Maximize Your Company’s Value: Avoid These 5 Common Errors (video)

When it comes to selling a business, the process is far more complex than simply finding a buyer and signing on the dotted line. In a recent episode, host John Golden sat down with Cameron Bishop, Managing Director at Rain Catcher, to discuss the most common—and costly—mistakes business owners make that can severely undermine their company’s sellability. Drawing on decades of experience in investment banking and CEO roles, Cameron offers a masterclass in what it takes to prepare a business for a successful exit.

Below, we break down the main themes and each of Cameron’s top five mistakes in detail, providing actionable advice and expert insights to help business owners maximize their company’s value and ensure a smooth sale.

Why Sellability Matters: The Overlooked Exit Strategy

Key Insight:
Every business owner will eventually exit their company—voluntarily or not. Yet, most entrepreneurs focus on day-to-day operations and neglect to plan for this inevitability.

Actionable Advice:

• Start with the end in mind: Integrate an exit strategy into your business plan from day one. This doesn’t mean you need to know the exact date or buyer, but you should have a vision for what a successful exit looks like.
• Regularly revisit your exit plan: As your business grows and market conditions change, update your strategy to reflect new realities.
• Educate yourself on exit options: Understand the differences between selling to a strategic buyer, private equity, management buyout, or passing the business to family.

Expert Tip:
Cameron emphasizes that a lack of exit planning can lead to rushed, undervalued sales or, worse, an inability to sell at all. Treat your business as an asset you’ll eventually need to transfer.

Mistake #1: Poor Accounting Practices

The Problem:
Many business owners operate on a cash basis or use informal accounting methods, resulting in unclear or inaccurate financial records. This is a major red flag for buyers and can drastically reduce your company’s value.

Why It Matters:

• Buyers want transparency and reliability. Incomplete or inconsistent financials make it impossible to assess true profitability and risk.
• Operating outside of Generally Accepted Accounting Principles (GAAP) can lead to a distorted view of your business’s health.

Actionable Steps:

• Adopt GAAP-compliant accounting: Even if you’re a small business, using accrual accounting and standardized practices is essential.
• Invest in professional bookkeeping: Hire a qualified accountant or CPA to ensure your records are accurate and up-to-date.
• Prepare for due diligence: Organize at least three years of financial statements, tax returns, and supporting documentation.
• Regularly review financials: Don’t wait until you’re ready to sell—make financial health a routine check.

Expert Insight:
Cameron notes that clean, accurate financials not only attract more buyers but also command higher valuations. Sloppy accounting can kill deals or force you to accept a lower price.

Mistake #2: Owner Dependency

The Problem:
If your business can’t run without you, it’s not truly a business—it’s a job. Owner dependency is a major risk for buyers, who fear the company will falter once you leave.

Why It Matters:

• Buyers want a business that can operate independently.
• Heavy reliance on the owner for customer relationships, operations, or expertise signals instability.

Actionable Steps:

• Build a strong management team: Delegate key responsibilities and empower leaders within your organization.
• Document processes: Create standard operating procedures (SOPs) for all critical functions.
• Develop succession plans: Identify and train potential successors for key roles.
• Gradually step back: Reduce your involvement in daily operations to prove the business can thrive without you.

Expert Insight:
Cameron shares that businesses with high owner dependency often struggle to sell or receive lower offers. Buyers want to see a self-sustaining operation, not a one-person show.

Mistake #3: Customer Concentration

The Problem:
Relying on a small number of customers—especially if one accounts for more than 20% of revenue—creates significant risk. If that customer leaves, the business could be in jeopardy.

Why It Matters:

• High customer concentration is a red flag for buyers and lenders.
• It can lead to lower valuations or even derail a sale.

Actionable Steps:

• Diversify your customer base: Proactively seek new clients and expand into new markets.
• Monitor revenue sources: Regularly analyze your customer mix to ensure no single client dominates.
• Strengthen contracts: Where possible, secure long-term agreements with key customers to provide stability.
• Develop customer retention programs: Reduce churn and build loyalty across your client base.

