Twelve mistakes that can cut the price when you sell
The most expensive mistakes usually happen before any offer arrives: too little preparation, unclear expectations and contract decisions taken without comparing alternatives.
1. Starting when you already want to be out
When the decision to sell is driven by exhaustion, ill health or a falling-out between shareholders, urgency cuts the time available to prepare the business and compare options.
Buyers notice time pressure and reflect it in the price, the terms or the pace of the process.
Consequence: less time to line up alternatives, fix risks and use structures or reliefs that have qualifying periods.
2. Confusing enterprise value with what you receive
An indication of £4m may refer to enterprise value, not to what the shareholders will be paid. Debt, cash, working capital and other agreed adjustments sit between the two. Our guide to net debt and equity value walks through the bridge.
It is a communication error rather than a calculation error, but it shapes every decision after it, because it sets an expectation that is then missed.
Consequence: the wrong figure in your head, which can stall the negotiation once debt, working capital, tax and other adjustments appear.
3. Only one buyer in the room
With a single interested party there is no competitive reference point. You can accept, reject or negotiate on one basis only.
It happens most when a buyer approaches out of the blue, often a competitor, and talks move forward without looking at anyone else. Speed has value, but weigh it against the loss of alternatives and of market information.
Consequence: nothing to compare price, terms, certainty of completion and the buyer's plans for the business against.
4. Granting exclusivity too early
Heads of terms usually give the buyer exclusivity for a set period, typically four to eight weeks on an SME deal. From that point you cannot talk to other buyers while they complete due diligence.
If the scope, the timetable or the assumptions behind the offer are vague, any finding can reopen the price at a point where you have fewer options.
How to limit it: a short exclusivity period, the key terms pinned down before you sign, and a dated due diligence timetable.
5. Not reading the tail clause in the engagement letter
Most engagement letters include a tail clause: if you complete a deal with a party the adviser introduced within a set period after the engagement ends, the success fee is still payable.
The period should be proportionate to the deal and to what the adviser actually did. Some letters combine a long tail with a definition of "introduced" so wide that it covers anyone who received a teaser. That can mean paying a full fee two years later on a deal you found and ran yourself.
Consequence: a success fee on a later deal even where the adviser's role in it is doubtful. Our guide to M&A adviser fees covers the wording to ask for.
6. Selling off a falling year
Buyers look at the historical trend and give more weight to the latest period. A dip, even with a good explanation, raises doubts about sustainable profit.
Before you start, work out whether the fall is temporary or structural, and prepare evidence to support your forecasts, order book and corrective actions.
Consequence: a more cautious valuation, extra conditions, or an average of several years if the buyer thinks the decline could continue.
7. Treating an earn-out as money in the bank
Consideration linked to future results is not cash at completion. The buyer may change strategy, integrate the business or change how costs are allocated, and the target may stop being measured on the same basis unless the share purchase agreement says otherwise.
If there is an earn-out, the detail to negotiate is the definition rather than the headline amount: which metric, calculated how, by whom, what happens if the business is restructured, and how much control you keep to hit it.
Consequence: a real gap between the price announced and the amount you finally receive, plus room for disputes over the calculation.
8. Hiding a known problem
An employment claim, an open HMRC enquiry or the likely loss of a customer should be assessed and disclosed at the right time and to the right extent.
If something material surfaces late, the buyer reassesses its financial impact and also the reliability of everything else you have told them. Under an English law share purchase agreement, a matter fairly disclosed in the disclosure letter generally cannot found a warranty claim; a matter you hid can.
Consequence: the cost of the problem itself plus a much more sceptical review of the rest of the information.
9. Taking your eye off the business
A sale takes far more time than anyone expects, and the seller is usually the person the business depends on most, which is the original problem.
If results fall during the process, the buyer will revisit the valuation and the forecasts with the new numbers. A trading dip can hurt as much as a due diligence finding.
How to limit it: let your adviser carry as much of the workload as possible, and block out fixed time each week for the sale instead of handling it in interruptions.
10. Leaving tax to the end
If your tax adviser arrives in the month of signing, the deal structure may already be fixed and some options may no longer meet their conditions or deadlines. Business Asset Disposal Relief, for example, generally requires you to have held at least 5% of the shares and been an officer or employee for two years before the sale.
The difference between structures can be material, but starting early does not guarantee a saving: each option has its own conditions, costs and risks. Our guide to tax on selling a business sets out the main points.
Consequence: a less efficient structure, or a tax risk that can no longer be fixed without affecting the price or the timetable.
11. Accepting the first offer because it looks good
If the first offer is above what you expected, you still need to test what it is based on, how it is paid, its conditions and how certain it is to complete. A high first number does not prove there is nothing more on the table.
You do not have to turn it down. Keep the analysis open until you have compared it with the other credible parties, or recorded why there are none.
12. Not agreeing your post-completion role in writing
Many deals include a handover period or a longer role for the seller. If duration, time commitment, duties, reporting line, pay and termination are not written down, the risk of a dispute after completion goes up.
These terms need to be coordinated with any deferred or earn-out payments before control of the company changes hands. Good leaver and bad leaver definitions deserve particular care.
Frequently asked questions
Which mistake should I deal with first?
Lack of time makes most of the others worse. An early review lets you prioritise information, dependencies, tax and alternatives before the first approach.
Which mistake tends to cost the most?
Negotiating with only one buyer can be especially costly, because it removes any comparison. Once the deal completes, you can never know what a real alternative would have offered.
Can I fix a mistake halfway through?
Some of them. You can widen the process to more buyers once exclusivity has expired, renegotiate an earn-out before the share purchase agreement is signed, and consider withdrawing with advice on your obligations. What you cannot recover is preparation time that was never spent.
