From the time you decide to sell your business, to the time the deal is sealed, there are countless considerations in preparation for today’s competitive market – especially awareness of how buyers will assess the value of your business. While all buyers have different expectations and standards, Osage has identified 10 common denominators that devalue a company and increase risk of jeopardizing a sale. Here are the first five:


“Concentration” is when a company relies heavily on one customer or vendor to consistently drive revenue. Many buyers consider this to be a value-killer because it raises skepticism around whether that one customer will continue to play a big part in the business’s success if you, the owner, are gone. Likewise, having a broad vendor base plays a key role in the value of your business, especially now that the world is undergoing a supply chain issue. From the start, be sure to have multiple vendors from around the world that you can rely on to offset trouble for your business down the road.

Non-Recurring Revenue

Companies that are project-based, meaning they work on specific jobs that have an end date, may potentially have a negative impact on the valuation of a business. Although these types of businesses have been historically successful, a buyer prefers to see that there is a consistent stream of revenue that is reliable and recurring to drive future growth. Typically, buyers are most comfortable if the company has several contracts on the books that are strategically aligned with the buyer’s business and that span multiple years.

Owner Dependency

Prior to jumping into the market, sit back and reflect on whether your company is dependent on you, the owner, to yield growth. Owner dependency increases the risk of a sale price that is lower than what you may have expected. In the buyer’s eye, the goal is to acquire a business with a strong management team and skilled labor force. Look to build a talented and strong group of employees and have key positions, such as Sales, Production and Finance, filled before going to market. Buyers purchase companies not only for their product, but also for their talent; each employee, no matter what position, should have the skill set and impact to drive revenue.

No Reported History of Earnings

Unfortunately, the pandemic caused many companies to have some tough years and the  inability, or slow return to historical revenue and profitability levels. This situation will put your business at risk of receiving a lower value than you expect. Even if you were able to bring back all revenue, or more than you lost, some buyers might still conclude that not enough time has passed since the end of the pandemic to get them comfortable. Demonstrating to buyers that you have a proven track record of accomplishment during and after the pandemic, will help a buyer envision how well your company’s economic formula aligns with their own.

Lack of Financial Information

Another common devalue in a transaction is the inability to provide the buyer with reliable, accurate, and up to date financial information. A buyer will ask you to prove your financials during the due diligence period so it’s best practice to be more than prepared. Financial examples you should bring to the table are CPA prepared financial statements, monthly internal financials for the past several years, and tax returns. If you do not have these documents prepared, you can always hire a reputable firm to do a sell-side quality of earnings report to assist in verifying your financials. Do whatever you can to prove that your business is worthy of a high sale price.

Have you considered the above? Now that you’re aware of five common denominators that devalue transactions, it’s time to reflect on your business. The earlier you devote your attention to these common issues, the better. Each one plays a critical role in a successful deal, but keep in mind that one does not sit higher on the list than another.

Stay tuned for when we discuss the next five common denominators that devalue a deal in the near future.

Osage Advisors provides a lot of guidance in the M&A market here on our blog and on our YouTube channel and Podcast.