What a buyer discounts before price comes up.

Owners tend to think of a sale as a negotiation about price. Buyers think of it as a series of risk questions, and the price is what falls out of the answers. That difference in framing is why so many owners are surprised by an offer: they were preparing an argument, and the buyer was running a checklist.

1. Customer concentration

If one client is twenty per cent of revenue, a buyer is not purchasing your business. They are purchasing a relationship they have never met, held by someone who is about to be paid and leave.

There is no presentational fix. The only remedy is a broader base, and broadening a base takes years, not months. What can be done sooner is to reduce the fragility of the concentration: multi-year contracts rather than rolling ones, relationships held by more than one person, and a written record of why the client stays that does not rest on the founder’s judgement.

A useful test: if your largest client’s main contact left tomorrow and was replaced by a stranger, would the account survive on its merits? If the honest answer is “probably, because of the relationship”, that is the risk being priced.

2. Owner dependence

This is the one owners most consistently underestimate, because from inside it does not feel like dependence. It feels like competence.

The questions a buyer is really asking are narrow and specific. Who approves pricing exceptions? Who is called when a delivery goes wrong at nine in the evening? Whose personal relationships hold the top five supplier terms? If the answer to more than one of those is the owner, the business is a job with staff attached, and it is valued accordingly.

The test is not whether you could take a fortnight off. It is whether the business would make the same decisions in your absence, and whether anyone would know what those decisions were.

Fixing it means writing down the judgements, not just the processes: the pricing floor and why it is there, the criteria for accepting a difficult client, the reasoning behind the supplier arrangement. Eighteen months is a realistic timeframe. Six is not.

3. Contract quality

Revenue that recurs is worth considerably more than revenue that merely repeated. Buyers distinguish sharply between the two, and many owners present the second as the first without realising the distinction is being made.

• Are the contracts written? Long-standing arrangements on a handshake are common and are treated as month-to-month.
• Do they survive a change of control? A change-of-control clause that lets a client walk on sale is a direct deduction.
• Is pricing defined, with a mechanism to raise it? Contracts with no uplift clause cap future margin, and that cap is priced in.
• Do they say what happens on renewal? Auto-renewal with notice is worth more than an annual conversation.

Of the four things on this page, contract quality is the most improvable in a short window, because it is largely administrative. It is also the one most often left until diligence, when there is no time.

4. Margin durability

A buyer will ask what happens to your margin if a key input cost rises ten per cent, or if your largest client asks for five per cent back. If nobody has modelled either, the answer is guessed, and guesses are discounted.

What demonstrates durability is not a high margin. It is an explained one: margin analysed by product, channel and customer, with the reasons legible. A business that can show which twenty per cent of its revenue produces most of its profit, and why, is describing a machine. One that reports a single blended figure is describing a hope.

The timing problem

These four are ordered above roughly by how long they take to fix. Contract quality can be improved in a quarter. Margin analysis takes a quarter to build and a year to act on. Owner dependence takes eighteen months to two years. Concentration takes as long as it takes to win the customers.

Which is why exit readiness work that begins six months before a process starts is limited to presentation, and why we suggest eighteen to thirty-six months. The point of starting early is not to prepare a better story. It is to still have time to change the facts.

Worth doing even if you never sell

Every item on this page describes a business that is more robust to run, not merely more saleable. Less concentrated revenue, decisions that do not queue behind one person, contracts that hold, margin you can explain: these are the characteristics of a business that survives a bad year.

The sale is simply the moment somebody else audits them.

This reflects how we approach exit readiness and capital engagements. It is general guidance rather than advice on your circumstances, and it is not regulated financial advice. See our disclaimer.