The Closing Argument

How Owner Dependence Lowers the Sale Price

Key takeaways

• When a buyer learns that key customers depend on the owner, it treats that revenue as at risk. The usual response is a lower multiple and less cash at closing.
  

• On a $7.5 million deal, cutting the multiple from 5.0x to 4.25x and adding a market-rate manager reduces the price to about $6.0 million.
  

• At least 18 months before going to market, test whether the business can run for 90 consecutive days without you.

You sign an LOI to sell your packaging distribution business for $7.5 million, or 5.0x adjusted EBITDA of $1.5 million. The buyer will pay $6.0 million at closing and $1.5 million through a seller note, and you agree to stay on for 60 days. In week four of exclusivity, the buyer calls your 12 largest customers. 9 of them ask whether you are staying.

The customer calls confirm what the buyer suspected after reviewing the company’s records. For the past six years, you’ve priced every quote above $50,000, and only you can approve discounts. Your operations manager handles fulfillment but has never met the purchasing contacts at your three largest accounts. The buyer now has to assess whether those customers will stay after you leave.

The buyer revises the offer to account for the cost of replacing you and the risk of losing customers. A general manager’s $200,000 salary replaces your $120,000 salary, reducing adjusted EBITDA to $1.42 million. The buyer also lowers the multiple from 5.0x to 4.25x, bringing the price to about $6.0 million. You’ll receive $4.5 million at closing, with the remaining $1.5 million payable only if revenue from the 12 largest customers holds steady for 24 months. This earnout replaces the seller note, and you’ll need to stay for 12 months instead of 60 days.

By the time the buyer revised the offer, you had little time to show that someone else could manage those accounts. Hiring a general manager 18 months before the sale would have cost about $300,000 in salary, but the buyer could then have reviewed a record of customers placing orders and accepting quotes without your involvement. That record would have strengthened your case for the original sale price. 

Building that record starts with giving the manager the knowledge and authority to handle those accounts. Document how you set prices, which discounts protect a valuable account, and what commitments you’ve made to major customers. Give each account a second contact who joins reviews and handles issues. These steps allow the manager to make decisions and earn customers’ confidence while you’re still available to support the handover.

Step away from routine account management for a month and record every issue that reaches you. Use those cases to adjust decision authority, fill gaps in account records, or strengthen the manager’s relationship with the customer. Extend the test to 90 consecutive days, tracking revenue and margins alongside your involvement. That gives a buyer evidence of how the business performs without you.

By the Numbers

56,130 SBA 7(a) loans were approved in the fiscal year ended September 30, down 28.1% from the prior year, according to Coleman Report’s FY2026 lender rankings. Dollar volume fell 13%, to $32.43 billion. And the average loan rose to about $578,000 from about $477,000, an increase of roughly 21%. Live Oak stayed the largest 7(a) lender at $2.58 billion, down 9.4%, while its loan count rose 5.7%. Huntington’s approvals fell 44.6%, and JPMorgan Chase dropped from 9th to 28th after a 56.6% decline. For owners expecting to sell to an individual buyer, fewer SBA loan approvals could limit the pool of buyers able to finance the purchase.

The Reader’s Sentiment

Your buyer’s SBA lender approved over 40% fewer 7(a) loans this year and now needs two more weeks to finish underwriting. What do you do first?

1. Give the buyer two more weeks of exclusivity

2. Ask the buyer to secure a commitment letter from a backup lender

3. Resume talks with the next highest bidder

4. Offer more seller financing to reduce the SBA loan amount

Essential Reading

This analysis of the FY2026 SBA 7(a) results looks at why approvals fell 28% while dollar volume fell only about 13%. It traces the drop to tighter credit standards after the June 2025 rule changes and covers the competing explanations, including higher rates and loans approved before the late 2025 government shutdown that would otherwise have closed in FY2026. It also uses a $1.5 million acquisition to explain what buyers need to secure an SBA loan under the October 2026 underwriting rules.