3 Biggest Mistakes I See Sellers Make with Due Diligence

by Elle Likopoulos 13th of December, 2024

3 Biggest Mistakes I See Sellers Make with Due Diligence

Selling your business is an exciting journey, but it can also be challenging, especially during the due diligence phase. This is when potential buyers take a deep dive into your business to assess its value and viability. Unfortunately, I often see sellers make some common mistakes that can hinder the sale. Here are the three biggest pitfalls to avoid during due diligence:

1. Sale Fatigue

One of the biggest hurdles I see sellers face is “sale fatigue”. After months of prepping their business for sale, many sellers become overwhelmed by the flood of questions and requests from buyers. This fatigue can lead to frustration, and sometimes sellers respond in ways that escalate the situation unnecessarily. This can turn buyers off and slow down the due diligence process.

To avoid this, try to gather as much information as you can before you officially list your business. Work on your due diligence documents bit by bit during the sale campaign—it doesn’t have to be done all at once! Another great strategy is to connect your accountant with the buyer’s accountant. This way, two professionals can handle questions directly, easing your burden and creating a smoother process.

2. Unclear Financials

Another common mistake I see is sellers not having clear and organized financial records. Remember, buyers are digging into your financials to understand the health of your business. If your financials are unclear, it’s like trying to find a door in the dark for them. The
clearer and more structured your financial information is, the easier it will be for buyers to get a grasp on your business, speeding up the due diligence process.

Take the time to get your financial statements organized, ensuring they are accurate and easy to interpret. Transparency builds trust, and it helps buyers make informed decisions more quickly.

3. Not Willing to Cooperate

Finally, sellers sometimes resist cooperating with buyer inquiries. Keep in mind that “no question is a silly question.” Buyers may have concerns or queries that seem trivial to you, but they’re essential for them. Being open and respectful in your responses helps create a positive atmosphere and makes due diligence run more smoothly.

Be mindful of the buyer’s position and show a willingness to provide clarity on any concerns.

Address every question thoughtfully. This approach not only informs the buyer but also alleviates any feelings of discomfort or suspicion. Remember, transparency during due diligence is key to a successful sale.

Conclusion

By steering clear of these three mistakes—sale fatigue, unclear financials, and a lack of cooperation—you can significantly improve the due diligence experience. Prepare in advance, ensure your financials are clear, and maintain a cooperative attitude. A smooth due diligence process not only benefits you but also helps build a foundation of trust with potential buyers. With the right approach, you’ll set the stage for a successful and efficient sale!

Tags: selling exit strategy tips small business