What Makes a Business Worth More?
By Troy Frank, Owner, Indiana Equity Brokers
Estimated read time: 6 min
The short answer: A business is worth more when a buyer can see steady profits, low risk, and a company that runs without the owner. The biggest business value drivers are recurring revenue, a diversified customer base, a real management team, clean financials, and consistent growth. Two businesses with the same earnings can sell for very different prices because of these factors. Most Main Street businesses sell for roughly 2 to 3.5 times their seller’s discretionary earnings, and the strongest value drivers are what move you to the top of that range.
Two owners walk into my office in the same month with the same number on their tax return. Both made about $500,000 in adjusted earnings last year. One sells for $1.4 million, and the other sells for nearly $1.8 million. Same earnings, very different price. The gap comes down to business value drivers, which are the things a buyer studies to judge how risky and how durable your profits really are.
You can’t always put an exact dollar figure on each one. But you can look at your business honestly and see where you stand. Below is the scorecard buyers use, what each driver does to your price, and where Indiana owners tend to leave money on the table.
The value-driver scorecard
Here’s a simplified version of what a buyer or appraiser weighs when they size up your company. Look at each row and decide, honestly, whether you sit on the low, medium, or high end.
| Value Driver | Low | Medium | High |
|---|---|---|---|
| Demand for your business type | Little demand | Some demand | High demand |
| Growth | Flat or shrinking | Steady | High and steady |
| Market share | Small | Growing | Large and growing |
| Profitability | Unsteady | Consistent | Strong and steady |
| Management depth | Owner does everything | Some staff | Strong team in place |
| Financial records | Compiled | Reviewed | Audited or clean reviewed |
| Customer base | Concentrated | Fairly steady | Broad and growing |
| Litigation history | Recent issues | Occasional | None in years |
| Revenue type | One-time sales | Repeat customers | Recurring contracts |
| Industry trend | Declining | Stable | Growing |
The list could go on, because almost anything that affects risk affects value. But don’t just compare yourself to businesses in general. Compare yourself to the specific buyers and competitors in your market, because that’s the bar your sale price gets measured against.
The two drivers that move price the most
If you only fix two things before you sell, fix these. In my experience they swing the final price more than any other factors on the scorecard.
Customer concentration
Buyers get nervous when too much of your revenue comes from too few customers. The rule of thumb most buyers and appraisers use is straightforward. If your single largest customer is under 10 percent of revenue, you’re in healthy territory. Between 10 and 20 percent, a buyer gets cautious. Once one customer crosses 20 percent, and especially north of 30 percent, you’re in a high-risk zone, and the multiple usually gets compressed below the industry median.
The logic is simple. If losing one phone call could cut your revenue by a third, the buyer is buying that risk along with the business. Long-term contracts and high switching costs soften the blow, but the safest path is to spread your revenue across more accounts before you go to market.
Owner dependence
This is the one Indiana owners underestimate most. If the business only works because you’re the one answering the phones, holding the customer relationships, and making every decision, then a buyer isn’t purchasing a company. They’re purchasing a job that depends on you, and you’re the one person leaving. Key-person dependence on the owner compresses the multiple below the median for exactly that reason.
The flip side is real money. A business with a capable second-in-command, documented processes, and customer relationships spread across the team is far less risky to buy. De-risking owner dependence is one of the few moves that can meaningfully raise your multiple, and in some cases it can come close to doubling it. The earlier you build that bench, the more it’s worth at closing.
How business value drivers turn into a number
Main Street businesses generally sell in a range of about 2 to 3.5 times seller’s discretionary earnings, and larger lower-middle-market companies trade on a multiple of EBITDA. Where you land inside that range is the whole game. Strong, diversified, well-documented businesses earn the high end. Owner-dependent businesses with shaky books and one giant customer earn the low end, if they sell at all.
That’s why two companies with identical earnings can sell hundreds of thousands of dollars apart. Most of that gap is goodwill — the value that isn’t on the balance sheet. The earnings tell a buyer what the business made last year. The value drivers tell a buyer how confident they can be that the profits will still be there next year, without you. Confidence is what buyers pay a premium for.
This is also why the timing matters. Most of these drivers can be improved, but not overnight. Diversifying a customer base, building a management layer, and cleaning up financials are projects that take quarters or years, not weeks. Owners who start a year or two ahead consistently sell for more, which is the heart of good exit planning.
What you can do before you sell
Start by getting an honest read on where you actually stand, ideally from someone who sells businesses for a living rather than from your own optimism. At Indiana Equity Brokers we give every owner a free, confidential business valuation before they sign anything, so you know your range and your weak spots up front.
From there, the highest-payoff projects are usually the same. Reduce your reliance on any single customer. Build and document a team that can run the day-to-day without you. Get your books clean enough that a buyer’s accountant won’t find surprises. Each of those directly attacks the risk a buyer is pricing in, and lowering that risk is what moves you up the multiple.
