What actually kills a business sale

A business sale that fails at the enquiry stage costs you a conversation. A business sale that fails four months in, after exclusivity, costs you legal fees, a quarter of management attention, the momentum of the process and, frequently, some of your staff.

The uncomfortable pattern is that the causes are almost always visible long before they bite. Here they are, roughly in order of how often they are the reason.

1. The owner is the business

The most common and the most fundamental. The buyer models the business without you in it and the model does not work, because the customer relationships, the pricing judgement, the supplier terms and the technical knowledge are all yours personally.

What it looks like early: you cannot take two consecutive weeks off. Every significant quote crosses your desk. Customers ask for you by name and will not deal with anybody else.

What to do: this is the one that needs twelve months, not twelve weeks. Hire or promote a manager. Introduce your customers to them, deliberately and early. Write down what is in your head. Then take a holiday and see what happens.

2. Add-backs that did not survive the buyer's accountant

You quoted adjusted profit of £310,000. Their accountant accepts £240,000. At a multiple of three, that conversation costs £210,000 and it happens in week five.

What it looks like early: an adjustment schedule you have not written down, or one where some lines are "roughly" a number, or where a cost the business genuinely needs has been treated as personal.

What to do: build the schedule before you go to market, evidence every line, and remove the ones you cannot defend. Quoting a lower number you can prove is worth more than a higher number you cannot. Our guide to add-backs sets out which survive.

3. The lease

A leasehold business is partly the landlord's asset. If the lease has three years unexpired, or is excluded from security of tenure, or has a change of control clause requiring consent, the buyer's willingness to proceed depends on somebody who is not in the room.

What it looks like early: you have not read the lease in full since you signed it, and you do not know whether it is inside or outside the Landlord and Tenant Act 1954.

What to do: read it. Take advice on it. If the term is short, open the conversation with the landlord about a renewal or an extension before you go to market, because the answer changes what you are selling.

4. Something found late that should have been disclosed early

A dispute with a former employee. An HMRC enquiry. A customer who has given notice. A piece of equipment under a finance agreement nobody mentioned.

The damage here is rarely the fact itself. It is that a buyer who finds an undisclosed problem in week six stops believing the rest of the picture, and begins looking for what else is missing. Some withdraw over facts that would not have troubled them at all if they had heard them at the start.

What to do: write down everything that could be described as a problem before you market the business. Disclose it in the information memorandum or early in the process. You lose nothing: a disclosed issue is priced into the original offer instead of being used to re-price a deal you thought was agreed. It also protects you legally, because a properly disclosed fact cannot later be a warranty claim.

5. Customer concentration

One customer at 40 per cent of revenue. It is a common shape in small business and it is not automatically fatal, but it is always the question.

What it looks like early: you know exactly who your biggest customer is and you have never worked out the percentage.

What to do: work out the percentage. Then prepare the answer: how long they have been with you, how many people at their end are involved, whether there is a contract and what its term is, whether there is a change of control clause, and what happened the last time they went out to tender. If you have twelve months, spend them reducing the number.

6. The buyer's funding does not arrive

An offer is not money. Lending decisions are made by credit committees who have not met you and who are assessing the buyer as much as the business.

What it looks like early: the buyer has not named their lender, cannot describe their deposit, or is vague about where the money comes from.

What to do: ask for evidence of funding before you grant exclusivity. Not as an insult, as a normal step. A serious buyer expects the question and has the answer ready. A buyer who is offended by it has told you something.

7. The numbers soften during the process

Selling a business takes six to twelve months of your attention. Businesses whose owner is distracted tend to underperform, and a buyer watching the monthly figures decline during due diligence has a real, defensible reason to reduce the price.

What to do: protect the trading. Delegate the deal where you can, to an adviser and to your accountant. Set aside specific time for it rather than letting it consume everything. This is another argument for building a management layer before you sell.

8. Chipping

A late reduction in the offer, after exclusivity, framed as a response to something discovered.

Some of it is legitimate. Sometimes due diligence genuinely finds a problem worth money. Some of it is tactical, and it works because at month seven a tired seller with committed fees and a business that has been off the market for weeks will often accept a 10 per cent reduction rather than start again.

What to do: three things. Prepare thoroughly, so nothing new is available to find. Negotiate the exclusivity clause so that an attempt to re-price for a reason not discovered in due diligence releases you. And decide your walk-away number early, in writing, before you are tired.

9. Shareholders who were not really on board

Four shareholders. The majority holder has been running the process. One of the others decides at week eight that the price is not enough, or that they want a different structure, or that they will not give the warranties.

What it looks like early: you have not actually had the conversation, in a room, with everyone who has to sign.

What to do: have it before you go to market. Check the articles and any shareholders agreement for pre-emption rights, drag along and tag along provisions. Get everyone's agreement to the process and the price expectation in writing.

10. Both sides run out of momentum

No single reason. The buyer's adviser takes ten days to reply. The seller takes a fortnight to find a document. The solicitors exchange four rounds of comments on a clause neither client cares about. Six weeks pass, then a summer holiday, and somewhere in there the deal stops feeling inevitable to both parties.

Deals that lose momentum are rarely rescued.

What to do: treat responsiveness as a term of the deal. Agree a timetable in the heads of terms. Have the document pack ready on day one so the buyer never waits. Chase your own advisers. Momentum is the thing a seller can actually control and most do not try.

The pattern

Nine of the ten are a preparation failure rather than a negotiation failure, and eight of the ten are visible before the business goes to market. The work that saves a sale is done in the six months before it starts, by an owner who went looking for the problems on purpose.

That is not a comfortable message, because it means the most valuable thing you can do about a deal collapsing is something you have to do a long time before there is a deal. It is still the accurate one.