A divorce forced the sale. Buyers came and looked, and what they found was a business that was really one man. His judgement, his relationships, his sense of how the work actually got done. There was nothing to hand over.
No buyer could see how it kept running once he walked out, because it wouldn't have. He closed it instead and walked away with nothing.
Thirty years building something rare, in a niche you could not recreate today with any amount of money. Both networks the business runs on are tied to him personally. The clients call him, and the subcontractors who do the work answer to him. His senior people have all moved on and the institutional knowledge went with them.
His wife wants to retire and he wants to travel. He has had the business valued and he is hoping for a clean cash sale. That offer is unlikely to arrive, because nobody has been groomed to take his place and a buyer would be paying for a network that leaves with him.
He found a buyer, agreed a price and went under contract, and the number on the offer was life changing. He told people the business had sold. What he had not weighed was how little of that number was cash at close.
Most of it sat behind an earnout tied to performance in a business he no longer controls, plus money held back against his customers staying put. He is two years in and still working, and on current form he will collect pennies on the dollar against the number he thought he had agreed.
These are three real situations, and none of the men in them thought it would go this way. None of these are stories about bad luck or bad lawyers. All three problems were fixable, and none of them was fixable by the time it mattered. That is the difference between working on this early and dealing with it when something forces your hand. Reactive costs money. Proactive costs time, and time is the one thing every one of these owners had plenty of, right up until they didn't.
What happens when owners go to market
The Exit Planning Institute puts it plainly. Only 20 to 30 percent of businesses that go to market actually sell. Four out of five owners who list never find a buyer, and it gets worse the smaller you are.
What kills those deals is not usually the business. It is four things, and if you have ever run a Pareto chart you already know what comes next.
Share of failed sales attributed to each cause. Source: DueDilio analysis drawing on Exit Planning Institute data.
Three causes, eighty percent of the failures, and they are all the same root problem wearing different clothes. Fix one and you have moved the other two.
The valuation is unrealistic because the owner priced a business the buyer cannot see running without him. The documentation is poor for one of three reasons. It was never written down. It was written down years ago and no longer matches how the work is actually done. Or it exists and it captures the steps but not the judgement, so it reads like a manual for a job nobody could actually do from it. Twenty years of knowing which customers to chase and which jobs to walk away from does not fit in a procedure, and most owners do not realise how much of that they are carrying until somebody asks them to hand it over.
And the third cause is not a separate item at all. It is the reason for the first two.
A broker will tell you the same thing from the other side. Buyers and lenders do not know how your business runs, so they rely on the documentation. Then they look at your people. They ask who handles each major account, they read your reporting lines, and they test whether your team actually knows the business or simply takes direction from you. What they are looking for is spread. Decisions, relationships and knowledge held across a team rather than concentrated in one person. When all of it runs back to the owner, the buyer is not looking at a business with a strong leader. He is looking at a single point of failure, and he prices it as one.
What it costs
The discount never appears on your profit and loss. That is exactly why owners do not see it coming.
Illustrative. Analysis of closed deals across thirteen service industries found owner-dependent businesses selling at a discount of one to two turns of earnings. Appraisers put the same effect at 10 to 40 percent of value.
Same profit, same customers, same trucks in the yard. Two million dollars of difference, and none of it is performance.
You do not choose the terms you qualify for them
Here is the part almost nobody explains to an owner before he accepts an offer and signs a term sheet.
An earnout exists to bridge the gap between what the seller thinks the business is worth and what the buyer will pay today. In roughly one in five tracked transactions the two sides cannot agree a price at closing, so part of the money moves into the future and hangs on what happens after the sale.
That gap is the buyer's uncertainty. When the business depends on you, you are the uncertainty. The terms are not a punishment for negotiating badly. They are the buyer pricing a risk you handed him. And it is rarely one lever. Buyers hedge in three places at once, with a lower multiple, an earnout tied to numbers you no longer control, and money held back against customers staying.
Across all deals with an earnout, payouts come to roughly 21 cents on the dollar, rising to about 50 cents among only the deals that paid anything at all. Smaller deals do worse than the average. Source: SRS Acquiom, which administers these transactions.
Terms are what you accept when the buyer cannot tell whether he is purchasing a company or purchasing you.
The clock is not yours to set
Most owners do not pick the date. Divorce picks it, or a diagnosis does, or a spouse who has waited long enough. And most owners know this is coming and do nothing about it. Exit Planning Institute research found 53 percent of owners with no written transition plan and only 32 percent with a documented exit plan at all. Among the generation closest to the door, only 27 percent have completed a formal valuation.
There is a fair counter-argument that this is a slow trickle rather than a wave, and that owners are working later than they used to. More runway is good news. It does not change the discount, and it did not help the man whose wife has already decided.
Six questions
None of this needs a consultant to answer. Sit with these on your own.
- If you were unreachable for ninety days starting tomorrow, what stops first?
- Which customers would ask for you by name, and how much of your revenue do they represent?
- Who else can price a job and be trusted to get it right?
- Where is any of that written down, in a form somebody else could follow?
- How many of the relationships this business runs on exist only in your phone?
- Could your team run next Tuesday without asking you a single question?
If the honest answers made you uncomfortable, that is useful. That gap is the difference between what you have built and what somebody would pay for it.
Fixing it means shifting what depends on you into the business itself, where it becomes an asset a buyer can see, value and take on. Documented processes, relationships the company owns, people who can decide without you. That work takes years rather than weeks, and every year of it adds to what the business is worth. It is the most reliable exit strategy there is, and the only one that also makes the business better to own in the meantime.
Start it today and you keep your options. Leave it, and you end up choosing between the three men above.