Frequently Asked Questions
What are the main value drivers of a business? The main value drivers are recurring or repeat revenue, a diversified customer base, consistent and growing profits, a management team that can run the business without the owner, clean financial records, and a healthy industry trend. Buyers study these to judge how risky your profits are. The stronger they look, the higher the multiple a buyer will pay.
How much is my business worth? Most Main Street businesses sell for roughly 2 to 3.5 times their seller’s discretionary earnings, and larger companies sell on a multiple of EBITDA. Where you land in that range depends on your value drivers, so two businesses with the same earnings can sell for very different prices. A confidential valuation from a broker is the most reliable way to pin down your number.
Does customer concentration lower the value of my business? Yes. When one customer makes up more than 20 percent of your revenue, and especially more than 30 percent, buyers treat it as a real risk and usually pay a lower multiple. Under 10 percent from any single customer is considered healthy. Spreading revenue across more accounts before you sell is one of the most reliable ways to protect your price.
How does owner dependence affect business value? A business that only runs because of the owner is harder and riskier to sell, so it earns a lower multiple. Buyers want a company that keeps performing after the owner leaves. Building a capable management team and documenting your processes reduces that risk and can meaningfully raise your valuation, sometimes close to doubling the multiple.
How can I increase the value of my business before selling? Focus on the business value drivers that lower a buyer’s risk. Diversify your customer base, build a management team that can operate without you, clean up your financial records, and show steady growth. Most of these take a year or more to improve, so the owners who plan their exit early are the ones who sell for the most.
The bottom line
Your earnings tell a buyer what your business made. Your value drivers tell them how safe those earnings are going forward, and that’s what decides whether you sell at the top or the bottom of the range. The good news is that most of these drivers are within your control if you start early enough.
If you want an honest assessment of where your business stands and what it could be worth, a confidential conversation costs nothing. Troy Frank and the team at Indiana Equity Brokers have closed more than 884 deals for Indiana business owners, with no upfront fees and a free valuation to get started. You can reach Troy at troy@indianaequitybrokers.com
Read MoreDeal Structure When Selling a Business
By Troy Frank, Owner, Indiana Equity Brokers Estimated read time: 6 min
The short answer: Two offers at the same price can leave you with hundreds of thousands of dollars’ difference in real, after-tax cash. Deal structure decides what you keep, and it comes down to how much is cash at closing, how much is a seller note, and how much is rollover equity. Roughly 70 to 80 percent of small business sales involve some seller financing, and a typical seller note runs 10 to 20 percent of the price. The time to plan structure is before you go to market, not after the offers arrive.
A seller called me last year, thrilled, because he had two offers on his business and one of them was $400,000 higher than the other. He wanted to take the bigger number and move on. So we sat down and ran the actual math together. The smaller offer put more cash in his pocket at closing, and it freed him from five years of risk, so that’s the one he took.
This is the part of selling a business that almost nobody talks about. The headline price is not what you keep. What you keep depends on how the deal is structured, and the best time to think it through is before the offers ever land on your desk.
Same price, very different deals
Picture two offers on a business listed at $5 million.
Offer A comes in at the full $5 million. The buyer puts $3.25 million in cash at closing, signs a $1 million seller note paid over five years, and asks the seller to take the remaining $750,000 as rollover equity, meaning an ownership stake in the business under its new owner instead of cash.
Offer B comes in at $4.6 million, all cash at closing, with a buyer who’s already pre-approved for financing and can close in 60 days.
Offer A looks bigger, so it’s tempting to stop there. But look at what the seller is actually holding. That seller note makes them the buyer’s junior lender for five years, sitting behind the bank. If the business hits a rough patch, the bank will almost certainly force the note onto full standby, which means the seller’s payments stop until the bank is made whole. The rollover equity is a minority stake in a company the seller no longer controls, and there’s no guaranteed date or price for cashing it out.
None of that makes Offer A a bad deal. Seller notes get paid in full far more often than owners fear, and rollover equity is how some sellers earn a real second bite of the apple. If the new owners grow the business and sell it again in five or seven years, that retained stake can be worth more than the cash they gave up at closing. Spreading the payments across several years can also soften the tax hit.
The point is simply that you can’t compare two offers on price alone, and the smart time to work through all of this is before you go to market.
The five questions to answer before you list
Long before a buyer sees your financials, you and your advisor should be able to answer these.
How much cash do you need at closing, really?
Not what you’d like to walk away with, but what you genuinely need to retire debt, cover taxes, and fund whatever comes next. That number sets your floor, and it tells you how much flexibility you can afford to offer on terms. This is exactly the kind of planning that separates owners who plan their exit early and sell for more from those who scramble once offers start arriving.
Can the business carry acquisition debt?
