Common Deal Killers When Selling a Business (And How to Avoid Them)
A business is sellable only when it serves profit to the buyer. And the process is also about navigating a complicated transaction, and anything in the contract can derail the process! Many people list companies for sale in Alberta or anywhere unaware of the hidden factors that can cost them time and money. It can also end up being a problem for the next owner, and you might face issues even after exiting the business.
So be aware of the most common deal killers and ways to avoid them. Continue reading to know them and ensure a successful business exit!
Deal Killers of Contracts for Selling Businesses
The following are some of the indicators that you should consider when selling a business to make sure you don’t end up with a problematic liability disguised as a business.
Overdependence on the Owner
If the company mostly revolves around the owner, it can be a major red flag for the ones who are going to own it next. Because if operations, decision-making, and client relationships depend solely on one person, you can consider the business to be fragile! It won’t have the strength to strive in a competitive market. And buyers demand continuity and scalability instead of personality-driven companies.
To avoid this, a business owner hoping to sell it should delegate responsibilities, develop competent management and operational teams, and document processes. And this should be done a long time before even thinking about listing the business.
Legal Issues or Unresolved Liabilities
Pending lawsuits, unresolved tax issues, or unfiled contracts can stop a deal in its tracks. Buyers don’t want to inherit someone else's legal baggage. These risks can lead to a lower valuation or scare off buyers entirely. That’s another reason for the deal to fall through, because no one wants to buy a liability knowingly!
Owners should conduct a legal audit before putting the business on the market. Clean up corporate records, resolve any disputes, and ensure all regulatory obligations are met.
Read our other blog here to know more legal pitfalls that you should avoid when buying companies for sale.
Unrealistic Valuation Expectations
Overpricing a business is one of the quickest ways to kill buyer interest. Sellers often base their asking price on emotion, years of hard work, or future potential, not actual market value. Sometimes, a business bought at a high price can become a loss for the new owner. And no one wants to go through that.
A credible business valuation, ideally performed by business brokers in Edmonton or anywhere else, helps set realistic expectations. It also builds buyer trust and increases the likelihood of serious offers.
Customer or Supplier Concentration Risks
One customer might account for more than 30% of your revenue, or you might also rely heavily on a single supplier. It can be beneficial for you, but buyers are likely to see that as risky. Because a disruption could severely impact business performance.
To mitigate this, work on diversifying your customer and vendor base. It’s better if you practise this normally, not just before initiating a sale. Show buyers that your revenue is stable and not dependent on a handful of relationships.
Lack of Confidentiality
Loose lips can do serious damage. If employees, clients, or competitors learn that your business is for sale before the right time, it can trigger panic and hurt performance. Worse, it could create instability that scares buyers off.
Use NDAs (Non-Disclosure Agreements), limit internal communication, and work with an experienced business broker who can handle buyer enquiries discreetly.
Buyer Financing Falling Through
Even if you have a serious buyer, the deal can fall apart if their financing fails. This is especially common when buyers are not ready or rely on unrealistic loan terms.
Check buyers early and make sure they have the financial ability to follow through. Brokers can help screen candidates and suggest financing options or qualified buyers with pre-approved funding.
Conclusion
Sure, you would get loads of companies for sale in Alberta, but attention to detail matters. Because it involves high stakes. And the aforementioned deal killers would threaten your business exit. These problems delay progress, reduce value, and can cause damages to the business. Especially if you return to operations after the sale fails. Therefore, proper preparation, right advice, and accurate valuation are needed. Partnering with experts like Performance Business Advisory will help anticipate risks to transfer the business seamlessly.
Contact us to discuss the selling or buying of a business.