The Buyability Gap: Why Strong Performance Doesn't Equal Transferable Value
Two businesses enter diligence with identical profiles: $6 million revenue, 25% margins, strong growth. One receives a term sheet. The other gets a polite pass after three weeks of analysis.
The difference wasn't in the numbers. It was in the infrastructure supporting them.
The $6 Million Reality Check
Consider the business that got passed on. From the outside, it looked perfect. Revenue grew 30% annually. Customers were satisfied. The P&L was clean. But diligence revealed a different story. All pricing decisions ran through the founder's judgment. Margins varied wildly between crews. No documented training existed. Field performance went unmeasured. When asked to explain the pricing model, only the founder could.
This wasn't a business. It was a talented operator with employees. And buyers could see it immediately.
What Buyers Actually Evaluate
During diligence, buyers ask six questions that determine everything:
Can this business grow without adding chaos?
Will a new leader need 12 months of handholding?
Are systems strong enough to survive employee turnover?
Is execution driven by process or individual memory?
What happens if the founder disappears tomorrow?
Is current performance repeatable or lucky?
These questions reveal whether you've built a transferable asset or a personal services firm. Most founders can't answer them confidently until it's too late.
The Two-Week Test
Want to know if your business is truly buyable? Leave for two weeks. No emails, no calls, no quick questions. Before you go, arrange for someone independent to track five metrics: quoting accuracy, crew margins, schedule adherence, customer complaints, and decisions that required your input.
If more than one of these deteriorates significantly, you haven't built a business. You've built a job that happens to have employees. This is exactly what buyers test for during diligence, except they're using their capital to find out.
What Makes Businesses Buyable
The businesses that close quickly at premium valuations share specific traits. They run focused service lines with predictable margins. Their teams quote and deliver without escalation. Pricing follows documented logic anyone can understand. Leadership exists below the founder. Performance gets measured weekly, not monthly.
These aren't accidents of good management. They're deliberate choices to build infrastructure before it's needed. The cruel irony is that founders who need to sell rarely have time to build these systems. Those who build them rarely need to sell.
The Bottom Line
Good businesses attract buyer interest. Buyable businesses get bought.
The gap between them isn't performance—it's transferability. If your success depends on your presence, you've built a practice, not an enterprise. And practices don't command premium multiples.
Start building infrastructure now. Not because you're selling, but because it's the difference between owning a valuable asset and being permanently employed by your business.