Surprises CEOs Face When Selling Their Companies
Surprise #1: Substantial Time Commitment
In the real estate business, once the owner engages the broker there is very little for the owner to do until the broker presents the various offers from the potential buyers. In the M&A business, there is a substantial time commitment required of the CEO/Owner in order to complete the sale properly, professionally and thoroughly. The following examples are worth noting:
Offering Memorandum:
This 30 + page document is the cornerstone of the selling process because most business intermediaries expect the potential acquirers to submit their initial price range based on the information presented in this memorandum. The intermediary will heavily depend on the CEO/Owner to supply him or her with all the necessary facts.
Suggestions of Potential Acquirers:
Chances are that the sales manager is the only person who knows the best companies to contact and those not to contact (competitors). Arguably, this information should be mostly supplied by the intermediary, but as a thorough team effort, the CEO/Owner should play a major role in this endeavor.
Management Presentations:
Assuming the intermediary conducts the normal process of boiling down the bidders to 4 or 5 potential acquirers, it is then customary to have management presentations before the final bids are submitted. In order to help extract the best offers, it is advisable that the CEO show the benefits of combining the acquirer and seller and/or the future upside for the selling company.
Surprise #2: The Need to Enjoin Other Employees in the Process
A number of owners selling their company are paranoid about a confidentiality leak regarding the sale of their company. In fact, some owners prefer that no other person in the organization is aware of the pending sale of the company. At a bare minimum, the CFO and Sales Manager should be informed. The CFO will be asked to pull all the financials together, to supply projections, to articulate reconstructed earnings (add-backs) and to supply monthly statements…all of which suggest that the company is being sold. The Sales Manager will be asked to supply the names of synergistic companies in or around the particular industry. And, perhaps, the CEO’s secretary will be asked to set up a “war room” where all legal and contractual information is assembled for the buyer’s due diligence team. In order to protect the company from confidentiality leaks and assure retention of key employees, the CEO/Owner should implement “stay agreements” for these key employees.
Surprise #3: The Need to Maintain, or Accelerate, Sales
The tendency for some owners is to become so distracted with the M&A process that they take their “eye off the ball” in running the business on a daily basis. Potential acquirers will be watching the monthly sales reports like a hawk to see if there is a turn-down in business. Acquirers become very apprehensive when they see a recent downward trend in the company they are about to acquire and may, as a result, want to negotiate a lower price.
Surprise #4: A Confidentiality Leak
Naturally, most CEOs expect the M&A process to go smoothly and usually it does. However, there should be a contingency plan in place for such occurrences as confidentiality leaks. The degree of damage determines what action should be implemented. On one occasion the draft of the Offering Memorandum was e-mailed to the CEO/Owner for his corrections; however, the sender from the brokerage firm used one incorrect letter in the CEO’s e-mail address. As a result of this misstep, the e-mail was rejected by the CEO’s computer and ended up in the company’s general mailbox which was administered by the employee in charge of IT. The employee was told by the quick-thinking CEO that the Offering Memorandum was being used to raise growth capital. Luckily, the incident went no further. Much more serious confidentiality leaks can occur, and it is wise to discuss ahead of time how the matter is going to be handled with those concerned.
Surprise #5: Unexpected Low Bids
Ultimately, the M&A market sets the price of the company. However, rarely does a seller go to market without having certain expectations of price. Let’s use a hypothetical case in which a company is growing at 15% annually. The CEO/Owner believes that it is worth $6 million based on $1 million of EBITDA. However, the top bid is $5 million cash or, obviously, 5 times EBITDA. Assuming the business intermediary has exhausted the universe of acquirers, the seller has two choices to reach his desired $6 million selling price. Either he can take the company off the market and return several years later when either the company’s earnings have improved or when the M&A market has heated up. Alternatively, the CEO can negotiate further with the top bidder by selling 80% of the company now and the remaining 20% in three years on a pre-arranged formula on the expectation that business will improve. Or, the CEO can sell the company now for $5 million with an earnout formula that might give him the additional $1 million.
