June 9, 2025
If you’re a mid-sized business owner thinking about selling your company, you’re likely focused on maximizing value, attracting serious buyers, and ensuring a smooth transition. But beware: even strong, profitable companies can send signals that make buyers nervous!
As M&A advisors who’ve specialized in the United States and Canadian mid-market for 30-plus years, we’ve seen first-hand how these red flags can derail negotiations, kill deals, or slash your sale price.
Here’s what to look out for, and how to fix these red flags before going to market…
Buyers want businesses that can operate independently of the founder. If you’re the rainmaker, decision-maker and problem-solver all in one, your departure is a risk—it signals that the business might not survive without you.
Fix It: Start building a strong, independent leadership team; delegate key responsibilities and document processes. Remember that buyers pay a premium for businesses with strong, self-sufficient teams.
If one client makes up more than 20-30% of your revenue, buyers see a major vulnerability because what happens if that client leaves after the sale?
Fix It: Diversify your client base and/or put long-term contracts in place to reduce perceived risk.
Clean, accurate financials are non-negotiable. If your books are messy or inconsistent, buyers lose confidence in your numbers—and your business.
Fix It: Work with a CPA familiar with M&A and make sure you have accrual-based financial statements that close out monthly.
A buyer doesn’t just want a stable business—they want one with future upside. If you can’t articulate where the growth is coming from, it limits perceived value.
Fix It: Develop a strategic plan that highlights untapped opportunities, new markets and/or product expansion paths.
Buyers run from lawsuits, regulatory issues, or unresolved disputes. These introduce risk and delay due diligence, both of which are deal killers!
Fix It: Proactively resolve or disclose issues. Hire legal counsel to clean up loose ends before going to market.
Buyers want assurance that the business can thrive post-sale. If your team lacks depth or experience, that’s a massive red flag.
Fix It: Invest in leadership development and retention. Make sure key roles are filled with capable, committed individuals.
Buyers walk away fast if a seller has inflated price expectations or isn’t willing to negotiate. You may think your business is worth, for example, $20 Million—but if market comparisons say $12 Million that disconnect can halt conversations early.
Fix It: Get a proper valuation from a seasoned M&A advisor—not a business broker. To be clear: this isn’t to say credible business brokers aren’t good at their jobs, only that businesses with an annual turnover of $5 Million-plus require deep market insight, deal structuring expertise, and buyer network access that business brokers usually cannot offer. Woodbridge has 30-plus years experience in mid-sized M&A deals in the North American market and offers free business valuations for mid-sized companies; book your obligation-free appointment with one of our M&A experts here.
If you’re planning to sell your business, proactively addressing these red flags early in the M&A process gives you leverage, increases buyer confidence, and often results in faster, more lucrative deals.
Working with an experienced M&A firm like Woodbridge can help you prepare, position, and present your business in a way that attracts premium buyers—while avoiding the pitfalls that less sophisticated sellers fall into.
Start the process by booking a free business valuation with one of our M&A experts here.