A seller may want a certain price for their business.
A buyer may find the perfect business and agree with the asking price.
Both sides can reach an agreement and move forward.
And the transaction can still fall through… why?
Because between intent and closing, there is one question nobody can bypass:
Will the buyer make money?
If the answer is unclear — or worse, if the answer is no — there will be no financing.
And without financing, can there be a deal?
What many sellers underestimate
When an owner thinks about the sale price, they naturally think about themselves.
About their net vs. gross, their retirement, and their family: that is normal.
But a serious buyer looks at the transaction differently.
They are not only asking: “Do I like this business?”
They are also asking:
- Can I finance this acquisition?
- Will the business cover its debt service?
- Will there still be enough profit to absorb surprises?
- How long to repay the debt?
- How long to recover my down payment?
In other words, a business does not only need to be attractive.
It is obvious that nobody wants to pay to lose money.
A transaction needs to generate returns.
The bank’s role
In many files, the lender acts as the safeguard.
As serious as the buyer and seller may be, the lender imposes the financial rules.
Because if the financing does not hold, the deal is at risk.
The bank does not finance a dream.
It finances repayment capacity.
What it wants to understand is fairly simple:
- how much the business will generate after normalization;
- how much the debt will cost;
- what expenses will need to be added or reviewed after the seller’s departure;
- and how much safety margin will remain once everything is paid.
If the buyer has to pay too much relative to the available profit level, the equation is broken.
And when the equation does not work, one of three scenarios typically occurs:
- the bank pulls out;
- the transaction falls through;
- the buyer renegotiates downward.
In all three cases, the seller is left disappointed.
Managing expectations and the right LOI
“If we find the right buyer, they’ll pay.”
Maybe.
But paying — does that involve financing?
In a recent file, the defendable value was around $2.7M.
The seller wanted more.
Our auction process, conducted among qualified buyers, led to three offers being submitted.
One of the offers exceeded $3 million — what to do?
The price is better, but will the buyer pass the financing stage?
Worse, will they revise their price downward at the last minute?
Choosing the right buyer to close a transaction does not always mean taking the highest price — there are several other factors to consider.
Are all the offers received realistic?
Will they pass the financing stage?
Knowing the fair market value of your business can help you decide which offer to accept.
At this stage, you want to make an informed decision.
Understanding the financing rules that will govern your transaction is valuable.
By knowing the fair market value, you know what financial structure is realistic.
That can make the difference between choosing the winning horse and one that will not finish the race.
A satisfied seller
If you want to maximize your chances of closing, you need to accept a simple reality:
The best price is the one that leads to a closed transaction.
Fair market value is often the best indicator of that price.
It can be used to calculate the net remaining after the transaction.
That is useful for planning your retirement.
If the numbers work and you feel ready, you can begin the sale process.
And if there is a gap, you work a bit longer to accumulate additional profits to reach your retirement objectives.
In both cases, you are in control.
Understanding the fair market value of your business allows you to make that kind of decision.
Because we understand that a successful transaction depends on buyer profitability.
That is good for the continuity of the business you built.
It is also good for your employees, suppliers, and clients who will benefit from the fair and winning context you will have left for the buyer.
Good selling.
Key takeaways:
- An interested buyer is not enough — they still need to finance the acquisition and remain profitable
- The bank is looking at repayment capacity, not just enthusiasm around the deal
- An asking price that is too high can kill a deal even when both sides want to move forward
- Thinking about buyer profitability also protects the seller by improving the real odds of closing
