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The Hidden Pitfalls Of Selling A Business

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Opinion piece by Keith Hardington, Director, Head of Company and Commercial Law at Walker Foster

If you are preparing to sell your business, there are critical considerations to make and common mistakes that must be avoided to guarantee a smooth and successful transaction.

This guide explains how to avoid the most common business sale pitfalls to maximise your eventual payout.

Confidentiality breaches

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When you commence the process of selling a business, maintaining strict confidentiality and securing sensitive information is absolutely necessary. If confidential details about the sale (such as price, buyer identity, or the fact that the business is for sale at all), should leak to your staff, competitors or suppliers, it can seriously unsettle the people who keep the business running. This uncertainty often leads to staff turnover, strained supplier relations, or aggressive moves by competitors.

Furthermore, a breach can severely weaken your negotiating position with potential buyers, who may lose faith in your professionalism. Once trust is damaged, it becomes significantly harder to negotiate favourable terms, and you may find that serious interest in the sale drops away far sooner than expected, potentially collapsing the entire deal.

Not consulting professionals

While selling a business without professional assistance is technically possible, the inherent complexity of the transaction, coupled with the high stakes involved, makes using a business sale solicitor (and often an accountant or broker) strongly advised. These dedicated legal experts have the comprehensive, up-to-date knowledge of commercial law and transaction procedures required to guide you through the lengthy process.

Critically, they help structure the deal correctly, handle detailed due diligence, negotiate favourable terms and mitigate risks, ultimately helping you to achieve the optimal outcome and protecting your interests long after the sale is complete.

Misrepresentation to the buyer

It is natural and expected that you want to present your business in the most positive and appealing light to potential buyers. The issue arises, however, when this enthusiasm turns into misleading exaggeration, or when you deliberately leave out important financial or operational details that a buyer would reasonably expect to know before proceeding.

If the buyer later discovers, often during the thorough due diligence stage, that something doesn’t match what they were initially told, frustration and distrust are inevitable. This breach of confidence can severely damage the relationship and lead to serious consequences, including costly renegotiations, significantly reduced offers, or even the collapse of the deal altogether.

Accepting vague heads of terms

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The Letter of Intent (heads of terms) is much more than a preliminary document; it sets the fundamental tone and framework for all subsequent negotiations. If the terms outlined in the heads of terms are vague, ambiguous, or incomplete, it grants both the buyer and seller far too much room to argue over critical points that should have been definitively settled early in the process. Loose wording, missing conditional clauses, or unclear expectations regarding warranties, liabilities, or working capital open the door to time-consuming, costly disputes during the due diligence phase.

Establishing clear and detailed terms from the absolute outset is therefore necessary to build a solid foundation, prevent confusion, and help to keep the transaction moving efficiently toward the completion of the sale.

Unrealistic pricing

If your price expectations are set far above the current market value, qualified buyers may not even enter negotiations, leading to long delays and potentially damaging your business’s reputation as “unsaleable”. To prevent this pitfall, obtaining an independent, professional business valuation provides a realistic and defensible benchmark for the asking price. This strategy helps you avoid overpricing that stalls the entire process, or conversely, underpricing that leaves a significant amount of money on the table.

Disorganised record keeping

Buyers rely on accurate, accessible information to make informed decisions and validate the value you claim. If your financial and operational records are incomplete, outdated, or difficult to follow, it immediately raises serious questions about the competence of management and how reliably the business has been run.

Clear, meticulously organised accounts, contracts, and comprehensive operational information are essential for making the due diligence stage run smoothly and for building vital confidence in the sale. Without this level of preparation and transparency, delays will mount and doubts will grow quickly, often leading to price chipping or even the collapse of the deal.

Lack of preparation

Selling a business involves far more than finding someone willing to buy. If you come into the process unprepared, issues surface later that could have been handled earlier. Preparing financial records, tidying operational processes, and addressing any weaknesses helps keep negotiations on track. Taking the time to prepare properly gives you a stronger position and a more streamlined sale journey.

As we’ve covered, preparation is power. By diligently steering clear of these common business sale pitfalls, you solidify your chances of achieving a successful sale that not only reaches completion but goes precisely as you intended.