5 mistakes that lower your sale price

When a Canadian small business owner decides to sell, the mistakes that hurt the eventual sale price are rarely dramatic. They are usually small, avoidable gaps that surface during due diligence and give buyers leverage to renegotiate the price, ask for a holdback, or walk away entirely after months of work on both sides.

The mistakes that come up most often

• Messy or commingled financials. Personal expenses run through the business, cash sales that do not reconcile against GST/HST filings or what was reported to the CRA, or books that simply are not up to date. Buyers and their accountants build the cost, and the risk, of untangling this into a lower offer, and lenders are often more cautious when the numbers do not tie out cleanly.
• Starting too late. Businesses that go to market with last year's books unfinished, no current-year interim statements, and no organized documentation lose momentum with buyers who expect a reasonably complete package from the outset, and some walk away rather than wait.
• Heavy owner dependence. If the business cannot function without the owner personally handling sales, key client relationships, or specialized technical work, buyers price in the cost and risk of replacing that role, sometimes by asking for a longer transition period instead of a straight price cut.
• Customer or supplier concentration. A business where one or two accounts make up a large share of revenue is inherently riskier to a buyer, and that risk usually shows up as a lower offer or as earn-out and holdback terms tied to whether those relationships survive the change of ownership.
• An unrealistic asking price. Pricing based on what the owner needs rather than on how comparable businesses have actually traded creates a stand-off. Buyers who already have financing lined up tend to quietly skip listings that look unrealistic rather than take the time to negotiate them down.

None of these issues usually kill a deal outright on their own. More often, they surface partway through due diligence, after a buyer has already spent time and legal fees getting to a signed letter of intent, which is exactly when a seller has the least room to walk away and start over with a different buyer.

What tends to work better

Owners who address these issues well before listing, cleaning up bookkeeping, documenting processes and key relationships, and getting a realistic read on pricing from more than one broker or advisor, generally see smoother due diligence and fewer surprises once a buyer is under a letter of intent. Some of this work, like training a second layer of management, simply takes time, which is part of why advisors often suggest starting the process earlier than owners expect. None of this guarantees a specific outcome. Every sale depends on its own numbers, its own market conditions, and its own pool of buyers.