Surprise #6: The P&S Agreement is Not What the CEO Expected
Numerous CEOs drive the M&A process to the letter of intent and then turn over the deal to their attorney to iron out the details of the purchase and sale agreement. While the CEO should not micro-manage his designated professional advisors in the transaction, he should be involved throughout the process, or otherwise the CEO will invariably object to the final wording of the document at the signing state. The area most likely to be overlooked by the CEO/Owner is the critical section of reps and warranties.
Surprise #7: Agreement of Other Stakeholders
While the CEO can negotiate the entire transaction, the sale is not authorized until certain stakeholders agree in writing, namely the Board of Directors, majority of the shareholders, financial institutions which have a lien on certain assets, etc.
Conclusion
For many CEOs, selling their company is a once in a lifetime experience. They may be very experienced, very talented executives, but they can also be blind sided by surprises when selling their company.
Read MoreCompany Weaknesses
Take two seemingly identical companies with very similar financials, but one of the companies was worth substantially more than the other company. One company will sell for $10 million “as is” or some changes can be made and the same company can be sold for $15 million. Following is a partial list of potential company weaknesses to consider in order to assess a company’s vulnerability.
Customer Concentration: First, one has to analyze the situation. The U.S. Government might be considered one customer but from ten different purchasing agents. Or, GM might have one purchasing agent but be directed to ten different plants. One office product manufacturer with $20 million in sales had 75% of its business with one customer…Staples. They had three choices: 1. Cross their fingers and remain the same; 2. Acquire another company with a different customer base; or 3. Sell out to another company. They selected the third choice and took their chips off the table. The acquirer was a $125 million competitor which was unable to sell to Staples, so after absorbing the smaller company, the customer concentration to Staples was only about 10% ($125m + $20m=$145m of which $15 million was sold to Staples or 10+%).
Single Product: Perhaps the most famous example of a single product acquisition is when General Motors overtook Ford’s single product, the Model A, with Alfred Sloan’s brilliant concept of a different model for people with different financial thresholds. Henry Ford’s stubbornness to stay with one product (Model A) almost cost the company its existence.
Regional Sales/Limited Marketing: Companies with parochial focus have limited capabilities to grow other than within their own domain. A widget company with national and international sales has substantially greater prospects to grow than one limited to its own region.
Aging Workforce/Decaying Culture: Skilled workers in certain trades, such as tool and die shops, are not being replaced by the younger generation. This is a sign that the next generation will not provide the companies with a skilled workforce in certain industries.
Declining Industry: Some companies are agile enough to completely change their industry, such as Warren Buffet’s Berkshire Hathaway and Fashion Neckwear Company which completely changed from neckties to polo shirts.
Pricing Constraints/Rising Costs: Companies who sell a commodity product often lack pricing elasticity and are unable to pass on their increased costs to their customers. For a while, the steel industry was in this predicament, but through massive industry consolidation and a booming demand from China, the situation changed.
CEO Dependency/No Succession Plan: Many middle market companies have successfully been built up by the founder/entrepreneur/owner and some critics call these individuals a “one-man-band” for good reason. These superman types tend to dominate most aspects of the company, but this is no way to build a sustainable business long term. Furthermore, these CEOs usually have not created a succession plan.
Maximizing Value
If the owners of a company, many of whom may be outsiders, want to increase the value of their investment, they should, through the Board of Directors, try to overcome the company’s weaknesses. On the other hand, the CEO may not be either capable or motivated to do so. The alternative is to implement a CEO succession plan, preferably with the cooperation of the current CEO. Kenneth Freeman’s thesis in “The CEO’s Real Legacy” (Harvard Business Review, Nov 2004) is that the CEO’s real legacy is implementing a succession plan.
Freeman advises:
“Your true legacy as a CEO is what happens to the company after you leave the corner office.
“Begin early, look first inside your company for exceptional talent, see that candidates gain experience in all aspects of the business, help them develop the skills they’ll need in the top job…
“During good times, most boards simply don’t want to talk about CEO succession…During bad times when the board is ready to fire the CEO, it’s too late to talk about a plan for smoothly passing the baton…Succession planning is one of the best ways for you to ensure the long-term health of your company.”
Both buyers and sellers should assess the company’s weaknesses. While some weaknesses are difficult to overcome, especially in the short term, one potential weakness that is very easy to overcome is to implement a succession plan…especially during the company’s good times before things go bad and it’s too late.
