The Deal That Stopped at Question One

deal stories Jun 08, 2026

I looked at a deal recently that, on the surface, checked most of the boxes I look for.

A services business with revenue in the mid-eight figures. Stable performance for several years running, even in a soft year for the category. Asset-lite, with all the work executed through subcontractors. Multi-location. The asking multiple wasn’t a stretch. No major competitors of size in the region.

On paper, this looked like a business worth serious diligence.

I walked.

This is a Deal Stories post about why.

What looked good

The numbers were clean enough at first glance. The asking multiple wasn’t a stretch in this category. The revenue stability was genuinely impressive. The category had a soft year and the business still produced near its three-year average. That tells you something real about the sales infrastructure.

The structure also looked thoughtful. A multi-tier sales organization with branch leaders who had earned their roles by hitting clear revenue milestones. A senior operator sitting above them, functioning effectively as a GM. A roster of W-2 commission-only sales reps following a defined career path with revenue triggers at each promotion.

If you stopped reading the CIM at page seven, you’d think this was a buyable business.

What was underneath

The first thing that caught my eye was a single sentence in the owner’s section. The owner spent his time on recruiting, weekly KPI meetings, sales rallies, rep training, and motivating the team. He openly admitted that operations was not his strength and was looking for a partner who could handle that side.

Stop and read that again.

The owner wasn’t running operations. The senior operator was. The owner was running the sales engine. And in this business, the sales engine wasn’t a department. It was the entire business. There was no recurring revenue. No contracts. No maintenance agreements. Every dollar came from new sales every month, generated by reps the owner personally recruited, trained, and motivated.

Then I looked at the rep concentration. A small handful of reps drove the vast majority of commissions. A couple of individuals drove a meaningful share of total company revenue. These were the people the owner personally mentored. These were the people who showed up week after week because the owner ran the rallies.

So the question became: what happens to those reps if the owner leaves?

I couldn’t answer that question with any confidence. And that’s when I stopped.

What about the transition offer?

The owner had offered to stay on for an extended phased transition, or stay indefinitely in a senior sales leadership role. That sounds like it solves the problem. It doesn’t.

Here’s the issue. When a seller offers to stay, you have to ask yourself two questions. First: do you actually trust they’ll stay? Second: what happens if they don’t?

The first one is hard. People offer multi-year transitions and leave at month fourteen. They have a health issue. Their spouse gets a job in another state. They get bored. They have a fight with the new owner. None of these are theoretical. I’ve seen all of them. An employment agreement reduces the risk. It doesn’t eliminate it.

The second question is harder. Even if the owner stays the full transition period, what does the buyer have at the end of it? If the new buyer hasn’t built an independent sales leadership layer in the meantime, they’re back where they started. The owner leaves and the sales engine starts to wobble. The revenue follows.

To make this deal work, a buyer would need to do two things in parallel. Keep the owner engaged and producing for the bulk of the transition, and simultaneously build a true sales leadership function underneath him to take over. That second part is where this kind of deal dies. Sales cultures don’t transfer easily. A-players follow A-players. The reps in this business signed up to work for this owner. A new sales leader walks in and a quarter of those reps start taking calls from competitors within 90 days. That’s not paranoia. That’s just how this works.

I couldn’t get comfortable with that risk at this price.

Why nothing else mattered

There were other flags in the deal. The financials had an unusual add-back I wanted to dig into. The balance sheet had some movement that needed an explanation.

None of it mattered.

When the central question of a deal is “does this business still produce revenue if the owner walks,” and the honest answer is “probably not, at least not at the same level,” the rest of diligence is academic. You’re not finding flaws in a buyable business. You’re finding additional reasons not to buy a business you already shouldn’t buy.

Owner dependency isn’t one risk among many. It’s a gating risk. If a buyer can’t underwrite revenue continuity post-close, every other piece of diligence is decoration on a deal that doesn’t pencil.

What this means if you’re the seller

Most owners reading this won’t see themselves in the story until it’s too late. They think their team will just keep producing because the team is great and the systems are good. Sometimes that’s true. More often, the team is great because the owner is great. The systems work because the owner enforces them. The culture exists because the owner shows up every week and makes it exist.

If that’s your business, the work isn’t finishing the CIM. The work is building a layer of leadership that survives without you. When clients hire me, this is almost always the longest conversation we have, because it’s the hardest work. It takes 12 to 24 months minimum, and it should start years before you list. By the time a buyer is asking the question I asked, it’s far too late to fix.

As of this writing, that deal is still on the market. I didn’t even get to the rest of the diligence. Maybe it would have been fine. Maybe there were more issues underneath. I’ll never know. The deal stopped at question one.