Common Pitfalls To Avoid When Selling a Family-Owned Business

In my experience, the primary reasons why some business sales fall apart are rarely related to price; instead, they stem from inadequate preparation, which often results in distrust on the buyer’s side.

We have seen deals get delayed, renegotiated, or even collapse because of issues that could have been addressed earlier—potentially jeopardizing the sale when it matters most.

Here are five common challenges found in family-run businesses:

1. Unclear Ownership Records — Informal transfers of shares can create uncertainty about ownership.

2. Lack of Formal Roles — Family members often work without contracts or defined responsibilities, which can create complications.

3. Mixed Personal and Business Expenses — This not only complicates due diligence but also negatively affects valuation.

4. Absence of Operating Agreements — Without these, internal disputes can easily escalate when it’s time to sell.

5. Misaligned Estate or Tax Plans — This can lead to unnecessary tax exposure and conflict among heirs.

The good news is that these issues are entirely fixable. Addressing them before the pressure of an active deal can pave the way to a successful transition.