Expert Insight:
Cameron advises that buyers prefer businesses where no single customer represents more than 10-20% of revenue. Diversification not only reduces risk but also increases your company’s attractiveness.

Mistake #4: Vendor Dependency

The Problem:
Just as with customers, relying on a single vendor for critical products or services exposes your business to supply chain disruptions and bargaining power imbalances.

Why It Matters:

• Vendor dependency can scare off buyers who fear supply interruptions or price hikes.
• Lack of contracts or alternative suppliers increases perceived risk.

Actionable Steps:

• Identify alternative suppliers: Build relationships with multiple vendors for key products and services.
• Negotiate contracts: Secure favorable terms and ensure you’re not at the mercy of a single supplier.
• Regularly review vendor performance: Assess reliability, pricing, and quality to avoid surprises.
• Document contingency plans: Have a clear plan for quickly switching vendors if needed.

Expert Insight:
Cameron recounts deals lost because a business was too reliant on a single, non-contracted vendor. Buyers want to see a resilient, flexible supply chain.

Mistake #5: Not Understanding Gross Profit Margins

The Problem:
Many business owners don’t have a clear grasp of their gross profit margins or how they compare to industry benchmarks. This can lead to underpricing, overpricing, or missed opportunities for improvement.

Why It Matters:

• Buyers scrutinize gross profit margins to assess profitability and operational efficiency.
• Margins below industry standards can lead to lower valuations or failed deals.

Actionable Steps:

• Benchmark your margins: Compare your gross profit margins to industry averages and top performers.
• Analyze cost drivers: Identify areas where you can reduce costs or increase pricing without sacrificing quality.
• Implement regular financial reviews: Make margin analysis a routine part of your business management.
• Adjust business strategy: Use margin insights to inform product mix, pricing, and operational improvements.

Expert Insight:
Cameron stresses that understanding and optimizing gross profit margins is critical for both day-to-day management and maximizing sale value. Buyers want to see a business that’s not just surviving, but thriving.

The Complexity of Selling a Business: Why Professional Guidance Matters

Key Takeaways:

• The average time to sell a business is around nine months, but addressing the above mistakes can extend this timeline.
• Selling a business is a specialized process—most owners lack the experience to navigate it alone.
• Hiring professionals (investment bankers, M&A attorneys, accountants) can help you avoid costly errors, present your business in the best light, and negotiate the best deal.

Actionable Steps:

• Engage experts early: Don’t wait until you’re ready to sell—start building relationships with advisors now.
• Invest in a business valuation: Get an objective assessment of your company’s worth and areas for improvement.
• Prepare for due diligence: Work with your team to ensure all legal, financial, and operational documents are in order.

Expert Insight:
Cameron warns that going it alone often leads to leaving money on the table or, worse, failed sales. Professional guidance pays for itself many times over.

Proactive Planning Is the Key to Sellability

Selling a business is one of the most significant financial events in an entrepreneur’s life. By addressing these five critical mistakes—poor accounting, owner dependency, customer and vendor concentration, and lack of margin awareness—you can dramatically increase your company’s value and ensure a smoother, more profitable exit.

Final Recommendations:

• Start planning your exit strategy today, no matter where you are in your business journey.
• Regularly audit your business for these common pitfalls and take corrective action.
• Surround yourself with experienced professionals who can guide you through the complexities of the sale process.

Remember:
A sellable business is a valuable business. Whether you plan to sell next year or a decade from now, the steps you take today will determine your success tomorrow.

Our Host

John is the Amazon bestselling author of Winning the Battle for Sales: Lessons on Closing Every Deal from the World’s Greatest Military Victories and Social Upheaval: How to Win at Social Selling. A globally acknowledged Sales & Marketing thought leader, speaker, and strategist, he has conducted over 1500 video interviews of thought leaders for Sales POP! online sales magazine & YouTube Channel and for audio podcast channels where Sales POP! is rated in the top 2% of most popular shows out of 3,320,580 podcasts globally, ranked by Listen Score. He is CSMO at Pipeliner CRM. In his spare time, John is an avid Martial Artist.