“How do I Sell My Business?” Avoid These Mistakes

Are you leaving money on the table?

How One Owner Lost Millions on a Sale (And How You Can Avoid the Same Mistakes)

Early last year, I represented a buyer in the acquisition of an engineering maintenance business. This story is a classic example of what can go wrong when selling a business without proper planning. The deal ended up being a bargain for the buyer—a common outcome when selling businesses without proper preparation or support, and the seller did not achieve the right price for their business. We secured the company at a 2.5× earnings multiple in a market sector where businesses typically sell for 5–7× earnings.

The business was historically very profitable, generating around $1.3 million CAD per year on $5.5 million in revenue. So why did the seller walk away with far less than they could have? Because of five avoidable mistakes—and various oversights in preparing the business for sale, which ultimately impacted the business sale.

Drafting the business purchase agreement involved many factors and required careful preparation. Here’s what happened—and what you can learn from it.

Selling Your Business: The Five Mistakes That Cost the Seller Millions

1. High Customer Concentration
   With 75% of revenue tied to a single client on a 12‑month contract, buyer confidence plummeted.
   What the seller should have done: Actively pursue a contract renewal to spread risk, build a strong and diverse customer base, and manage relationships with key clients to strengthen your position when you decide to sell your business.

2. No Operational Systems—Just Chaos
   Invoicing, billable hours, tracking—all done manually in Excel. No CRM or database.
   What the seller should have done: Implement a simple CRM or database to track business assets, jobs, and invoicing—making the business smoother to transfer and more appealing to potential buyers.

3. No Clarity on Profitability by Customer or Project
   Without job costing, buyers assumed the worst.
   What the seller should have done: Use basic job-costing to highlight your most profitable customers and projects, and track financial performance by customer or project, boosting your business valuation.

4. Overly Dependent on the Owner
   The business master was a one‑person show working 80–100 hours a week.
   What the seller should have done: Delegate key responsibilities to employees, document time spent, build an experienced team, and show replacement capacity—even one subject-matter expert can make a huge valuation difference.

5. No Standard Operating Procedures (SOPs)
   With no SOPs in place, handover and transition costs soared.
   What the seller should have done: Write SOPs for core functions, document and protect intellectual property, and ensure handovers become smoother, reducing friction in the business evaluation process.

What These Mistakes Cost the Seller

These issues drove the deal multiple from 5–7× down to just 2.5× earnings, resulting in a significant loss of money. The seller was paid much less than expected. Fixing even three mistakes could’ve lifted it to 3–3.5× earnings—adding potentially millions to the payout, instead of having the business sold for less than its potential value.

Essential Steps Most Sellers Overlook

These small details help sellers maximise value in business sales and ensure the business owner maximizes the value of their business venture.

• Organise Financials & Clean Up Assets
  Make sure your financial records are ready, including gathering all relevant financial documents and recent filings. Ensure your assets are accounted for, and any disputes are resolved well before you invite interested buyers or sign an NDA.

• Understand Your Capital Gains Tax Position
  Capital gains tax can eat into your profits if left unchecked. Paying the correct taxes is essential, so explore reliefs like Business Asset Disposal Relief and other available tax reliefs, especially those designed for small business and small businesses. Engage a tax advisor early to plan strategically.

• Notify HMRC and Meet Legal Obligations
  Telling HMRC is crucial when you have stopped trading. Sole traders must inform HMRC and may need to cancel National Insurance contributions, while limited companies must update Companies House and HMRC. Partnerships require the nominated partner to complete and submit the partnership tax return to ensure proper reporting.

• Consider Working with Transfer Agents or a Business Broker
  An expert can manage buyer outreach, vet potential buyers, negotiate offers, and guide you through the negotiation process with confidence.

• Prepare Thoroughly for Due Diligence
  Keep contracts, SOPs, asset schedules, and financial disclosures well-structured. Ensure you clarify ownership structures and review all finance agreements. Transparency, including providing accounts filings and other relevant documents, speeds up sales and supports a smooth transaction.

• Choose the Right Sale Structure
  Decide whether to proceed with a share sale, asset sale, or selling the entire shareholding. Each structure has different implications for ownership transfer, liability, and tax. In a limited company sale, appointing new directors and updating official records with HMRC and Companies House is required.