Lenders and serious buyers all run the same math. They take your adjusted earnings, subtract a market salary for the new owner, then subtract the annual loan payments your asking price implies, and they see what’s left over. If that cushion is thin, your price isn’t financeable at conventional terms, no matter what the valuation report says. Either the structure has to bridge that gap, or the price has to come down.
Will you carry paper, and on what terms?
A seller note of 10 to 20 percent of the price is common, and it does real work. It bridges valuation gaps, it satisfies lenders who want the seller to keep skin in the game, and it signals confidence in the business. But the terms matter enormously, because the interest rate, the payment schedule, the security, and the standby provisions all change what that note is actually worth to you. That last piece got sharper in 2025, which I’ll come back to in a moment.
Would you keep equity after the sale?
Rollover equity isn’t right for everyone. It works best when you believe in the buyer’s growth plan and can afford to leave part of your money illiquid for several years. If what you want is a clean exit and a clean break, say so early, because it shapes which buyers your advisor should even bring to the table.
What does each structure do to your tax bill?
What’s being sold, how the price is allocated, and when you actually receive the payments can all swing your after-tax proceeds dramatically. This is worth a real conversation with your accountant before you set an asking price, because some of the most valuable tax planning has to be in place a year or more ahead of a sale.
What changed in 2025: the SBA rules tightened
Here’s an expert-level detail most sellers never hear about. In June 2025 the SBA rolled out new lending rules, known as SOP 50 10 8, and they reshaped how acquisition deals get financed.
Under the new rules, a seller note can cover only half of the buyer’s required equity injection. In practice that often caps the seller note at roughly 5 percent of the deal when it’s counted toward the buyer’s equity, and that portion typically sits on full standby for the first two years. For years sellers routinely carried anywhere from 10 percent to a third of the price, so this genuinely changed the math.
The result is real friction in the market. About 41 percent of business brokers say the 2025 SBA changes are causing delays in closing deals. If you’re planning to sell, this matters to you directly, because it affects how buyers finance the deal and how much paper you may be asked to carry. A broker who’s closing deals in this market knows where the new limits bite and how to structure around them.
Flexibility widens your buyer pool, and that’s where price comes from
Here’s the part most sellers underestimate. Structure doesn’t only affect what you keep from a single offer. It also affects how many offers you get in the first place.
A business offered strictly as all cash, full price, as-is is only available to the small slice of buyers who can write that check or finance the whole amount conventionally. Add reasonable seller financing or an openness to a rollover piece, and the qualified buyer pool grows. More qualified buyers competing for your business is the single most reliable way to push the price up.
The market data backs this up. Roughly 70 to 80 percent of small business sales involve some seller financing, yet a recent survey found that only 22.8 percent of sellers plan to offer it while 62.3 percent of buyers want it. That gap is your opening. Sellers who insist on total rigidity often end up taking a lower price from the one buyer who could meet their terms. Flexibility isn’t a concession you make, it’s a negotiating asset you use.
Where an M&A advisor fits in
Your accountant knows your tax position, and your attorney will protect you in the purchase agreement. But neither one spends their days watching what buyers in Central Indiana are actually offering, what lenders are actually approving, and which structures are actually closing this year.
That marketplace view is what a good broker brings, and it’s most valuable early, while you’re still deciding whether and how to go to market rather than after you’ve anchored yourself to a number that can’t be financed. It also helps to see what’s actually selling in your market right now.
At Indiana Equity Brokers we’ve closed more than 884 transactions over 23 years, and the pattern is consistent. The businesses that sell well are rarely the ones with the highest asking price. They’re the ones packaged so the price, the structure, and the financing all work together, for the seller’s bottom line and for the buyer’s ability to say yes.
Frequently Asked Questions
What is seller financing when selling a business? Seller financing is when the seller accepts part of the purchase price over time instead of all cash at closing, usually in the form of a promissory note. A typical seller note runs 10 to 20 percent of the price and is paid over three to five years with interest. It bridges valuation gaps and helps buyers qualify for bank financing, which is why roughly 70 to 80 percent of small business sales include some form of it.
Is a higher offer always the better deal when selling my business? No. Two offers with the same headline price can differ by hundreds of thousands of dollars in real, after-tax proceeds. A higher price loaded with a long seller note and illiquid rollover equity can put less cash in your pocket than a lower all-cash offer. The smart move is to compare offers on net proceeds and risk rather than on the headline number.
What is rollover equity in a business sale? Rollover equity is when a seller keeps an ownership stake in the business under its new owner instead of taking that portion in cash. It can deliver a second bite of the apple if the new owners grow the company and sell it again later. Because it’s a minority stake with no guaranteed cash-out date, it suits sellers who believe in the buyer’s plan and can afford to hold illiquid value for several years.
