Selling a Business: It May Be Profitable, But…
12 October 2026
..is it sellable??
You’ve spent 25 years building a successful business. Sales are strong, profits are healthy, and you’ve developed an excellent reputation in your industry. Now, you’re ready to retire.
Based on the company’s earnings and the multiples generally applied to businesses like yours, you believe it’s worth $5 million, and you put it on the market.
Buyers express interest. They review the financial statements. They like what they see. But as they begin asking questions, something troubling becomes apparent.
The business may be profitable, but it’s not particularly transferable. And that can become a serious problem.
Profitability Isn’t the Same as Sellability
One of the most common misconceptions among business owners is that a profitable business will automatically be attractive to buyers.
Profitability is certainly important. After all, buyers generally acquire businesses because they expect to earn a return on their investment.
But there’s another question that’s equally important: Will those earnings continue after the current owner leaves?
Suppose a business generates $750,000 in annual discretionary earnings. On paper, that’s an attractive acquisition.
But what if the owner personally manages the company’s largest customers, negotiates all significant supplier contracts, supervises every department and makes virtually every important operating decision?
What happens when that owner walks out the door?
We offer a comprehensive coaching program – both group and 1:1 options – in The Brokers Roundtable℠, our online support platform tailored for business owners, business brokers, Realtors, buyers and anyone else interested in valuing, buying or selling a business.
That’s what buyers want to know.
The Owner-Dependency Trap
Many entrepreneurs become victims of their own success.
They started the company, developed its products or services, established customer relationships, hired employees and built the business into a profitable operation. Over time, they became indispensable.
Unfortunately, being indispensable isn’t necessarily a good thing when it’s time to sell.
Consider a manufacturing company whose owner is personally responsible for estimating every major job. Nobody else understands the estimating process well enough to assume that responsibility.
Or a distribution company where the owner maintains personal relationships with customers representing 60% of annual revenue.
Or a professional services firm where virtually every important client expects to deal directly with the founder.
Each business may be highly profitable.
But each presents a significant risk to a buyer.
The buyer isn’t simply acquiring a company. He’s acquiring a company that may struggle to function without its current owner.
Due Diligence Exposes the Problem
During due diligence, sophisticated buyers investigate much more than financial statements.
They want to understand how the business operates.
Who manages employees? Who handles major customer relationships? Who negotiates contracts? Who makes purchasing decisions? Who is responsible for sales? Most importantly, who will perform these functions after closing?
If the answer to most of those questions is “the seller,” the buyer has a problem.
Our video, on how the value of a business’ assets might add to the value of a business, is HERE on our YouTube channel.
The buyer may need to hire additional management, retain the seller for an extended period or accept the risk that important customers and employees could leave.
Each possibility has a cost. And those costs will affect what the buyer is willing to pay.
The Impact on Business Value
Owner dependency can affect a transaction in several ways.
- First, buyers may apply a lower multiple of earnings because they perceive greater risk.
- Second, they may require the seller to remain involved for an extended transition period.
- Third, they may propose an earn-out, making part of the purchase price contingent on the business maintaining its performance after closing.
They might also require significant seller financing.
Check out our video series on business valuation, “How Much is My Business Worth“ on our YouTube channel.
In extreme cases, buyers may simply walk away.
Think about that. You could spend decades building a profitable company, only to discover that the very thing that made it successful—your personal involvement—has become one of the biggest obstacles to selling it.
How to Make Your Business Transferable
Fortunately, owner dependency is a problem that can often be corrected. But doing so takes time.
Start by developing management. Identify capable employees and give them meaningful responsibilities. If necessary, hire experienced managers who can assume functions currently performed by the owner.
Document your systems and procedures. Important business processes shouldn’t exist only in the owner’s head. Create written procedures for estimating, purchasing, customer service, production and other critical activities.
Transfer customer relationships. If customers deal exclusively with you, begin introducing them to other members of your team. Make sure their loyalty is to the company rather than solely to you.
Delegate decision-making. Allow managers to make decisions, solve problems and develop confidence. A business that requires the owner’s approval for everything isn’t truly independent.
And perhaps most importantly, give these changes time to work.
___________________________________________________________________________________________________
Our 14-part series of video shorts, “How to Buy a Business”, is available here.
Buyers will be more comfortable with a management team that has successfully operated the business for two years than one assembled three weeks before the company goes on the market.
The 90-Day Test
Here’s a simple exercise every business owner should consider.
Suppose you decided tomorrow to take a 90-day vacation. No telephone calls. No emails. No checking in with employees.
Would your business continue operating successfully? Would customers still receive the same service? Would employees know what to do? Would sales and profits remain relatively stable?
Or would everything begin falling apart?
If your business can’t operate without you for 90 days, imagine how a buyer will feel about purchasing it if you’re not part of the acquisition.
The Bottom Line
When preparing a business for sale, owners naturally focus on increasing revenue, improving profitability and cleaning up their financial statements.
All of those things matter. But there’s another objective that deserves just as much attention:
Build a business that can thrive without you.
A buyer isn’t purchasing your past accomplishments. He’s purchasing the expectation of future earnings. And the more confident he is that those earnings will continue after you leave, the more attractive—and potentially more valuable—your business becomes.
Remember: The most valuable business isn’t necessarily the one making the most money today. It’s the one most likely to keep making money after its owner is gone.
“If you are not willing to risk the usual, you will have to settle for the ordinary.”
– Jim Rohn, motivational speaker, author
If you have any questions or comments on this topic – or any topic related to business – I’d like to hear from you. Put them in the comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast.
I’ll be back with you again next Monday. In the meantime, I hope you have a safe and profitable week.
Joe
Searching For…
NOTE TO READERS: Our “Searching For…” feature has been moved to our online community, The Brokers Roundtable℠. It will appear there exclusively from now on.
#business #businessacquisition #sellabusiness #becomeabusinessbroker #businessbrokering #businessvaluation #MergersandAcquisitions #buyabusiness #sellabusiness #realtor #realestateagents
The author is the founder of Worldwide Business Brokers and holds a certification from the International Business Brokers Association (IBBA) as a Certified Business Intermediary (CBI) of which there are fewer than 1,000 in the world. He can be reached at jo*@*******************og.com
