Don't Wait for the Buyer to Find Your Problems

I had breakfast with a friend last week — he's also a client, which is how a lot of my best conversations start. We weren't talking business, just catching up, when he mentioned that his wife was planning to list their house next year. Someone had advised them: if you know you're selling in a year, hire a building inspector now. Find the problems. Fix them on your own timeline, not under the gun of a purchase contract when the buyer is already nervous and the deal is already fragile.

I thought about that for a minute. Then I thought: that's exactly what I tell business owners who are thinking about an exit.

The Same Logic Applies to Your Business

If you know — or even suspect — that you'll be selling your business in the next few years, the worst time to discover your problems is during due diligence, with a buyer on the other side of the table and a signed letter of intent creating expectations on all sides.

By the time a buyer's lawyers are in your files, you've lost control of the narrative. A problem discovered at that stage doesn't get quietly fixed — it becomes a negotiating point, a price reduction, an escrow holdback, or, in bad cases, a reason to walk. The buyer's counsel isn't your counsel. They're not helping you solve problems. They're cataloguing them.

The alternative is to find your problems first.

Hire Counsel to Run Diligence on You

What I recommend to clients who are thinking ahead about a sale is this: engage a law firm to conduct due diligence on your company as if they were representing a buyer — a buyer who doesn't exist yet. Go through the same exercise a real buyer would. Examine your organizational documents, your equity structure, your material contracts, your employment practices, your IP ownership, your regulatory compliance.

What you find, you can fix. Quietly, affordably, and on your schedule. A cap table with a technical defect can be corrected. A contract that has auto-renewed past its intended term can be addressed. An employee classification issue can be remediated before it becomes a liability in a rep and warranty negotiation.

The sellers who come out of transactions intact — with the price they expected and the terms they wanted — are rarely the ones who got lucky. They're the ones who looked.

Two Honest Complications

I'd be doing you a disservice if I stopped there, because there are two real issues with this approach that you should understand before you start.

The first is cost. Conducting real due diligence on your own company takes time and money. It is not a trivial exercise. But here's the frame I'd offer: the cost of finding a problem now is almost always less than the cost of that same problem surfacing during a deal. When a problem appears in diligence, it doesn't disappear — it gets priced. And it gets priced by someone who is not on your side.

The second issue is more important, and it's the one only a lawyer is likely to raise with you.

When you conduct pre-sale diligence and find a problem, you have to fix it. Not because it's good business practice — though it is — but because of what happens if you don't. In most business sale transactions, the seller is required to make representations and warranties about the state of the company. If you found a problem, knew about it, and failed to disclose it, you have converted an unknown risk into a known, undisclosed one. That's not a gray area. That's the territory of fraudulent concealment — and it can expose you to rescission of the deal, damages claims, and fraud liability that survives the closing.

Put plainly: a seller who finds a problem and buries it has not avoided the problem. They've made it worse. The diligence process only works if you're willing to act on what it finds.

What This Actually Looks Like in Practice

This isn't a theoretical exercise. Good outside counsel can structure a pre-sale review as a privileged engagement — the work product belongs to you, it's protected, and it's designed to give you actionable findings, not just a list of risks to ignore.

There's one more thing worth naming. Once a seller has a signed letter of intent, something happens that is completely understandable and almost impossible to stop: they start spending the money in their heads. The deal feels done. The diligence period feels like a formality. And that's precisely when a discovered problem hits the hardest — not just because of what it does to the deal, but because of what it does to a seller who had already moved on emotionally.

The best antidote to that experience is to not be surprised.

The building inspector your friend hired isn't hoping the house is perfect. He's hoping to find the problems before the buyer does. That's the right mindset. And it's exactly the mindset that separates the sellers who close cleanly from the ones who spend the last thirty days of a deal defending their company instead of finalizing it.

If you're thinking about an exit — even loosely, even years out — and you'd like to talk through what a pre-sale review might look like for your business, I'm always happy to have that conversation over coffee.