Read MoreWhat Would Your Business Sell For?
There is the old anecdote about the immigrant who opened his own business in the United States. Like many small business owners, he had his own bookkeeping system. He kept his accounts payable in a cigar box on the left side of his cash register, his daily receipts – cash and credit card receipts – in the cash register, and his invoices and paid bills in a cigar box on the right side of his cash register.
When his youngest son graduated as a CPA, he was appalled by his father’s primitive bookkeeping system. “I don’t know how you can run a business that way,” his son said. “How do you know what your profits are?”
“Well, son,” the father replied, “when I came to this country, I had nothing but the clothes I was wearing. Today, your brother is a doctor, your sister is a lawyer, and you are an accountant. Your mother and I have a nice car, a city house and a place at the beach. We have a good business and everything is paid for. Add that all together, subtract the clothes, and there’s your profit.”
A commonly accepted method to price a small business is to use Seller’s Discretionary Earnings (SDE). The International Business Brokers Association (IBBA) defines SDE as follows:
Discretionary Earnings – The earnings of a business enterprise prior to the following items:
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income taxes
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nonrecurring income and expenses
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non-operating income and expenses
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depreciation and amortization
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interest expense or income
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owner’s total compensation for one owner/operator, after adjusting the total compensation of all other owners to market value
Here are some terms as defined by the IBBA:
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Owner’s salary – The salary or wages paid to the owner, including related payroll tax burden.
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Owner’s total compensation – Total of owner’s salary and perquisites.
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Perquisites – Expenses incurred at the discretion of the owner which are unnecessary to the continued operation of the business.
Developing a Multiplier
Once the SDE has been calculated, a multiplier has to be developed. The following (just as a guideline) should be rated from 0 to 5 with 5 being the highest. For example, if the business is a highly desirable business in the current market, “desirability” would be rated a 4 or 5. If the business is in an industry that is quickly declining or nearly obsolete, “industry” would be given a 0 or 1 rating.
Age: Number of years the seller has owned and operated the business.
- Terms: Is the seller willing to offer terms? For example, will the seller accept 40 percent as a down payment with the seller carrying back 60 percent at terms the business can afford while still providing a living for the buyer?
- Competition: Consider the local market.
- Risk: Is the business itself risky?
- Growth trend of the business: Is it up or down?
- Location/Facilities
- Desirability: How popular is the business in the current market?
- Industry: Is the industry itself declining or growing?
- Type of business: Is the business type easily duplicated?
The average business sells for about 1.8 to 2.5. Obviously, if the SDE is solid and the multiple is above average, the price will be higher. Keep in mind that the price outlined includes all of the assets including fixtures and equipment, goodwill, etc. It does not include real estate or saleable inventory. The price determined above assumes that the business will be delivered to the buyer free and clear of any debt.
Veteran Wisdom
When all else fails, the words of a veteran business broker will work.
Asking Price is what the seller wants.
Selling Price is what the seller gets.
Fair Market Value is the highest price the buyer is willing to pay and the lowest price the seller is willing to accept.
Sellers should keep in mind that the actual price of a small business is about 80 percent of the seller’s asking price.
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How Long Does It Take to Sell a Business in Indiana?
By Troy Frank, Owner — Indiana Equity Brokers
Estimated read time: 7 min
The short answer: Selling a business in Indiana typically takes 6 to 12 months from listing to closing. In our experience at Indiana Equity Brokers, well-prepared sellers with clean financials and realistic pricing close in 6–9 months. Sellers who list before they’re ready — messy books, inflated price, no documentation — often wait 12–18 months or don’t close at all. The single biggest variable isn’t the market. It’s how prepared you are on day one.
Most sellers ask this question the wrong way. They want to know how long it takes. What they should be asking is: what controls the timeline — and what can I do right now to shorten it?
After more than 23 years and 884+ closed transactions in Indiana, I can tell you the answer isn’t mysterious. It comes down to a handful of factors you have direct control over. This article walks through all of them.
The Realistic Timeline for Selling a Business in Indiana
The national median close time for a Main Street business is roughly 170 days — just under 6 months — according to recent market data. But that’s from listing to close, not from the day you decide to sell.
