Many business owners dream of selling their business for a high price. But what most fail to see is the reality of buyer risk.
A buyer is not just buying your business. They are buying your risks, your cash flow, your client relationships, your team’s stability, and your industry’s future. If they do not see a clear path to a return on investment, or if lenders do not see enough cash flow to support a loan, your business will sit on the market unsold.
Let me give you a real-world example.
We recently reviewed a service business doing about $3 million in annual sales. The seller wanted to price the business at $4.5 million, thinking the client relationships, team, and reputation were enough to justify the price. On the surface, it sounded good. But when we broke it down from a buyer’s perspective, the math did not add up.
At a $4.5 million purchase price, a buyer putting down 10 percent would need to invest $450,000 upfront. Financing the rest through an SBA loan at 10 percent over 10 years, the monthly payments would be around $59,000. The business’s true, normalized discretionary earnings were about $500,000. That gave a debt service coverage ratio barely over 1.0—far too thin for a lender to approve.
The seller was focused on what they wanted, not what the market could support. Buyers and banks would walk away because the risk was too high, and the business simply would not sell at that price.
This is where understanding buyer risk changes everything.
Buyers evaluate:
The cash flow and whether it covers the loan
The amount of down payment required
The risk of losing key customers or employees
The industry’s stability and growth potential
The ability to replace the owner’s role
If the numbers do not work, the deal does not happen.
That is why we take a buyer-first approach. We prepare clear, normalized financials that are ready for lenders. We analyze buyer risk based on down payment, loan terms, and DSCR. We flag any operational or financial risks early so they can be addressed before going to market.
Finally, we structure deals that make sense—blending down payments, seller notes, and earnouts to bridge the gap between what a seller wants and what a buyer can afford.
Here is the bottom line.
If you do not think like a buyer, your business may sit on the market for months, even years, with no real offers.
If you want to sell, you must understand buyer risk, structure your deal accordingly, and make it financeable.
That is the difference between a business that sells and a listing that sits.