You built a business worth $8M. You found a buyer. The LOI is signed. Then the buyer's accountants open your books — and the deal falls apart in six weeks. This happens more often than most owners realize, and it almost never has to.
It's rarely about price
Most owners assume deals fail because the buyer offers too little or the seller asks too much. That does happen. But from what we've seen, the majority of failed deals collapse in due diligence — after both sides have already agreed on a number.
The buyer's team digs into the financials and finds problems. Not fraud. Not catastrophic issues. Just enough inconsistency, missing documentation, and unexplained entries to erode confidence. And once confidence is gone, the deal is gone.
The five things that kill deals
These aren't edge cases. We see them in almost every engagement where a business owner comes to us mid-sale — or worse, after a deal has already cratered.
1. Unreconciled accounts
If your bank accounts haven't been reconciled monthly for the last two years, that's the first thing a buyer's CPA will flag. It doesn't matter if the numbers are close. Close isn't good enough when someone is writing a check for your company. Every unreconciled month is a question mark, and question marks cost you money.
2. Owner expenses buried in the P&L
The personal car payment running through the business. The family vacation coded as a "company retreat." The country club membership. Every owner does some version of this. The problem isn't that these expenses exist — it's that they aren't documented and separated. Buyers expect to normalize EBITDA by adding back owner perks. But they can't add back what they can't identify. Undocumented personal expenses make your real earnings look lower than they are.
3. Revenue recognition issues
You recognize revenue when the invoice goes out. Or when cash hits the bank. Or when the project starts. If the answer is "it depends on who was doing the books that month," you have a problem. Inconsistent revenue recognition means the buyer can't trust your top line. And if they can't trust revenue, they can't trust anything below it.
4. No supporting documentation
A buyer's team will ask for: contracts, lease agreements, loan docs, vendor agreements, customer contracts, tax returns, and bank statements going back 2-3 years. If you can't produce these within a week, you look disorganized — or worse, like you're hiding something. Due diligence moves fast. When you can't keep up with document requests, the buyer starts discounting.
5. Unexplained adjustments
Journal entries with no description. Large year-end adjustments that shift $200K between accounts with a memo that says "correction." Balances that don't tie between periods with no explanation. Each one of these triggers a question. Questions lead to follow-up requests. Follow-up requests lead to delays. Delays kill momentum. And dead momentum kills deals.
What this actually costs you
When a buyer finds problems in due diligence, one of three things happens — and none of them are good.
- They re-trade the price. The original offer was $8M. Now it's $6.5M because they "found risk" they didn't account for. You're three months into the process and emotionally committed. Most sellers take the haircut.
- They walk. The deal dies. You're back to square one, except now you've been off the market for four months and your team knows something was happening.
- They add an escrow or holdback. Instead of clean proceeds at close, $500K-$1M sits in escrow for 12-18 months while "outstanding items" get resolved.
In every scenario, you leave money on the table. The gap between a clean deal and a messy deal is typically 10-20% of the purchase price. On an $8M sale, that's $800K to $1.6M.
How to fix it before you list
The good news: every one of these issues is fixable. The bad news: it takes time. Start 6-12 months before you plan to go to market.
- Reconcile everything. Bank accounts, credit cards, loans, AR, AP. Current month first, then work backward. Two years of clean reconciliations is the minimum for most buyers.
- Separate and document owner expenses. Go through the last 2-3 years. Identify every personal expense running through the business. Create a schedule. Label each one clearly. This becomes your EBITDA normalization schedule and it's one of the first things a buyer will ask for.
- Standardize revenue recognition. Pick a method. Document it. Apply it consistently going forward. If past periods are inconsistent, restate them with a clear explanation of the methodology change.
- Build a document room. Create a folder structure with every document a buyer will request. Contracts, leases, tax returns, bank statements, insurance policies, employee agreements. Having this ready before you go to market is the single biggest accelerator of a smooth sale process.
- Clean up journal entries. Review every entry over $10K for the last two years. Add descriptions where missing. Document the business reason for large adjustments. If you can't explain an entry, research it and fix it now — not when a buyer is asking.
When to get help
If your books are current and mostly clean, you can probably handle steps 4 and 5 yourself with your existing accountant. But if you're sitting on a year or more of unreconciled accounts, mixed-in owner expenses, and no documentation — and you want to go to market in the next 12 months — you need someone who does this full-time.
The cost of professional sale preparation is a fraction of what you'll lose if due diligence goes badly. We've seen owners spend $30K-$50K on cleanup and walk away with $500K+ more at close because the numbers held up under scrutiny.
Deals don't die because your business isn't worth what you think. They die because the buyer couldn't prove it was. That's a fixable problem. Fix it before someone else decides not to.