Add 30–90 days of pre-market preparation, and the full process from “I’m ready to sell” to “check cleared” looks more like this:
- Preparation phase: 1–3 months (valuation, documentation, assembling your team)
- Marketing & buyer outreach: 2–4 months
- Due diligence: 4–8 weeks
- Financing & closing: 4–8 weeks
Total: 6 to 12 months is realistic for most Indiana sellers. Complex deals — larger companies, SBA financing, multiple buyers at the table — can run 12–18 months. Simple, well-documented businesses with motivated buyers have closed in under 90 days.
The key is that each phase builds on the one before. If your financials aren’t clean, due diligence drags. If you’re overpriced, you spend 6 months on the market before reducing the price — and now buyers wonder what’s wrong with the business.
What Actually Controls the Timeline
1. How Realistic Your Price Is
This is the biggest one. Overpriced listings sit. They attract the wrong buyers, generate low-quality interest, and force a price reduction — which raises red flags for the next round of buyers who wonder why it’s been on the market for months.
A business priced at 3x SDE when the market says 2.5x will take twice as long to sell, if it sells at all. At Indiana Equity Brokers, we use a detailed free business valuation process before we go to market — not to give sellers the number they want to hear, but the number that will actually get the deal done.
2. How Clean Your Financials Are
Buyers need three years of tax returns and financial statements. If your books are a mess — personal expenses run through the business, unexplained fluctuations, inconsistencies between returns and P&Ls — due diligence takes longer. Sometimes it falls apart entirely.
What kills deals isn’t usually price. It’s the books. A buyer who gets two weeks into due diligence and can’t reconcile the numbers will walk. That sets you back to square one, months later.
Clean, consistent, well-documented financials are the single best thing you can do to shorten your timeline. If your books need work, start there — even if you’re not planning to sell for another year.
3. Whether SBA Financing Is Involved
All-cash buyers close fastest. But most Main Street deals in Indiana involve SBA financing. An SBA 7(a) loan adds 30–60 days to closing because the lender requires its own appraisal, environmental checks, and underwriting. That’s not a problem — SBA opens your business to far more buyers than cash-only — but plan for it.
One thing that helps: choosing a business broker who works regularly with SBA-preferred lenders. We know which lenders move quickly and which ones add unnecessary delays.
4. How Ready You Are on Day One
Sellers who have everything organized before they list move faster than sellers who scramble to gather documents after a buyer signs an NDA. Here’s what you should have ready before you list:
- Three years of tax returns
- Three years of P&L statements and balance sheets
- A copy of the lease (and any assignment clauses)
- An equipment list with rough values
- Key employee agreements (if applicable)
- Copies of any licenses, permits, or contracts that transfer
This isn’t a checklist of nice-to-haves. It’s what every serious buyer will ask for. Having it ready means you don’t lose 3 weeks on document requests while the buyer’s interest cools.
The Phase Most Sellers Underestimate: Due Diligence
Sellers tend to assume that once a buyer makes an offer and both sides sign a letter of intent, the deal is basically done. It isn’t.
Due diligence is where deals live or die. A typical due diligence period runs 30–60 days. During that window, the buyer’s accountant goes through your books, the buyer’s attorney reviews your contracts, and the lender orders an appraisal. Any one of these can surface an issue that kills the deal or renegotiates the price.
According to research on M&A transactions, roughly half of deals that reach due diligence never close. At Indiana Equity Brokers, our close rate is significantly higher than that industry average — because we screen buyers before an LOI is signed and we prepare sellers to pass due diligence, not just survive it.
The way to protect yourself: understand why deals fall apart before you get to that stage. The surprises that kill deals aren’t usually surprises to the seller — they’re just things the seller didn’t think to disclose upfront.
What You Can Do Right Now to Sell Faster
Start preparation before you’re ready to list. Sellers who begin organizing their financials 6–12 months before they want to go to market consistently get better outcomes — faster closings, fewer surprises in due diligence, and stronger offers.
Price it based on data, not hope. A realistic price based on actual comparable transactions in your industry will attract serious buyers faster than an aspirational number that scares them off. Curious what your business is actually worth? Our free valuation takes about 15 minutes and gives you a honest number.
