If you’re planning to sell your business in the next 12-24 months, you need to know what buyers actually care about—and what kills deals or drives down valuation.
Many business owners believe that revenue and profit are the most important factors in determining a company’s worth. While financials matter, sophisticated buyers pay just as much attention—if not more—to risk factors that could make the business difficult to sustain or scale after acquisition.
The good news? You can address these valuation killers before they impact your exit. The Scaling Up framework provides a structured playbook for reducing risk, improving operations, and making your business a more attractive acquisition target.
Here are the top five valuation killers that can sink your deal or force you into an unfavorable earn-out—and what you can do to fix them.
- Owner Dependency: The Business Can’t Run Without You
Why This Kills Valuation
If your business relies too heavily on you, the owner, buyers will see it as a high-risk acquisition. They don’t want to purchase a job—they want to buy a self-sustaining system that generates profit without your direct involvement.
How to Fix It
- Build a leadership team that can run the business without your daily involvement.
- Document key processes so that decision-making isn’t reliant on tribal knowledge.
- Develop repeatable systems for sales, marketing, and operations to ensure continuity.
💡 Scaling Up helps you create a leadership structure, accountability systems, and operating rhythms so your business runs like a well-oiled machine—even in your absence.
- Messy Financials: Unstructured or Unreliable Books
🚨 Why This Kills Valuation
Buyers need clean, transparent financials to assess risk and project future performance. If your books are messy, incomplete, or inconsistent, due diligence will be a nightmare—and deals will fall apart.
How to Fix It
- Use accrual-based accounting and ensure GAAP-compliant financials.
- Clean up your profit & loss (P&L) statement, balance sheet, and cash flow reports.
- Eliminate personal expenses running through the business that distort true profitability.
- Create financial dashboards to track revenue, margins, and key performance indicators (KPIs).
💡 Scaling Up ensures financial discipline by implementing clear reporting systems and cash management strategies so buyers see a business they can trust.
- Customer Concentration: Too Much Revenue From a Few Clients
🚨 Why This Kills Valuation
If more than 10-20% of revenue comes from a single client, buyers see huge risk. If that client leaves, the business could collapse, making it too risky to acquire at full value.
How to Fix It
- Diversify your client base by acquiring new customers in different industries or sectors.
- Strengthen contracts and recurring revenue streams to stabilize cash flow.
- Develop marketing and sales systems that ensure consistent new business development.
💡 Scaling Up’s strategy framework helps you identify growth opportunities and reduce reliance on a handful of clients—making your business more resilient and valuable.
- Poor Operational Execution: No Scalable Systems in Place
🚨 Why This Kills Valuation
A business without standardized, scalable processes is difficult to transition to new ownership. Buyers don’t want to inherit inefficiencies, inconsistent service delivery, or operational chaos.
How to Fix It
- Develop and document standard operating procedures (SOPs) for core functions.
- Implement key performance metrics to measure execution and efficiency.
- Create a rhythm of meetings and accountability structures to ensure alignment.
💡 Scaling Up helps businesses implement structured execution models so operations become predictable, efficient, and easily transferable to new owners.
- Cash Flow & Profitability Issues: Growth That Consumes Cash Instead of Generating It
🚨 Why This Kills Valuation
Revenue growth means nothing if it’s accompanied by poor cash flow management. Buyers look for consistent profitability and strong free cash flow—not a business that needs constant capital infusions.
How to Fix It
- Shorten your cash conversion cycle by improving invoicing and collections.
- Strengthen gross margins by optimizing pricing and reducing costs.
- Create a financial model that projects stable and growing profitability.
💡 Scaling Up provides cash management strategies to ensure financial health and strong valuation in an acquisition.
What Happens If You Don’t Fix These Issues?
If these issues aren’t addressed before going to market, you risk:
❌ Lower Valuation – Buyers discount businesses that present operational or financial risks.
❌ Longer Sales Timelines – A business that isn’t prepared can take 18-24+ months to sell instead of 6-12 months.
❌ Unfavorable Earn-Outs – If buyers lack confidence in stability, they may tie your payout to future performance, keeping you tied to the business for years.
❌ Deal Breakdowns in Due Diligence – Many transactions fall apart because of surprises found in financials, operations, or customer contracts.
How CoreFour Advisors Can Help You Fix These Issues
If you’re thinking about selling your business in the next 12-24 months, the time to address these valuation killers is now. Buyers want scalable, transferable businesses—not ones with hidden risks.
At CoreFour Advisors, we specialize in helping SMB owners implement Scaling Up so they can eliminate these risks and maximize their exit value. Whether your goal is to sell, transition to a successor, or step away from daily operations, we can help you build a stronger, more valuable business.
