10 Common Deal-Killers & How to Avoid Them
When a business sale falls apart, it’s rarely because of one dramatic issue. More often, small details stack up — unclear books, a lease that can’t transfer, or a business that suddenly looks different right before closing.
Across the lower-middle market, data and deal feedback suggest that roughly 40 to 60 percent of small-business transactions never reach the finish line. The reasons are surprisingly consistent. Below are the most common deal-killers sellers encounter — what owners often assume, how buyers and lenders view it, and what typically happens in the market when a sale actually closes.
This isn’t about perfection; it’s about preparation and awareness. A little foresight early creates a smoother, faster closing later.
1. Financial Quality & Clean Books
| Viewpoint | Perspective |
| Seller | “My accountant’s handled it for years — these numbers reflect how I run things.” |
| Buyer / Lender | “We only rely on financials that can be verified through tax returns and bank statements.” |
|
Market Norm |
Buyers and lenders base offers on reconciled, accrual-basis financials (typically 3 years). Imperfect books aren’t a deal-breaker — they just add time and complexity to confirm accuracy before closing. |
Takeaway:
Even if your books aren’t spotless, that’s okay. The key is transparency. Having documentation, even if imperfect, helps buyers verify numbers without losing trust — and that keeps your deal moving.
2. Working Capital & Cash Needed to Run the Business
| Viewpoint | Perspective |
| Seller | “There’s plenty of cash — I should be able to take most of it out at closing.” |
| Buyer / Lender | “The business needs enough cash and current assets to operate for 60–90 days after closing, especially if it’s seasonal.” |
|
Market Norm |
Most transactions use a 12-month average of working capital as the baseline. That amount is usually split between buyer and seller — sellers don’t take all the cash. The goal is to leave enough liquidity so the business can sustain operations immediately after the hand-off. |
Takeaway:
Leaving sufficient working capital protects your reputation and helps the new owner succeed — which protects your financing, your note payments, and your legacy.
3. Lease / Real Estate Assignability
| Viewpoint | Perspective |
| Seller | “My landlord knows me — it’ll be fine.” |
| Buyer / Lender | “If the lease can’t be transferred or renewed, the business location becomes a risk.” |
|
Market Norm |
Buyers and lenders require proof that leases can transfer. Sellers typically verify whether the current lease is assignable and contact the landlord early to secure written consent. |
Takeaway:
A quick review of your lease now avoids last-minute stress later. Confirming that transfer rights exist is one of the simplest ways to keep diligence on track.
4. Customer Concentration & Contract Risk
| Viewpoint | Perspective |
| Seller | “My top customers are loyal — they’ll stay.” |
| Buyer / Lender | “If one or two customers make up most of revenue or contracts can’t be reassigned, risk increases.” |
|
Market Norm |
When a few customers represent a large portion of revenue, buyers often seek reassurance. Sellers sometimes agree that a small portion of payment is delayed — often up to 12 months — to confirm key customers remain after the sale. |
Takeaway:
You don’t need to change client relationships; you just need to document them. Showing written agreements or renewal histories builds confidence and can minimize any delayed payments.
5. Undisclosed Liabilities
| Viewpoint | Perspective |
| Seller | “Everyone has small issues — that’s normal." |
| Buyer / Lender | “Unpaid business taxes, vendor debts, or other obligations can halt funding.” |
|
Market Norm |
Buyers expect visibility into any business-related liabilities. Transparency helps — known issues can usually be handled, but surprises create delays and distrust. |
Takeaway:
If there’s something lingering — a vendor dispute, a late tax filing, an old loan — disclose it. Most issues can be managed; hidden ones derail closings.
6. Owner Dependence / Transition
| Viewpoint | Perspective |
| Seller | “My team can run it after I’m gone.” |
| Buyer / Lender | “If everything depends on the owner, continuity risk increases.” |
|
Market Norm |
Transition periods vary widely — some sellers stay 30 days, others longer. Documenting key processes or introductions makes the hand-off smoother, but it’s not required — it simply builds buyer confidence. |
Takeaway:
Think of transition as protecting your employees and customers, not adding work. A short, well-planned hand-off builds goodwill and speeds up your payout.
7. Performance Shifts During Diligence
| Viewpoint | Perspective |
| Seller | “That dip is just seasonal.” |
| Buyer / Lender | “If sales or profit decline before closing, the lender re-checks projections and valuation.” |
|
Market Norm |
Buyers and lenders review updated performance data before funding. Consistent operations — and avoiding major purchases, large withdrawals, or other disruptions — help keep valuations stable and deals on schedule. |
Takeaway:
During diligence, treat every month like a continuation of business as usual. Stability reassures lenders and buyers that the story you told at LOI still holds true.
8. Valuation Expectations
| Viewpoint | Perspective |
| Seller | “I deserve the same multiple as the company down the road.” |
| Buyer / Lender | “Valuation must align with risk and cash flow.” |
|
Market Norm |
Multiples (often 2.5×–4× SDE — Seller Discretionary Earnings) vary by growth, recurring revenue, customer concentration, and management depth. Each business is unique; understanding what drives value avoids disappointment or renegotiation. |
Takeaway:
Comparing your business to others can mislead you. Focus on your own cash flow, stability, and transferability — that’s what buyers actually pay for.
9. Financing / Underwriting Conditions
| Viewpoint | Perspective |
| Seller | “We already agreed on price — why is it taking so long?” |
| Buyer / Lender | “Even conventional financing requires detailed review of financials, collateral, and legal documents.” |
|
Market Norm |
Most funded deals take 60–90 days to close. Quick responses and organized records help keep momentum; delays usually stem from missing documentation, not price changes. |
Takeaway:
Expect the process to feel slower than you’d like. Staying responsive and keeping documents ready can save weeks off the timeline.
10. Legal / Entity Documents
| Viewpoint | Perspective |
| Seller | “I’ve had this business for years — everything’s fine.” |
| Buyer / Lender | “Missing or inconsistent ownership or asset records slow legal review.” |
|
Market Norm |
Buyers and lenders confirm that corporate, ownership, and asset documents match what’s being sold. Gathering these early prevents attorney back-and-forth and last-minute holdups. |
Takeaway:
You don’t need a corporate overhaul — just organization. Having clean digital copies of your entity docs and asset lists keeps attorneys focused on closing, not cleanup.
Closing
Most failed transactions come down to uncertainty, not unwillingness. The better organized, clearer, and steadier your business is during diligence, the easier it is for everyone to keep momentum.
Preparing these areas ahead of time doesn’t mean overhauling your operations — it simply shows transparency and consistency. That confidence keeps deals moving and helps sellers reach the closing table faster.
If you’d like to have a confidential discussion about your business, understand what buyers typically look for, or talk through where you stand today, click here to connect
If you're exploring the idea of selling — now or in the future — and want to understand what this process could look like for your business, I'm happy to have a conversation. Book your discovery call here.