Offers & due diligence
Is Your Deal Really Going to Close? The Red Flags Buyers Find After the LOI
The findings that most often turn a signed letter of intent into a lower price or a dead deal, and how to deal with each one first.
By Michael D. Rubin, CEO & Founder · Updated September 2026 · 736 words
A signed letter of intent means a buyer likes your company at a price; it does not mean the deal will close. The letter of intent (LOI) is mostly non-binding, and it is followed by due diligence, the weeks in which the buyer's accountants, lawyers and operators test everything you have said. What they find decides whether the price holds, drops or disappears.
Most findings that hurt deals are not secrets. They are facts the seller knew but did not present early or fix in time. These are the ones that matter most.
Concentration: too much riding on too little
Buyers pay for predictable earnings, and concentration makes earnings less predictable. You cannot cure it in a month, but you can explain it: how long each key relationship has lasted, what contracts are in place, and why the account is loyal to the company rather than to you. Our answer on how customer concentration affects valuation covers the effect on price.
Buyers check for concentration in three places.
- Products. If one product line produces most of the sales, a change in that single market moves the whole company.
- Customers. An account that brings in a large share of revenue may leave when the owner does, so buyers ask for revenue by customer over several years.
- Suppliers. A sole source for a critical input, especially one with no written agreement, raises the question of what happens after the sale.
Equipment, facilities and environmental questions
For manufacturers, distributors and any company with machinery, buyers inspect the equipment and the site. Machines near the end of their useful life signal spending the buyer will have to fund. Deferred maintenance, lapsed permits and unclear ownership of equipment all come to light. Environmental questions, such as how the property was used before, which chemicals are stored there and whether contamination is possible, can stop a lender, and with it the deal. If the property is part of the sale, learn what an environmental review would say before the buyer's lender orders one.
The practical fix is a walk-through before going to market. Look at the company the way a buyer's inspector would, list what they would flag, and decide for each item whether to repair it, reflect it in the price or disclose it with context.
What exactly is being sold
A surprising number of deals stumble on scope. The buyer assumed a piece of equipment, a trademark, a patent or a key software license came with the company, and it turns out to be owned personally by the founder, leased, or not transferable. Settle ownership of every important asset before going to market.
- Confirm that trademarks, patents, domain names and software are registered to the company.
- List equipment that is owned, leased or financed, along with any liens against it.
- Check whether key contracts and leases can be assigned to a new owner.
- Put arrangements with related parties, such as a building you own personally, in writing.
People and receivables
Buyers want to know the team will stay. They ask about turnover, pay compared with the market, and who holds the customer relationships. A company where the founder knows every customer and makes every decision carries owner-dependence risk, which usually lowers the price or pushes more of it into an earnout, a payment that depends on results after closing. Employees who are essential to the handover may need a retention agreement, signed before or at closing, so the buyer can count on them.
Receivables get the same scrutiny. Old or uncollectable balances overstate both earnings and working capital. Write off what will not be paid, collect what you can, and be ready to explain slow payers. Our guide on what causes a sale to fall apart in due diligence covers the wider list.
How we prepare sellers for due diligence
We try to find these issues before a buyer does. The financial recast, the confidential marketing package and buyer screening all come before any LOI in our ten-step process, and we raise concentration, asset and staffing questions with you while there is still time to address or explain them. That lets us disclose early, on our terms, rather than letting a buyer use the same facts as leverage later. Every buyer is screened for the ability to fund the purchase before seeing anything that identifies you. The first step is a free, confidential discovery meeting; contact us to arrange one.
Where this fitsHow a business sale works, step by step →
Questions owners ask next
How long does due diligence take after an LOI?
It varies with the size of the company and how prepared the seller is. An organized company answers requests quickly and keeps momentum; a disorganized one invites delays and more questions. The LOI usually sets an exclusivity period, and running past it gives the buyer room to renegotiate, so have documents ready before you sign.
Should I disclose a problem before the buyer finds it?
Yes, in almost every case. A problem you disclose early, with an explanation and a plan, is a negotiating point. The same problem found by the buyer's team becomes a question about what else you have not said, and it usually costs more in price and in trust.