How did the 2025 SBA rules change seller financing? The SBA’s SOP 50 10 8, effective June 2025, limits a seller note to half of the buyer’s required equity injection, which often works out to about 5 percent of the deal when it counts toward equity, and that portion usually sits on full standby for two years. Previously sellers commonly carried anywhere from 10 percent to a third of the price. About 41 percent of brokers report that the changes are delaying closings.
How early should I plan deal structure before selling? Before you set an asking price. Your cash-at-closing needs, the financeability of the price, and your tax planning all shape that number, and some tax strategies have to be in place a year or more ahead of a sale. Planning structure early also widens your buyer pool, which is what ultimately drives price up.
The bottom line
The price on the offer sheet is not what you keep. The cash at closing, the seller note, the rollover equity, the financing, and the taxes all decide your real proceeds, and the smart time to plan them is before you go to market.
If you’re thinking about what your business might be worth and how to structure a sale that protects your bottom line, a confidential conversation costs nothing. Troy Frank and the team at Indiana Equity Brokers have closed more than 884 deals for Indiana business owners, with no upfront fees and a free business valuation to get started. You can reach Troy at troy@indianaequitybrokers.com
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Can a Landlord Kill Your Business Sale?
The short answer: Yes — a landlord can block or delay a business sale, even after a buyer and seller have agreed on price and terms. When a business is sold, the commercial lease typically must be assigned to the new owner, and most leases require landlord approval to do that. If your lease has unfavorable assignment language, a short remaining term, or a difficult landlord, it can stall your deal — or kill it outright. Sellers with location-dependent businesses (restaurants, retail, salons, auto shops) should review their lease before they ever list.
You’ve accepted an offer. The buyer is ready. The price is right. And then the landlord says no.
It happens more than most sellers expect. In my experience working with Indiana business owners, lease issues are one of the most consistent deal-killers in Main Street transactions — not because sellers are careless, but because the lease rarely gets attention until it’s too late. By the time a problem surfaces, you’re already deep into due diligence, and now you’re negotiating three directions at once: with the buyer, the buyer’s lender, and a landlord who may have no incentive to move quickly.
This post covers what sellers need to understand about their lease before going to market — and what buyers should be looking for when they review one.
Why the Lease Matters as Much as the Financials
For any business that depends on its physical location — a restaurant in a specific neighborhood, a salon with years of foot traffic, a retail shop anchored to a shopping center — the lease is a core asset. Buyers aren’t just purchasing the revenue. They’re purchasing the right to operate from that address.
If that right is fragile, the business is worth less. And if the lease can’t be transferred at all, the deal may not be possible.
Most commercial leases include an assignment clause that governs what happens when the business is sold. The key phrase to look for is whether landlord consent is “not to be unreasonably withheld.” If that language is in the lease, the landlord can still say no — but they can’t do it arbitrarily. A qualified buyer who meets reasonable financial standards gives the landlord little legal ground to block.
If that language isn’t there, the landlord has far more discretion. They can demand new terms, a rent increase, or simply slow-walk approval until the buyer walks away.
The Three Lease Issues That Most Often Delay or Kill a Deal
1. Not Enough Time Remaining
Buyers — and their lenders — want runway. As a general rule, most buyers want to see at least three years left on the lease at closing, ideally with renewal options. Less than that, and SBA lenders often won’t approve the loan. A buyer borrowing money to acquire a business can’t get a 10-year loan on a location that might close in 18 months.
If your lease is within two years of expiring when you’re thinking about selling, talk to your landlord before you list. Getting a renewal in place early gives buyers confidence and removes a major contingency from the deal.
2. Slow or Uncertain Landlord Approval
There’s no universal law that says how long a landlord must take to approve an assignment. Some leases don’t specify a deadline at all. In practice, the approval process should take 10–15 days. When it drags to 30, 45, or 60 days, buyers get nervous. Some walk. And some do walk — not because the deal stopped making sense, but because the uncertainty became too uncomfortable.
Assignment fees are common and generally manageable — in transactions under $2 million, they typically run between $0 and $10,000, usually paid by the seller. The bigger risk isn’t the fee. It’s the timeline.
3. Restrictive Transfer Language
Some leases require the original tenant to remain personally liable even after the business is sold. Others give the landlord the right to recapture the space rather than approve an assignment — meaning the landlord could terminate your lease instead of consenting to a transfer. Both scenarios create problems for sellers who haven’t read the fine print.
If your lease has a recapture clause, you need to know that before you start marketing the business. It’s a negotiating point, but only if you catch it early.
What Sellers Should Do Before Going to Market
Pull out your lease and read it — or have your attorney read it. You’re looking for four things:
How much time remains, and what renewal options exist. Whether the landlord’s consent to assignment is required, and on what terms. Whether there are any recapture rights. And whether there’s language restricting what type of business the space can be used for, which matters if the buyer plans any operational changes.
