The 4 "Value-Killers" Owners Face When Trying to Exit Their Business
Thinking About Selling Your Business Someday? Read This.
Have you ever sold a home you've lived in for a while?
The moment you decide to list it, you start seeing things: Broken things. Old things. Messy things. All the things!
Why? Because once you decide to sell a home, you start thinking of it from a buyer's perspective.
So that one door handle that takes a little trick to unlock goes from a charming little nuisance to an "Oh my, I have to replace that!"
And the same goes for selling a business: The issues, frustrations, and inefficiencies you put up with while owning and operating a business become major red flags for a potential buyer.
I recently sat down with Jeff Potts, M&A advisor and founder of Gold Country Advisors, to talk about the "fix-it" list owners face when it's time to sell.
The biggest mistake Jeff sees? Not preparing early enough.
Owners wait until they're burned out, 75 years old, or forced to sell. By then, there's no time to address what's hurting the business's value. "We call it seller shock," Jeff said. "They hear the valuation and realize they're five years too late."
So what should you do?
Start with a valuation. Even if you're 3–5 years out from selling, get a baseline number. It's the only way to know what levers to pull to increase value.
From there, Jeff laid out the four most significant drivers of business devaluation and why they're so easy to underestimate. So let this serve as a guide for you if you're considering selling your business.
Let's dive in:
Value-Killer #1: No Management Team
Jeff called this the #1 issue in small business deals. "Most of the companies we see are what we call 'principal-centric,' the owner is the business," he said. "And that's a problem if they want to retire."
Here's what happens: private equity shows up, loves the numbers, but insists the owner stick around for 2–3 years post-sale to ensure continuity. That's not a real exit.
The fix? Build a strong, visible leadership team 3–5 years before you sell. Jeff's goal for his clients is to turn the founder into an absentee owner by the time of sale. (Or at least one that isn't holding the "keys to the kingdom.")
Value-Killer #2: Customer Concentration
Let's say one client accounts for 80% of your revenue. You might think that shows how critical your company is. Buyers see it as a giant risk.
"If you lose that one customer," Jeff said, "there goes the business. That's going to impact valuation, period."
He emphasized: this isn't something you can fix in six months. Diversifying your revenue base takes years. Start now.
Value-Killer #3: Messy Financials
I admit, this is a pet peeve of mine when I look at deals.
There are two types of messy financials, and both make it hard for a buyer to identify (and justify) value:
First, unclear reporting. Jeff shared an example: "I had a client with $35 million in revenue, but I couldn't tell how much of that was recurring vs. project-based. That's a huge problem. Recurring revenue is worth more."
Second, commingling personal and business finances. Most owners do it. Most buyers understand it. But it creates unnecessary friction. Jeff recommends cleaning things up 2–3 years out, and even taking the tax hit if needed, so your EBITDA adjustments don't look "sketchy."
Minimum standard? Reviewed or compiled financials from a CPA. Bonus points if you can present revenue segmented by category or type.
Value-Killer #4: No Recurring Revenue
"Recurring revenue isn't just nice," Jeff said. "It's less risky. And less risk means higher multiple."
Whether you run a service company, SaaS platform, or construction business, highlight any revenue that's predictable and ongoing, and separate it in your reporting.
He gave the example of two HVAC companies:
One had 60% of its revenue from maintenance contracts. It sold for a 6–7x EBITDA multiple.
The other was project-based. It sold for 3x.
That's the power of recurring revenue. And this is coming from someone who operates businesses with lots of "repeat" revenue but zero "recurring revenue.”
Jeff summed it up like this: "If you were buying your own business, where would you see risk? Now go fix those things, years before you sell."
Your buyer is the customer. Selling your company is still sales. Know what your customer values, and remove every objection in advance.
P.S. Jeff shares insights like this in his own newsletter. If you're even thinking about selling in the next 5 years, email him at jeff@goldcountryadvisors.com and get on the list.
Thanks for reading this post. I appreciate you. In return, please share this with those you know who may be interested.
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