If you’ve read my articles, you already know: I love stats. Stats cut to the chase. They give you the answer up front, and then you can work backwards to the ‘why’. Saves you time, saves me time, and frankly, keeps me from listening to someone talk in circles about “gut feelings” when the numbers already tell us the truth.
So here’s the stat that should make every business owner sit up a little straighter:
Only about 50% of businesses that go under contract actually make it to closing.
Yes, you read that right. Flip a coin, heads you sell your business, tails you waste months of your life, only to end up right back where you started (but more frustrated, with a file folder full of NDAs, and a buyer who ghosted you).
Why do half of these deals crash and burn?
Let’s break it down.
1. Misrepresented Financials & Over Market Asking Prices
You know that old saying: “Figures don’t lie, but liars figure”? Well, buyers can smell bad books from a mile away and overpriced businesses on the market.
* Understand the value of your business.
* Inflated sales, hidden expenses, “Oh, that’s just a personal expense we run through the business” (sure, Jan).
* Once the buyer’s CPA gets in there, if the story the numbers tell doesn’t match what you’ve been selling, game over.
Prevention tip: Get your financial house in order before you go to market. Normalized P&Ls, add-backs documented, clean tax returns. Otherwise, the deal dies the second someone pulls out a calculator. Have a business valuation completed as your step 1 from a professional in the business that actually sells businesses.
2. Financing Fiascos
Here’s the harsh truth: even if you have a buyer ready to sign, the bank still has to fall in love too. And banks are picky.
* Debt Service Coverage Ratios that don’t work.
* Unrealistic valuations.
* Collateral gaps the size of the Grand Canyon. If real estate is not part of the deal, there’s little collateral for a lender, which is a no go. Which is the reason majority of deals involve seller financing.
Prevention tip: A good broker (hi, that’s me) already knows how to package the deal and get ahead of any pitfalls so they never exist for your deal. Education, understanding and prep is where the butter is. The more you know💡.
3. Buyer Cold Feet
Sometimes the buyer just… freaks out. It’s like engagement season on social media: all sparkly excitement at the start, but halfway through due diligence they realize, “Oh wait, I’m committing to this forever.”
* Fear of taking on debt.
* Spouse gets nervous.
* They read one too many Reddit threads about why “small businesses are scams.”
Prevention tip: Serious buyers are prepared buyers. They have capital lined up, they’ve done their homework, and they understand what it takes to run the business. Vet them up front, don’t hand over your livelihood to a looky-loo with champagne dreams and beer budgets.
So, How Do You Beat the Odds?
* Preparation. Your financials, your operations, your story—tighten them up before you ever let a buyer peek.
* Realism. Price it based on your market valuation, not what you hope your retirement fund will look like.
* Professional Guidance. This is where I shamelessly plug the fact that I do this for a living and have for over 27 years. You wouldn’t defend yourself in court without a lawyer; why try to sell your biggest asset without an advisor?
The stat is what it is: only half of deals close. But stats aren’t destiny. With the right prep, the right representation, and a little less “winging it,” you can tilt those odds in your favor.