If there are problems, they’re almost always easier to fix before you’re under contract than during the due diligence phase. A landlord is generally more cooperative when there’s no deal on the table and no pressure. Once a buyer is in the picture, the landlord knows you’re motivated — and some will use that.
We’ve seen deals in Central Indiana where lease work took longer than the rest of the transaction combined. And we’ve seen deals fall apart entirely because a seller assumed the lease would transfer without issue and never checked. Don’t assume.
What Buyers Should Know
If you’re buying a location-dependent business, treat the lease review the same way you’d treat financial due diligence. Look at the remaining term. Read the assignment clause. Find out whether there are options to renew, and what those renewal terms look like. If a major anchor store or traffic driver closes nearby, does the lease give you any protection? Some do. Most don’t.
Pay attention to what the lease says about permitted use. A lease that was written for a pizza restaurant may not allow a buyer who wants to convert to fast casual or add catering. That’s not just a legal issue — it affects what the business is worth to you specifically.
And understand the personal liability question. If the seller is on the hook as a guarantor after closing, that affects how the deal is structured. If the landlord wants you to personally guarantee the lease, that’s a negotiation — not a given.
Frequently Asked Questions
Does a landlord have to approve the sale of a business with a commercial lease? In most cases, yes — if the lease includes an assignment clause requiring landlord consent, the landlord must approve the transfer of the lease to the new owner. Whether they can refuse reasonably depends on the lease language. Leases that say consent “shall not be unreasonably withheld” give the landlord less discretion. Leases without that language give them more. Indiana sellers should review their assignment clause before listing.
How long does lease assignment approval take when selling a business? It should take 10–15 business days. Some leases specify a deadline; many don’t. When there’s no deadline, the process can drag out — and a slow landlord is one of the more common reasons deals fall apart after a buyer is under contract. Sellers can address this proactively by starting the landlord conversation early and establishing a cooperative relationship before a deal is on the table.
How much does it cost to assign a commercial lease during a business sale? Assignment fees vary, but for Main Street transactions under $2 million, the fee typically ranges from $0 to $10,000. It’s usually paid by the seller. The fee itself is rarely the problem. The bigger issue is the timeline and any conditions the landlord may attach to the approval.
What happens if my lease has a recapture clause? A recapture clause gives the landlord the right to terminate the lease rather than approve an assignment. Instead of transferring the lease to your buyer, the landlord could simply take the space back. If your lease includes this language, you need to know before you list and factor it into your sale strategy. In some cases it can be negotiated away. In others, it’s a deal structure issue that requires creative solutions.
Can a short remaining lease term prevent the sale of my Indiana business? It can. SBA lenders generally require the lease to extend through at least the loan term — typically 10 years for acquisition financing. If your lease has 18 months remaining, most financed buyers can’t close. Buyers paying cash have more flexibility, but even they want reasonable runway. If your lease is short, pursue a renewal before you go to market.
The Bottom Line
A strong lease can add value to your business. A weak one can chip away at your price — or stop the sale entirely. In our work with Indiana business owners, the deals that run into lease problems almost always could have been fixed with earlier preparation.
If you’re thinking about selling and you haven’t looked at your lease recently, start there. Know your remaining term. Know what your assignment clause says. Know your landlord. These aren’t details — they’re foundations.
If you’d like a confidential conversation about where your business stands and what a sale process might look like, reach out directly. I’ve helped more than 884 Indiana business owners through this process, and a quick call costs nothing.
Troy Frank Indiana Equity Brokers troy@indianaequitybrokers.com indianaequitybrokers.com
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Why Do Business Sales Fall Apart After Both Sides Agree?
The short answer: About half of all business sales that reach the due diligence phase never close. The most common reasons have nothing to do with price — they’re due diligence surprises, messy financials, customer concentration, disagreements over reps and warranties, and sellers who weren’t fully ready to sell. Most of these problems are fixable, but only if you find them before a buyer does. Indiana sellers who prepare early close more deals, at better prices, with fewer surprises.
You’ve signed a letter of intent. Both parties shook hands on price. Attorneys are engaged. And then, somewhere between the LOI and the closing table, it falls apart.
It happens in roughly half of all business sales that make it to due diligence. The frustrating part is that most of these deals didn’t fail because the business was bad. They failed because of details — things that were knowable, fixable, and often preventable with the right preparation.
After closing more than 884 transactions across Indiana, I’ve seen the same deal-killers come up again and again. They’re not random. Here’s what they are and what you can do about them.
Why Business Sales Break Down
1. Financial Fog
Clean financials are the foundation of any deal. When they’re missing — inconsistent records, personal expenses mixed in, revenue recognized incorrectly, unexplained swings — buyers lose confidence fast. And a buyer who’s losing confidence starts pulling on every thread.
