Guest Columns

Perspective:
Industry Issues

Challenges owners should consider when selling business

Bob Wolter

Bob Wolter is a mergers and acquisitions advisor for Cornerstone Business Services, Green Bay, Wisconsin. He contributes this column exclusively for Cheese Market News®.

According to some interviews with business owners who sold all or portions of their companies, the decision to sell was among some of the most difficult conclusions in their lifetimes. Many said the sale was one of the most significant chapters of their lives.

As important as the selling decisions were to owners, many indicated they made serious errors in the process. While few wished to undo their transactions, owners cited a long list of things they did wrong. Some sold their businesses with money on the table. Others stuck it out for the highest price only to see undesirable consequences after the close for the employees. Some wished they sold to family members. Others said it was a mistake to sell to family members. Some sold too soon. Others held on too long. Some accepted more post-closing risks than they should have. All reported they paid too much in taxes. The common theme from former owners was: “I wish I knew then what I know now about the transaction process and would have done things differently.”

Business owners recognize the gravity of the transaction, yet they don’t discover or appreciate the important issues involved in the transactions until after the sale. Like taking the fingers off a chess piece, owners are stuck with the sale outcome after they sign all the closing documents.

Why is it so hard for owners to make wise decisions?

There are as many answers as there are owners, but a number of issues stand out:

• Emotions

Owners are committed to their companies on a visceral level. Some described the connection akin to a child or a significant other. But most say the business is a part of themselves. It has become an extension of who they are. It’s highly personal. Therefore, emotions and feelings oftentimes affect objective decision-making.

• Resistance to change

Most people are uncomfortable with change, but a business sale represents tectonic, wholesale changes for owners and their families. Unless there is a coercive vision steering the owner to new challenges, it’s hard to let go of the status quo. For some, a sale is a concession to age and mortality and put off for as long as possible.

• Non-ordinary business activity

Mergers and acquisitions (M&A) activity transactions are far outside the scope of normal business activities and are usually quite disruptive. Transactions entail hundreds of hours of intense preparation. Since the normal state of most middle market companies is already very busy, the M&A process asks for time and attention many owners don’t have or are unwilling to give.

• Professional advisor issues

Owners of privately held middle market businesses need professional advice to enable good selling decisions, but three things stand in the way of good counsel.

One of those is confidentiality. Owners are fiercely protective of confidential business information. Great harm could come to the company if competitors, customers, employees, suppliers or nearly anyone else learned the owners are even thinking about a sale. Therefore, owners are very cautious and keep their private thoughts hidden, even from trusted advisors like their attorney or a certified public accountant (CPA).

M&A is a specialty within the practices of law, accounting and taxation, and owners need advice from such experts. Unfortunately, owners resist such counsel due to loyalties with longtime trusted attorneys and CPAs.

Unfortunately, attorneys and CPAs — only tangentially familiar with private capital marketplace practices — are likely to offer damaging advice to owners without knowing it.

Few people appreciate the value of a buck more than business owners, and successful companies are never built from wasteful practices. Long embedded cash preservation habits often prevent owners from seeking specialized, professional M&A advice. Therefore, knowledgeable advisors are not given the opportunity to provide the best guidance. If done properly, businesses will spend more money on professional fees preparing for and ultimately selling their business than all past professional fees combined.

Owners need to know what the business is worth, and business appraisers don’t devote dozens of hours and analysis for free. Owners need specialized M&A legal counsel, which means legal costs at the top of the rate structure. Owners need tax and other financial advice, and CPAs charge by the hour. Investment bankers/M&A brokers charge to lead the selling process. Wealth advisors extract fees to manage funds from sudden liquidity events.

• Unfamiliarity with private capital marketplace

Most owners are not acquainted with the private capital marketplace, which is where most privately held middle market businesses will be sold. Owners don’t know who the right buyers might be or even the number of options available to them. Unfamiliarity causes some to believe only unsatisfactory options exist. Others have heard horror stories of private equity deals gone bad. In such cases, the decision to sell is simply no, and based on misinformation and wrong assumptions.

• Procrastination

In college, students can sometimes get away with failure to prepare by doing all-nighters and cramming for tests. But the lack of preparation in a business can’t be fixed quickly. It takes years. Therefore, transaction planning should begin years before the sale occurs. Owners who put off transaction preparation will always be at a disadvantage when it is time to sell and destined for less than optimal outcomes.

• Bad thinking

Owners often form their understanding of transactions from sources who are not professional M&A advisors. Consequentially, they can embrace an entire belief system that is way off about business values, transaction processes, buyer characteristics and so on.

• Unwarranted self-confidence

Owners are used to being in control. They are the ones others look to for decisions. Years at the helm sometimes promote excessive levels of self-assurance that can be counterproductive in M&A transactions. In most cases, buyers of privately held middle market businesses acquire companies for a living. They are highly professional. In most cases, sellers may have never sold a business before. When professionals get into the arena with amateurs, the result is very predictable. For amateurs with excessive self-confidence, the outcomes can be even more one-sided in the buyer’s favor. Therefore, owners would be wise to set the hubris aside and humbly accept capable advice from professional advisors who are there to protect the owner’s interests.

While selling decisions are difficult, they must be made. Transition planning is a foundational duty of ownership. The day of ownership transactions will arrive whether owners want it or not. Time respects no one.

Those who fail to plan will inevitably become passive/reactive sellers confined to suboptimal outcomes. Worse yet are those who die or are otherwise incapacitated while still in ownership. Such circumstances rarely deliver favorable results for those left behind. Business owners cannot shrink from proactively planning to transition from ownership no matter how difficult or uncomfortable the process may be.

CMN

The views expressed by CMN’s guest columnists are their own opinions and do not necessarily reflect those of Cheese Market News®.

© 2025 Cheese Market News • Quarne Publishing, LLC • Legal Information • Online Privacy Policy • Terms and Conditions
Cheese Market News • Business/Advertising Office: P.O. Box 628254 • Middleton, WI 53562 • 608/831-6002
Cheese Market News • Editorial Office: 5315 Wall Street, Suite 100 • Madison, WI 53718 • 608/288-9090