Back in 2016, I had a company doing $30M a year in revenue. |
We were climbing the Inc. 500 list…growth was explosive. |
I thought buyers would be in awe of our sales numbers and inspired by our projections. |
They weren't. |
Every single buyer who looked at us walked away during diligence. And less than a year later, that 8-figure business crashed and burned for all the same reasons those buyers bailed. |
Here's what I learned the hard way: if you want to sell your business for life-changing money, stop trying to impress buyers with your growth story. |
What actually matters is making your business less risky. |
Risk reduction equals sellability. Period. |
So I built a framework based on what those buyers taught me. I call it The 9 Risks... and it's the audit I wish I'd run before we ever went to market. |
Risk 1: Brand & Market Risk |
If you're in a declining market or selling a product that's being actively disrupted, you're unlikely to have a sellable business. |
THE FIX: Shoot for "Rule of 40" or better (growth rate + profit margin = 40% or better), and if you can't achieve that in your existing market or with your existing business model, it's time to pivot. |
Risk 2: Key Person Risk |
If the business is overly dependent on you or a top team member, buyers will worry it collapses the moment you leave. |
THE FIX: Upgrade your company operating system, hire a functional leadership team, and prove your business can run without you by going on vacation for 30+ days. |
(That's right, a long vacation can actually INCREASE the enterprise value of your company.) |
Remember: the more valuable you are to your business, the less valuable your business is. |
Risk 3: Systems Risk |
If the business only works because the team "just knows what to do," that's a problem. Buyers want documented systems, flowcharts, org charts with responsibilities by role, and scorecards with KPIs. |
THE FIX: Again, upgrade your operating system and take a 30-day vacation (here's how I do it) to prove there's no Systems Risk in your business. |
Risk 4: Customer Concentration Risk |
When a handful of clients drive too much revenue, buyers fear losing one means losing the business. |
THE FIX: No more than 20% of revenue should come from any single customer. |
Risk 5: Channel Risk |
If Meta shuts down your ad account or Google delists your site, can you survive? Buyers demand channel diversity. |
THE FIX: No more than 30% of traffic and leads should come from any one channel. |
Risk 6: Revenue Quality Risk |
Buyers value predictable, sticky, recurring revenue. If your revenue is one-time, transactional, or leaky from churn, expect a haircut on your multiple. |
THE FIX: Aim for 50% of revenue from subscriptions, recurring payments, or reorders. |
Risk 7: Capital & Logistics Risk |
If your only manufacturer is a single factory overseas, or scaling requires massive capital investment, that limits your buyers. |
THE FIX: Diversify suppliers. Two is the minimum… 3+ is better. |
Risk 8: Financial Risk |
Messy books, personal expenses running through the business, non-compliant financials... all of these kill deals. (I've seen more deals blow up because of bad books than almost anything else.) |
THE FIX: Get your financials audited, or at a minimum… reviewed. |
Risk 9: Legal & Compliance Risk |
Pending litigation, contractor misclassification, unresolved IP questions... any of these can put the brakes on what would otherwise be a great deal. |
THE FIX: You don't always have control over who sues you, but at a minimum, clean up your IP with clear trademarks, copyrights, and patents… and make sure they're held by the correct entity. |
Here's the thing: these aren't just exit risks… |
…they're business risks. |
Every single one of these will hurt you long before you ever try to sell. They'll cap your growth, drain your margins, and keep you trapped in the business, so fix them… |
…even if you don't plan to sell any time soon. |
⚡️ Action Step: Open a spreadsheet right now and list all 9 risks down the left side. Next to each one, rate yourself on a scale of 1-10 (1 = major vulnerability, 10 = bulletproof). Any score below a 7 is costing you money today and destroying your sellability tomorrow. Pick your lowest score and fix it first. |
Give it a shot and let me know how it works… |
-Ryan |
Ryan Deiss Co-Founder and CEO, The Scalable Company |
P.S. I'm looking for 5 business owners who want to work 1-on-1 with my team and me to install a custom "operating system" so your business can scale and so you can exit the day-to-day. Click here for the details. |
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