Work with a broker who moves deals. Not all brokers operate at the same pace. At IEB, we don’t sit on listings — we have an active buyer database, a structured marketing process, and a 23-year track record of closing deals across Indiana. You can see our recent transactions to get a sense of the businesses we’ve sold and how they moved.
If you’re earlier in the process and want to understand the full process for selling a business in Indiana, our selling tutorial covers it step by step.
Frequently Asked Questions
How long does it take to sell a small business in Indiana? Most small businesses in Indiana sell within 6 to 12 months of listing. Well-prepared sellers with clean financials and realistic pricing typically close in 6–9 months. Businesses with documentation gaps, pricing issues, or slow SBA financing can take 12–18 months. The preparation you do before listing is the biggest lever you have on the timeline.
What slows down a business sale the most? Overpricing and poor financial documentation are the two biggest timeline killers. Overpriced listings sit on the market for months before a price reduction, and that price cut signals to new buyers that something is wrong. Messy books drag out due diligence — or end it. A third factor is seller unavailability: buyers lose confidence when sellers go dark during the process.
Does having a business broker make the sale faster? Yes, meaningfully. An experienced broker narrows your buyer pool to qualified candidates, manages the documentation process, coordinates with lenders, and keeps the deal on track during due diligence. At Indiana Equity Brokers, we’ve closed 884+ transactions in Indiana — we know which steps slow deals down and how to stay ahead of them.
How long does due diligence take when selling a business? Due diligence typically runs 30 to 60 days for a Main Street business in Indiana. Complex deals with real estate, multiple entities, or SBA financing can take 60–90 days. The best way to shorten it is to have all documentation ready before the buyer begins — not after they ask for it.
Can I sell my business faster if I lower the price? Sometimes, but price isn’t always the bottleneck. If the delay is due to documentation issues or a slow financing process, a price cut won’t help. If you’re genuinely overpriced relative to market, then yes — a price correction can bring qualified buyers back quickly. A good broker will tell you honestly which problem you’re dealing with.
How Long Is Too Long?
If your business has been listed for more than 9–12 months without a serious offer, something is wrong. It’s usually one of three things: the price, the presentation, or the broker.
At that point, the right move isn’t to wait longer. It’s to get a second opinion on what’s actually holding the deal back. That might mean a pricing adjustment, better marketing materials, or a fresh start with a more active broker.
If you’re in that situation, or if you’re just starting to think about selling, a confidential conversation costs nothing. I’ve helped hundreds of Indiana business owners through this process — some who sold quickly and some who needed to reset. Either way, you deserve honest answers, not a sales pitch.
Read MoreWhen to Create an Exit Strategy
There is the old saying that the time to develop an exit strategy is the day you open for business. Sounds good, but it’s not very realistic. Further, it also isn’t very optimistic. On the day you open for business, thoughts about how you get out of it aren’t pleasant, or helpful, thoughts. However, as you get the business to a place where you have a bit of extra time to plan, you will find that the things you need to do to improve your business are some of the very things you will need to work on to plan an exit strategy.
You can’t predict misfortune, but you can plan for it. One never knows when an accident or illness will force one to sell. When the drive to your business becomes filled with dread, maybe it’s time to consider selling. The following ideas will improve your business, even if you’re not currently considering selling. Dealing with these areas will also supply the information a buyer will most likely be looking at when the time does come to sell.
Buyers want cash flow.
This, at least on the surface, is the thing a potential buyer will want to look at.
Appearances are important.
You may think everything about the business looks fine, but the two letters on the neon sign that don’t work indicate to a possible buyer that the seller may have lost interest in the business, causing them to also wonder what else doesn’t work or has been neglected.
There is probably more value than you think.
Business owners often don’t look at things that do create real value such as: customer lists, secret recipes, specialized computer systems, programs, customer loyalty programs, etc.
Eliminate the surprises.
Make sure the lease is transferable and that your landlord is willing to cooperate. Resolve that issue with town hall. Resolve the problem with that angry customer. Minor problems and issues will often raise their ugly heads during sensitive times, spooking a possible buyer. So, the time to resolve them is before going to market.
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