeps the process on schedule and signals seriousness to buyers.

For a deeper perspective on why representation matters, see our discussion of whether a sell-side advisor is an extra expense or a critical team member—the answer, in virtually every competitive process, is the latter.

Frequently Asked Questions

How do I know when I am truly ready to sell my business?

Readiness has two dimensions: financial and emotional. Financially, you should be confident the business can run without you for at least 90 days, that your financials are clean and defensible, and that the proceeds—net of tax—will meet your personal goals. Emotionally, you should be prepared to hand over the keys and support a transition rather than second-guess the new owner. If both conditions are met, you are likely ready.

What happens if a co-owner or board member objects during the sale process?

An objecting stakeholder can block or derail a deal at any stage. If a shareholder agreement does not include drag-along rights that compel minority holders to sell alongside a majority, the buyer may have no obligation to proceed. This is why resolving internal alignment before entering the market is essential—not after a buyer has been identified and emotions are running high.

How far in advance should I begin preparing to sell?

Most advisors recommend beginning preparation 12 to 24 months before the target close date. That window allows time to resolve legal and compliance issues, improve financial presentation, reduce customer concentration, and build management depth—all of which meaningfully affect valuation. If you are considering starting the process, preparing a transaction overview is a practical first step.

What is the biggest mistake sellers make when entering the market unprepared?

The most damaging mistake is allowing a buyer to discover a material issue during diligence that the seller already knew about. It destroys trust, invites aggressive price re-trading, and sometimes kills deals that would otherwise have closed. Transparency—delivered proactively through your advisor—is almost always the better strategy, because it preserves goodwill and demonstrates management credibility at a critical moment.