Selling a business
The Main Reasons Why the Sale of Your Business Can Fall Through
The common reasons signed deals collapse before closing, and the steps that prevent most of them.
By Michael D. Rubin, CEO & Founder · Updated September 2026 · 808 words
Most business sales that fall through do so for a handful of predictable reasons: the earnings cannot be proven, diligence turns up a surprise, the buyer was never able or willing to close, or a third party blocks the way. Bad luck plays a part, but a smaller one than owners think. Someone who has watched deals fail can usually see the trouble coming.
Knowing the reasons in advance lets you fix what you can before the company goes to market and screen out most of the rest.
The earnings do not hold up
A buyer and its lender pay for verified earnings. If the tax returns, financial statements and bank deposits tell different stories, or if large add-backs (expenses you say a new owner will not have) cannot be documented, the buyer's confidence drops and so does the price. Some buyers then try to renegotiate; others simply walk. A financial recast prepared before going to market and reconciled to the tax returns closes that gap before anyone asks. Owners who have run personal expenses through the company should expect to prove each one with statements or receipts; round numbers and memory will not satisfy a lender.
Diligence finds something new
Due diligence is the buyer's detailed review of your finances, contracts, employees, legal matters and operations after a letter of intent is signed. What kills deals there is rarely the problem itself; it is the fact that nobody mentioned it. Disclosed early, most issues become a negotiated point. Found by the buyer, they become a question of trust, and the buyer starts wondering what else is missing. The usual examples are below; there is more in what causes a business sale to fall apart in due diligence.
- An expired license or permit, or an open matter with a state or local agency
- A major customer contract that can be canceled when ownership changes
- Sales tax, payroll or worker classification questions
- Environmental or safety issues at the property
- A slide in monthly sales while the owner was busy with the sale
Warning signs worth acting on
| What you notice | What it often means | What to do |
|---|---|---|
| The buyer will not complete a financial profile | It may not be able to fund the purchase | Share nothing more until it does |
| The buyer wants exclusivity before putting terms in writing | It wants to take you off the market cheaply | Keep other buyers engaged until a letter of intent is signed |
| No lender has been named weeks into diligence | Financing is not lined up | Ask for the lender's contact and a term sheet |
| A new advisor appears on the buyer's side late | Settled terms may be reopened | Get your advisor talking to theirs early |
| Monthly sales dip while the company is marketed | The owner is distracted | Hand daily decisions to managers and watch the weekly numbers |
The buyer was never a real buyer
Some buyers are curious rather than committed; others overstate their resources or have not lined up a lender. A deal with such a buyer can drag on for months before it dies, and by then your other options have gone cold. The defense is screening before anything confidential changes hands: a signed confidentiality agreement, a financial profile or proof of funds, and a clear account of how the purchase will be paid for, whether through SBA, conventional or seller financing. It also helps to keep more than one serious buyer interested, so no single party can hold the process hostage or wear the price down; our answer on reducing the risk of a buyer retrading the price covers the tactics.
Third parties get in the way
People outside the deal can stop it. A landlord may refuse to assign the lease or demand new terms. A lender holding a lien on company assets has to release it. A partner, a family shareholder or a board may need to approve in writing. The buyer's own outside advisor may talk the buyer out of it late in the process. Leases are the most common surprise: many require the landlord's written consent to an assignment, and some treat a change in who owns the company as one. List every approval you need at the start, read the lease and loan documents for consent clauses, and bring the right people in at the right moment.
How MDR & Associates guards against it
MDR & Associates prepares the financial recast before a company goes to market, asks the hard questions a buyer will ask, and requires every buyer to sign an NDA and complete a financial profile before seeing any detail. Because we negotiate multiple letters of intent at once, a buyer who tries to renegotiate late knows others are waiting. Our success rate is over 90%. To see how your company looks to a buyer today, start with a free valuation snapshot.
Where this fitsSell your business in Texas →
Questions owners ask next
Can I keep a deposit if the buyer walks away?
Usually there is nothing to keep. In most lower-middle-market deals the letter of intent is non-binding on price and terms, so a buyer can walk before the purchase agreement is signed, and deposits at that stage are uncommon. Your real protection is screening buyers well and keeping other interested parties warm until closing.
What should I do if a buyer asks to lower the price late in diligence?
Ask for the specific finding behind the request, with numbers. If the issue is real, negotiate a remedy that fits it, such as an escrow or a targeted price adjustment. If it is a tactic, a strong alternative buyer is the best answer. Let your advisor and attorney respond rather than handling it alone.