Exit Like an Expert: How Sellers Can Avoid 5 Common Exit Deal Pitfalls

With decades of experience guiding middle-market CEOs through business exits, I've witnessed firsthand how the difference between a successful transition and a disappointing one rarely comes down to business fundamentals — it's almost always about process and preparation. 

The hard truth is that even highly successful entrepreneurs often stumble during their exit journey, leaving millions on the table and enduring unnecessary stress. While each business is unique, the pitfalls that derail exits are remarkably consistent. 

I'll walk you through the most common mistakes I've seen repeatedly, the strategies my most successful clients have used to avoid them, and why having an experienced advisor by your side can transform both the outcome and experience of your business transition.

5 Common Pitfalls of Exit Deals and How to Avoid Them

After guiding countless business owners through successful exits, I've observed the same mistakes repeatedly derail what should have been successful transitions. Let me share with you what I've learned from the front lines of M&A advisory.

1. Falling in Love with Your Own Valuation 

I've seen this scenario play out more times than I can count: a founder who has poured their heart and soul into building their business becomes emotionally attached to a specific valuation number. I've worked with brilliant entrepreneurs who were convinced their technology or market position was unmatched — until we conducted formal market analysis. The reality check was sometimes harsh.

The key thing to remember is this: no matter what you believe your business value is, it is only worth what someone is willing to pay for it.

In my experience, a founder’s emotional attachment rarely aligns with market realities. While you see years of sacrifice and innovation, buyers simply calculate future cash flows and risk factors. I've had difficult conversations with clients who were shocked—sometimes even offended—when market valuations came in 30-40% below their expectations. Sometimes, even 50% or more lower.

How to Avoid This Business Exit Pitfall: 

• Work with an Exit Expert to analyze recent comparable transactions in your industry
• Review your financials through a buyer's lens and industry benchmarks
• Focus on EBITDA multiples rather than revenue multiples
• Address potential buyer concerns before they impact the valuation
  
  

2. The Dreaded Late-Stage Term Sheet Changes

This can be a painful outcome: The seller receives an exciting initial offer that meets or exceeds expectations, only to watch the terms deteriorate as they approach closing. Perhaps there is a health-related or family-related reason for the urgency of the sale. Now, the seller is forced to choose between two equally unfavorable options: either leaving money on the table or walking away and starting over.

What starts as a clean cash deal often morphs into something far less attractive—extended earn-outs, employment contracts, or contingent payments tied to future performance. I've noticed that sophisticated buyers often use time and momentum against sellers, introducing changes when you're already emotionally invested in the sale.

How to Avoid This Business Exit Pitfall:

• Prepare for due diligence before it begins
• Get major terms in writing early
• Include deal-breaker conditions in the LOI
• Establish clear timelines with penalties for delays
• Maintain multiple interested buyers until the late stages
  
  

3. No NDAs Up Front or Disclosing Too Much, Too Soon

Many sellers eager to connect with multiple buyers and brokers fail to implement non-disclosure agreements (NDAs) early in the process, which can lead to significant risks. By not controlling what information is disclosed, and when, they may inadvertently give away sensitive information at the letter of intent (LOI) stage.

The most alarming and distracting outcome of not having an NDA is that your employees and customers could learn about your sale before you're ready (see pitfall #5). While it’s rare, why open yourself up to that kind of risk and drama?

This lack of control can compromise their negotiating position and expose them to potential competitive threats. It is essential to manage information disclosure carefully to protect the business's interests throughout the selling process.

How to Avoid This Business Exit Pitfall:

An experienced exit advisor implements a methodical approach to information sharing:

• Initial Stage: Company overview without proprietary details
• Qualified Interest Stage: Financial summaries and market position
• Post-LOI Stage: Detailed operational information and key contracts
• Final Diligence Stage: Complete access under strict confidentiality controls

This structured approach protects your business while still providing buyers with the information they need to make informed decisions at each stage of the process.

4. Neglecting Personal Financial Planning Until You’re in the Late Stages

I've witnessed successful business sales that resulted in disappointing personal outcomes because the founder hadn't aligned their exit strategy with their personal financial goals.

In my experience, entrepreneurs who engage with wealth managers early in the process tend to make significantly better decisions about deal structure, timing, and terms. I've seen cases where accepting a slightly lower valuation with better terms actually resulted in superior after-tax outcomes — insights that come only from proper financial planning.

How to Avoid This Business Exit Pitfall:

• Engage a wealth manager at least 12-18 months before exit
• Clarify your post-exit lifestyle needs and goals
• Model different deal structures and tax implications
• Develop an investment strategy for proceeds before closing
  
  

5. Failing to Develop and Secure Key Talent Before the Exit.

I've heard horror stories about deals on the brink of collapsing, with valuations being dragged down at the eleventh hour, only because key employees weren't properly secured or because buyers couldn't identify who would run the business after the acquisition.

The nightmare scenario for the seller is clear: if your key people have left and the deal falls through, then what do you?

Throughout my advisory career, I've emphasized that succession planning isn't just about your exit — it's about preserving and enhancing the value of what you've built. I've guided clients through implementing leadership development programs and key employee retention strategies years before their planned exit, resulting in substantially higher valuations and smoother transitions.

How to Avoid This Business Exit Pitfall:

• Identify and develop internal leadership candidates
• Create retention plans and “golden handcuffs” for key employees
• Document critical processes and institutional knowledge
• Reduce owner-dependency in customer relationships
• Establish clear reporting structures and responsibilities

Why Third-Party M&A Expertise Makes All the Difference

As a business owner contemplating your exit strategy, you're likely juggling competing priorities. Your focus remains on running daily operations while simultaneously planning one of the most significant transitions of your career – and, in some cases, your life’s work. This is precisely where third-party expertise becomes invaluable.

The right M&A advisor doesn't just handle transactions—they orchestrate your entire exit plan, from initial valuation to final signatures. They bring objectivity to emotionally charged decisions and maintain the confidentiality essential to preserving your company's value throughout the process.

My Advice: Start Your Exit Planning Today with the 11-Step Exit Planning Framework

In the next article, I outline what I call an 11-step roadmap to exit like a pro. Every deal and situation is different, so you may not NEED all of these steps. Or, you could have other steps added, given your business type. But in my experience, these are the foundational planning steps that every savvy seller needs to start with. 

> Read the 11-Step Exit Planning Framework

The Key to a Successful Exit is Time and Planning

Having navigated these waters countless times, I can tell you with certainty that successful exits aren't events —they're the culmination of months (and many times years) of deliberate planning. Whether your timeline is measured in months or years, the work you do today will determine your outcome tomorrow.

If you're ready to explore how third-party expertise can elevate your exit strategy, our team specializes in guiding entrepreneurs and CEOs through seamless transitions that maximize value while preserving business legacy.

> Learn more about our Transaction Preparation Services and Schedule a Call with us.