This is the single biggest deal-killer I’ve seen. Not price. Not personality. Financials. A buyer can’t get SBA financing without three years of clean tax returns. They can’t justify their offer to a lender without credible seller’s discretionary earnings (SDE) documentation. When the numbers don’t add up, the deal doesn’t close.
If you’re thinking about selling in the next one to three years, the most valuable thing you can do today is work with your accountant to get your books clean and consistent. It’s not glamorous. But it’s the difference between a deal that closes and one that doesn’t.
2. Customer Concentration
Buyers watch for this immediately. If one or two customers represent more than 30% of your revenue, sophisticated buyers treat that as a cliff — the risk that those customers don’t stay after ownership changes. The more concentrated the revenue, the harder it is to justify a full multiple.
This doesn’t necessarily kill a deal, but it affects price and structure. A buyer may offer a lower upfront payment with an earnout tied to customer retention. If you’re not prepared for that conversation, it can feel like a renegotiation — even if it was always going to come up.
3. Representations, Warranties, and Indemnification
Once the LOI is signed, the attorneys get involved. And the first thing they fight about is usually reps and warranties — the contractual assurances a seller makes about the condition of the business.
Buyers want broad guarantees. Sellers want to limit their exposure after the deal closes. This is a legitimate tension, and it’s rarely resolved without negotiation. Where it becomes a deal-killer is when sellers treat every warranty request as a personal attack, or when attorneys on either side turn a routine negotiation into a war.
The best approach: understand before you list what you’re willing to stand behind and what you’re not. Your broker can help you frame reasonable positions early so these conversations don’t blindside you in month three.
4. Key Employee Risk
Buyers aren’t just buying your revenue. They’re buying your operations — and often, key people are central to those operations. When a buyer worries that a general manager, lead technician, or top salesperson will walk after the sale, that’s a real risk they’ll price in or protect against.
Employment agreements, retention bonuses, or transition plans for key staff can go a long way toward reducing this concern. If you have a person or two who the business genuinely depends on, that’s a conversation to have before you go to market — not after a buyer raises it during due diligence.
5. Non-Compete Disagreements
Buyers almost always require non-compete agreements. That’s expected. What breaks deals is when the scope — geography, duration, or covered industries — feels unreasonable to the seller.
A seller who built a business over 20 years may resist a five-year, statewide non-compete that prevents them from doing anything adjacent to their former industry. That’s understandable. But if it’s not addressed early, it becomes a late-stage stall that erodes goodwill on both sides. Know your position before you get to the purchase agreement.
6. Seller Second Thoughts
This one is harder to talk about, but it’s real. Selling a business is emotional. Many Indiana owners I’ve worked with have spent decades building something that’s deeply tied to their identity. When the deal gets real — when the buyer is in your facility asking questions, when the closing date is on the calendar — some sellers start to hesitate.
Family-owned businesses are especially susceptible. When multiple family members are involved, one person’s cold feet can unravel months of work.
The best thing I can tell a seller is this: make sure you know why you’re selling before you start. Not just the financial reason — the personal one. Sellers with a clear answer to that question follow through. Sellers who are unsure often don’t.
What You Can Control
Most of the issues above have one thing in common: they’re knowable in advance. A good broker will surface them before you list, not after a buyer finds them. The deals that actually reach the closing table in Indiana are almost never the result of luck. They’re the result of sellers who did the preparation work.
Three things make the biggest difference. Clean, consistent financials for at least three years. A realistic valuation based on what the market will actually pay. And a genuine readiness to sell — emotionally, not just financially.
Everything else is negotiable. Those three things aren’t.
Frequently Asked Questions
Why do most business sales fail after a letter of intent is signed? The most common reasons are due diligence discoveries — financial inconsistencies, undisclosed liabilities, customer concentration issues, or problems with the lease or key employees. Other common causes include disagreements over reps and warranties, non-compete scope, and seller hesitation. Roughly half of deals that reach due diligence don’t close, and the majority of failures trace back to things that were knowable before the process started.
What financial records does a buyer need to close a business sale? Most buyers, especially those using SBA financing, need three years of business tax returns, three years of profit and loss statements, and a current balance sheet. They’ll also want a seller’s discretionary earnings (SDE) calculation that adds back the owner’s compensation and non-recurring expenses to show true cash flow. Inconsistent records, missing returns, or financials that don’t match tax filings are among the fastest ways to lose a qualified buyer.
How does customer concentration affect a business sale in Indiana? If one or two customers represent more than 30% of revenue, most experienced buyers will flag it as a concentration risk. It doesn’t automatically kill a deal, but it often affects price and structure — buyers may offer a lower upfront payment with an earnout tied to customer retention post-close. Sellers who diversify their customer base before going to market typically see better offers and cleaner deal structures.
