Selling a business
5 Misconceptions About Business Transactions and How to Avoid Them
Five common owner beliefs about selling a company that turn out to be wrong, and what actually happens in each case.
By Michael D. Rubin, CEO & Founder · Updated September 2026 · 798 words
The five misconceptions that cost sellers the most are that negotiation ends when a letter of intent is signed, that the headline price is what you receive, that every offer is funded, that you can sell without a team, and that selling means giving up every share of the company. Each belief feels reasonable to an owner selling for the first time, and each can lead to a lower price or a failed deal.
Here is what actually happens in each case, and how to prepare so none of them catches you off guard in the middle of a deal.
The five at a glance
| Misconception | What actually happens |
|---|---|
| Signing the LOI ends the negotiation | Due diligence and the purchase agreement bring a second, detailed round |
| The price is what I receive | Debt, working capital, fees, taxes and deferred payments change the cash you keep |
| Every offer is backed by money | Some buyers make offers before financing is arranged |
| I can sell it myself | Owners who try alone often lose value on terms, taxes and timing |
| I have to sell the whole company | Majority and minority sales, and rollovers, are common options |
1. The letter of intent is the beginning of the detail
A letter of intent, or LOI, sets out the proposed price, structure and main terms, and usually gives the buyer a period of exclusivity. Most of it is not binding. After signing, the buyer runs due diligence, and both sides negotiate the purchase agreement, which covers representations and warranties (statements of fact about the business you stand behind), indemnities, escrows and the working capital target. Problems found in diligence often lead to requests to change the price.
Treat the LOI as the start of the hardest stretch, keep the business performing, and disclose known issues before the buyer finds them. See what happens after you receive a letter of intent.
2. The headline price is not the cash you keep
Most company sales are priced as if the business is delivered without debt and without excess cash. That means the seller usually pays off loans and equipment financing from the proceeds at closing, and the buyer expects a normal level of working capital, the current assets minus current liabilities needed to run the business, to remain. Seller notes and earnouts defer part of the price, and taxes and fees come off the top. Our article on how debt and excess cash are treated in a sale walks through the math. Before accepting any offer, ask your advisor and CPA for an estimate of net proceeds, not just the price.
3 and 4. Unfunded offers and going it alone
A buyer can put an attractive number on paper without having the money. If the offer depends on a loan that has not been reviewed, or equity the buyer has not raised, it may never close. Ask for proof of funds before sharing details, and weigh how certain the financing is when comparing offers.
Selling without help is possible, but it is risky. The owner ends up running the company and the sale at the same time, results slip, and gaps in valuation, deal structure, legal terms and tax planning show up late. It also pulls the owner away from the company at exactly the moment results matter most. A sale team usually includes an M&A advisor, a transaction attorney and a CPA, each covering a different part of the work.
5. You do not always have to sell everything
Many buyers prefer to own the whole company, but other structures are common. In a majority recapitalization, often called a recap, a buyer such as a private equity group acquires control while the owner keeps a meaningful stake and shares in future growth. A minority investment brings in capital while the owner keeps control. A rollover lets the seller reinvest part of the proceeds in the new ownership. Each trades some cash today for potential value later, and each carries its own risks, so model them with your advisor and CPA.
Before choosing, ask who controls decisions after closing, how and when your remaining stake can be sold, and what happens if the new partner's plans differ from yours. Those answers matter as much as the price.
How MDR & Associates addresses these in practice
We screen buyers before they see anything, requiring a confidentiality agreement and a financial profile that shows they can fund the purchase. We negotiate multiple letters of intent at the same time, so terms are compared side by side, and a principal of the firm stays in the negotiation through due diligence and the legal documents, working with your own attorney and CPA. Our ten-step process shows each stage. To see what your company might be worth, request a free valuation snapshot.
Where this fitsSell your business in Texas →
Questions owners ask next
Can a buyer lower the price after the LOI is signed?
They can try, and it is common when due diligence finds something unexpected, such as weaker earnings than presented or an undisclosed liability. The best protections are accurate records, early disclosure of known issues, and other interested buyers you could return to if needed.
Is a majority recapitalization better than a full sale?
Neither is better in general. A recap suits an owner who wants cash now, confidence in the new partner and a share of future growth, and who is willing to keep working. A full sale suits an owner who wants a clean exit. The right answer depends on your goals.