As a business owner, it can be challenging to confront some of the potential issues that could lower your business’s value. However, many factors that impact valuation are often overlooked—sometimes until it’s too late. To avoid leaving money on the table in a future sale, here are five hidden factors that could be lowering your business’s value, with actionable steps to address them before it’s time to sell.
1. You’re Not Fixing Important Problems
During due diligence, buyers will uncover problems. Every business has issues, and if not properly handled, these can lead to lower offers in the future.
One common issue is customer concentration—If one customer accounts for more than 20% of your revenue, it will raise a red flag with buyers. Other problems may include outdated systems and processes, legal liabilities, or underperforming products or services.
Action Item: Identify the top five problems in your business. Develop and execute a plan to fix these issues before bringing your company to market. Buyers will appreciate that you are actively working to resolve key issues, which will give them more confidence in the long-term stability of your business.
2. Your Business Is Too Reliant on You
Many business owners play such a pivotal role in their operations that the business becomes inseparable from them. This is a major risk for buyers, who typically want an investment, not a job. If the business cannot function without your day-to-day involvement, it can be difficult to convince potential buyers that the company will continue to thrive after your departure.
Action Item: Hire a capable manager or leadership team who can handle most of your responsibilities. This will make the business more attractive to buyers by showing that it can operate independently of you, ensuring its long-term success.
3. You’re Waiting Too Long to Sell
Timing is everything when selling your business. Many owners make the mistake of waiting for the “perfect” moment to sell—often when they believe their company is at its peak. However, market conditions can shift, and business fortunes can change quickly. Buyers are more willing to pay a premium for a company on a positive growth trajectory. If you wait too long and growth stalls, you may miss your opportunity to sell at the highest possible value.
Action Item: If your business is performing well and current valuations meet your expectations, it may be time to start the selling process. If you have personal reasons to sell (such as retirement or health concerns), don’t wait for a perfect moment that may never come. Selling while your business is healthy and growing is the best way to maximize value.
4. You Have Unreliable Financials
Incomplete or inconsistent financial records are a deal-breaker for many potential buyers. Professional, CPA-prepared financial statements help you build credibility with buyers while expediting the due diligence process, which can lead to a faster and more favorable sale outcome.
Action Item: Hire a CPA firm to prepare audited financial statements. This will make your financials clear, reliable, and more attractive to buyers, increasing both the perceived value of your business and the speed of the sale.
5. You Try Doing Everything Yourself
A successful business exit requires specialized legal, financial, and M&A expertise. Without the right advisors, you risk undervaluing your business or making costly mistakes in the sale process. An experienced investment banker can help manage the bidding process, connect you with buyers, and maximize your company’s value.
Action Item: Engage an experienced M&A advisor or investment banking firm with a strong track record in selling businesses like yours. They will guide you through every step of the process, ensuring that your business receives the best possible offer.
If you’re considering selling your business, addressing these hidden factors beforehand can significantly boost your company’s value. Failing to fix important problems, relying too much on yourself, waiting too long to sell, having unreliable financials, or trying to handle the sale process alone can all lead to a lower valuation—or even prevent the sale altogether. By taking proactive steps, you’ll ensure that your business is in the best possible position to attract serious buyers and achieve the highest price. Ready to sell? Contact ACT Capital Advisors today for a free, no-obligation consultation, and let’s start the process of maximizing your business’s value.
Ready to sell? Contact ACT Capital Advisors today for a free, no-obligation consultation, and let’s start the process of maximizing your business’s value.
About ACT Capital Advisors
ACT Capital Advisors is a premier mergers & and acquisitions firm representing lower-middle-market companies across all industries. ACT has a 40-year history of deal-making, closing 250+ transactions, and unlocking over $2.5 billion in wealth for its clients. For more information, visit https://actcapitaladvisors.com.