Do I have to sign a non-compete agreement when I sell my business? Almost always, yes. Buyers need assurance that you won’t immediately start a competing business and take customers with you. The typical non-compete in a Main Street transaction runs two to five years and covers a defined geographic area and industry. The scope is negotiable, but refusing a non-compete entirely is rarely a viable position. Knowing your limits before you reach the purchase agreement stage prevents late-stage friction.
What is the biggest mistake sellers make when selling a business in Indiana? Unrealistic pricing accounts for roughly 25% of failed deals. But the mistake I see more than any other is a seller who hasn’t truly decided to sell. They list the business, entertain buyers, and then — when it gets real — they back out or become impossible to deal with. If you’re not certain you’re ready to hand over the keys, it’s worth taking more time to get there before you start a process that affects everyone around you.
The Bottom Line
The deals that close are the ones where the seller did the work upfront. Clean financials. Realistic expectations. A clear reason for selling. And a team — broker, accountant, attorney — who surfaces problems before a buyer does.
If you’re thinking about a sale in the next year or two and want an honest read on where your business stands, I’m happy to have that conversation. It’s confidential, it costs nothing, and it’s usually a lot more useful than waiting until you’re already under contract to find out what a buyer will find.
Troy Frank Indiana Equity Brokers troy@indianaequitybrokers.com indianaequitybrokers.com
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How to Evaluate a Business Before You Buy It
The short answer: Evaluating a business before buying it means digging into five core areas: the financials, the seller’s motivation, operational risks, customer concentration, and whether the asking price is grounded in reality. Most Main Street businesses in Indiana sell for 2–3x seller’s discretionary earnings (SDE), and due diligence typically takes 30 to 90 days. A deal that looks solid on paper can fall apart quickly when the books don’t tell the full story — which is why asking the right questions before you sign anything is the most important thing a buyer can do.
You found a business that looks promising. Revenue is steady. The industry makes sense. The seller seems motivated. But before you spend serious time — or serious money — on this opportunity, you need to know what’s actually under the hood.
A lot of buyers focus too early on price. Price matters, but it’s almost never the thing that kills a deal or destroys value after the close. What kills deals — and what destroys value — is what buyers didn’t ask about. This guide covers what to look for when evaluating a business in Indiana before you commit.
Start With the Financials. All of Them.
The first thing you want is three to five years of financial statements. Profit and loss, balance sheets, and tax returns. Not just a summary the broker prepared — the actual documents. That verifiable paper trail is one of the biggest advantages of a US purchase; it often doesn’t exist when buying a business abroad.
Here’s what you’re looking for:
Consistency. Does the business earn roughly the same amount each year, or are there dramatic swings? One great year followed by two average ones tells a different story than three years of steady growth.
Owner add-backs. Most Main Street businesses are priced on seller’s discretionary earnings — SDE — which is net income plus the owner’s compensation and any non-recurring expenses added back. Make sure every add-back is documented and legitimate. Aggressive add-backs are one of the most common ways asking prices get inflated.
Revenue concentration. If one customer accounts for more than 25% of the business’s revenue, that’s a material risk. Ask for a breakdown of the top 10 to 15 customers by revenue, and how long each relationship has existed. A business where the top customer has been a client for 12 years is very different from one where that same customer signed on 10 months ago.
Cash vs. accrual. Smaller businesses often keep their books on a cash basis. That’s fine — but understand the difference when reviewing the numbers, especially around accounts receivable and timing of revenue recognition.
Most Main Street businesses in Indiana sell in the 2.0x to 3.2x SDE range. Service businesses with recurring revenue and clean books often land at the higher end. Owner-dependent, high-variability businesses tend to come in lower. If a seller is asking 4x with no clear justification, you need to understand why before you move forward.
Understand Why the Seller Is Leaving
This one sounds obvious. It rarely gets enough attention.
Sellers have a lot of reasons for selling — retirement, health, burnout, partnership disputes, outside opportunity, or a genuine belief that this is the right time to transition. Most of those are fine. A few are not.
What you want to understand is: if this deal doesn’t close, what does the seller do next? Do they have another buyer lined up? Are they walking away regardless? Are they genuinely motivated, or are they fishing to see what the market says?
The answer tells you how flexible they’ll be in negotiations, what their timeline actually is, and whether there’s a real problem with the business they haven’t mentioned yet.
Ask directly: What would you do differently if you were starting over with this business? That question tends to produce honest answers. Sellers who’ve been running something for 10 years have opinions. The things they bring up — inefficiencies, missed opportunities, difficult customers — are exactly what you need to know before you buy.
Assess Whether You Can Actually Run This Business
Every business requires a specific combination of skills, relationships, and bandwidth. A profitable business can struggle badly under the wrong owner.
Be honest with yourself. Do you have experience managing employees in this industry? Do you have the technical knowledge to oversee the core work, even if you’re not doing it yourself? Do you have the relationships — with suppliers, customers, or the community — that this business depends on?