Tax Implications

One of the most overlooked aspects of selling businesses is the impact of taxes on your final proceeds. If you’re not prepared, capital gains tax can take a substantial bite out of your windfall. Before signing your agreement, make sure you know how much tax you will need to pay and what reliefs you might qualify for, such as Business Asset Disposal Relief. This particular relief can dramatically reduce the tax owed, helping you retain more of the value you’ve built.

In some cases, you may also be liable to pay capital gains tax alongside National Insurance contributions, depending on your business structure and how the sale is structured. These obligations can be complex—especially when you factor in share sales, asset transfers, or deferred consideration—so it's crucial to consult a tax advisor early. They’ll help you navigate these decisions, structure the deal efficiently, and claim every relief you’re entitled to.

After the sale is complete, don’t overlook your final self-assessment tax return. It needs to include details of the transaction, your gains, and any taxes due. A solid tax plan, backed by professional guidance, won’t just reduce risk—it will help you keep more of what you’ve earned and avoid last-minute surprises.

Choosing the Right Broker or Agent

Selecting the right broker or agent can make all the difference when it comes to selling businesses successfully. An experienced broker brings a broad range of industry contacts and knows how to attract potential buyers who are serious and qualified. A key part of their role is identifying and engaging prospective buyers, ensuring that your business is presented to those most likely to be interested and capable of completing the purchase. In some cases, business transfer agents can offer similar services with a focus on handling legal and administrative aspects of the sale—especially useful for owners managing complex exits.

Look for a broker with a proven track record in your business sector, as they’ll understand the unique challenges and opportunities your business presents. It’s also important to discuss upfront fees and the level of service you’ll receive. A reputable broker will offer discreet support, guiding you through the diligence process and helping you prepare your business for sale. They’ll handle negotiations, manage interested parties, and work to achieve the best price for your business. By leveraging their expertise, you can focus on running your business while they handle the complexities of the sale process, ensuring you achieve maximum value, a smooth transition to the new owner, and the best chance of finding the right buyer for your business.

Due Diligence: Preparing for the Buyer’s Deep Dive

Transparency is key during due diligence (DD), especially in business sales where trust and clarity drive speed and success. It is crucial to have a clear understanding of the terms and documentation to prevent misunderstandings and ensure all parties are aligned. DD is when the buying party really dig into every aspect—from revenue, assets, SOPs, profitability breakdowns, and legal agreements. Clear documentation reassures potential buyers that your business is well-managed and ready for transition. A broker and solicitor can streamline this stage, reducing stress, and ensuring the business purchase agreement is airtight.

Quick Wins

Before listing your business for sale, focus on these:

1. Document your processes with SOPs – reducing transition risk.

2. Track profitability by customer/project – boost valuation clarity.

3. Implement a CRM or basic database – show operational maturity.

4. Assemble a team of advisors, staff, and transfer agents – build trust.

5. Use a non-disclosure agreement (NDA) – manage information flow securely.

6. Leverage a business broker – to reach serious buyers and maximize your sale results.

Common Questions When You’re Ready to Sell your Business

1. When is the right time to sell my business?
Timing depends on market conditions, your business performance, and personal goals. Ideally, you want to sell when revenue is stable or growing and you've addressed any red flags that could reduce your valuation.

2. What’s the first thing I should do if I want to sell my business?
Start by getting your house in order—organise financials, document SOPs, and assess dependencies. A quick audit will reveal what might hold back your sale or drive up buyer interest.

3. Should I work with a broker to sell my business?
Yes. A seasoned broker adds tremendous value when you're looking to sell your business. They manage everything from buyer outreach and vetting to negotiation and finalising the purchase agreement—helping you avoid missteps and secure the best deal.

4. How can I increase the value before I sell my business?
Focus on reducing owner dependency, documenting your operations, and improving customer diversity. Quick wins like job costing systems and a CRM can drive up your multiple significantly.

Final Thought: What’s Your Exit Strategy?

Selling your business successfully means being easy to buy. Proactive planning around operations, systems, tax, and buyer negotiations could mean the difference between a lowball offer and a significant payout.

Need expert help preparing your business for a successful exit strategy? Let’s talk.