Five common reasons that business owners sell their companies for less than maximum value

Mergers & Acquisitions -The 86 Group Texas business brokers & M&A Experts Texas

When preparing to sell a business, it is important for a business owner to know all of the intricacies and implications of not recognizing their business’s full value in a transaction. Understandably, business owners want to sell for the maximum value possible without being unrealistic.

It is important to understand the value of your business from a couple of different metrics: discounted cash flows, multiple of earnings, and a valuation based on competition. This can help you recognize the full value of your company upon the date of a closing transaction. 

Let’s break down the five most common reasons business owners sell their companies for less than maximum value.

Did not know the value

Inadequate documentation

Not having the proper financial documentation can drastically reduce the value of your business. For example, the majority of deals in this size market use the SBA to obtain funding. So, having three years of historical financial statements is imperative to the SBA recognizing the full value of your business. These can also help support the prior performance and what the future performance of the business could be.

Sold to the wrong buyer

Selling your business to the right buyer ultimately helps with the transition period and gives you the confidence that your business will be in the right hands. This is where our experienced analysts and M&A advisors strategically make sure we are presenting your business to highly qualified professionals that understand how to properly value your business. Additionally, some buyers may not be financially qualified to purchase your business or hamstrung by SBA regulations. M&A advisors look for strategic buyers who will help your business be more profitable.

Improper transaction structure

The structure of the deal is just as important as the actual number of the deal. Factors like tax consequences, stock vs. asset sale, and the deal structure are critical to obtaining the most value for the sale of your business. M&A advisors know the best way to structure a deal to maximize the value of your business.

Sold at the wrong time

Timing is imperative to getting the maximum value for your business. Interest rates and other factors occurring in the market can determine what someone can pay for your business. If we are selling a business when the market isn’t hot or interest in your industry is low, you may receive less value than you would have at another time. M&A experts can help you determine the best time to place your business on the market.


If you want to ensure you receive maximum value when you sell your business, The 86 Group would love to help you reach that goal. Schedule a confidential consultation today!