One of the questions I always encourage buyers to ask is: What does a typical week look like for the owner? If the answer is “I’m here 60 hours a week handling everything from sales to operations to customer complaints,” that’s not a business — it’s a job. A very expensive job.
On the other hand, if there’s a documented process, a capable team, and the owner has actually stepped back from day-to-day operations, that’s a business with real transferable value. Documented standard operating procedures (SOPs) make transitions dramatically smoother. Businesses without them — where everything lives in the owner’s head — carry a real transition risk that should be reflected in the price.
Look for Risks That Aren’t in the Sales Materials
Nobody is going to hand you a document that says “here are the things most likely to go wrong after you buy this.” You have to find them yourself.
A few areas that consistently get overlooked:
Key employee risk. What happens if the top salesperson — or the person who knows how every piece of equipment works — leaves after the sale? Ask directly which employees are critical to operations, whether they know the business is for sale, and whether they plan to stay.
Lease and contract terms. If the business is in a leased location, how much time is left on the lease? Is the landlord likely to renew, and at what rate? A business with 18 months left on a lease in a building the landlord wants to redevelop is a very different investment than one with a 5-year option in place.
Pending legal issues. Ask specifically whether the business has any open or threatened litigation, regulatory issues, or outstanding liens. This isn’t about being adversarial — it’s about knowing what you’re acquiring. An asset purchase structure can protect you from most liabilities, but not all.
Supplier dependencies. Similar to customer concentration, a business that sources 80% of its product through a single vendor carries supply chain risk. Ask what would happen if that vendor relationship ended or terms changed significantly.
Know What You’re Paying For — and Whether the Price Makes Sense
Valuation is part art, part math, and sometimes part negotiation theater.
The most common valuation method for Main Street businesses is a multiple of SDE. Across more than 9,500 transactions tracked in recent BizBuySell data, the average multiple was approximately 2.5x SDE. That’s an average — which means some businesses sell for more and some sell for less.
What pushes a price up: recurring revenue, strong customer retention, documented systems, a tenured team, and an owner who is genuinely ready to transition and will stay for a reasonable training period.
What brings a price down: owner dependency, inconsistent financials, concentration risk, deferred maintenance, aging equipment, and an industry with structural headwinds.
Don’t just ask what the asking price is. Ask how the seller arrived at it. If the answer is a clear, documented multiple of normalized earnings — great, you have something to work with. If it’s vague (“we’re asking what the business is worth”), that’s a negotiation, not a valuation.
We’ve worked through enough Indiana acquisitions to know that buyers who understand valuation before they make an offer negotiate better outcomes. Buyers who don’t tend to either overpay or walk away from deals they should have done.
Frequently Asked Questions
How long does due diligence take when buying a small business in Indiana? For most Main Street transactions, due diligence takes 30 to 60 days once both sides are under a signed letter of intent. Smaller businesses with organized records can move in four to six weeks. Larger or more complex acquisitions — or businesses with messy books — can stretch to 90 days or longer. Starting the process before you’re fully under contract is a mistake; sellers typically won’t open their books without a signed LOI.
What financial documents should I request when evaluating a business? Request at least three years of profit and loss statements, tax returns, and balance sheets. You’ll also want current accounts receivable and payable aging reports, a list of the top customers by revenue, and any existing contracts (leases, vendor agreements, customer agreements). If the business uses specialized software, ask for a walkthrough of the data — not just printed summaries.
What is a fair multiple when buying a small business? Most Main Street businesses in Indiana and the broader Midwest sell for 2.0x to 3.2x seller’s discretionary earnings (SDE). The exact multiple depends on industry, revenue stability, owner involvement, growth trend, and whether there are documented systems in place. Highly owner-dependent businesses typically land below 2.5x; businesses with strong recurring revenue and a capable team can command 3x or higher.
What is the biggest red flag when buying a business? Customer concentration is one of the most common red flags we see. If a single customer accounts for more than 20 to 25% of revenue, losing that relationship after the sale could be devastating. The second most common: financials that don’t match the owner’s verbal claims. If the books say one thing and the seller’s story says another, dig in before you go any further.
Do I need a business broker to buy a business in Indiana? You don’t legally need one, but having a broker on the buy side — or working with the listing broker — helps you move faster, understand what’s normal versus concerning in due diligence, and navigate offer structure. For buyers new to acquisitions, the process has a lot of moving parts: LOIs, purchase agreements, SBA financing timelines, and closing mechanics. Professional guidance is usually worth it.
The Right Questions Change Everything
Buying a business is one of the biggest financial decisions most people make. The buyers who do it well aren’t necessarily smarter or wealthier — they’re more methodical. They ask more questions. They don’t confuse enthusiasm for due diligence.
If you’re currently evaluating a business in Indiana and want a second set of eyes on the opportunity — or if you’re just starting your search and want to understand what the process looks like — I’m happy to talk through it.
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