Silent Killers: Hidden Issues That Tank Business Value (And How to Spot Them Early)

Welcome back to another edition of The Wise Exit!

In today's issue, we're covering:

1. Silent Killers: Hidden Issues That Tank Business Value (And How to Spot Them Early)

2. Entity Purchase Agreement - All You Need to Know

3. The Real Secret to a Successful Exit

4. Deal of the Week: High-Margin Mental Health Practice

Let's dive in!

Silent Killers: Hidden Issues That Tank Business Value (And How to Spot Them Early)

When selling your business, the most dangerous threats aren't the obvious ones.

While revenue dips and market shifts get all the attention, I've spoken with several founders who had deals collapse from issues that were hiding in plain sight for years.

These "silent killers" erode your company's value long before you consider an exit.

And by the time they surface during due diligence, it's often too late to fix them without significantly impacting your sale price.

Here are 3 value-destroying issues you should address right now (not when you're in the middle of a deal):

Silent Killer #1: Customer Concentration

When more than 20% of your revenue comes from a single customer, buyers see risk, not opportunity.

How to Spot It: Calculate the percentage of revenue from your top five customers. If any single customer represents more than 20% of your total or your top five account for more than 50%... you have a problem.

How to Fix It: Develop a deliberate diversification strategy. Target new customer segments, create offerings for different market tiers, and implement account plans that spread risk across more clients.

Silent Killer #2: Undocumented Tribal Knowledge

When critical processes exist only in your team's heads rather than systems, you're selling uncertainty.

How to Spot It: Ask yourself: If key team members left tomorrow, could operations continue smoothly? If you hesitate, you've identified the problem.

How to Fix It: Implement systematic knowledge capture.

Create detailed process documentation, standard operating procedures, and training materials. And consider investing in workflow software that enforces these processes.

Silent Killer #3: Deferred Technology Investment

Outdated technology isn't just inefficient – it signals to buyers that they'll need to make immediate investments after the acquisition.

How to Spot It: Audit your critical systems.

If you're running unsupported software, maintaining workarounds for system limitations, or avoiding necessary upgrades, you're sitting on a ticking time bomb.

How to Fix It: Develop a technology roadmap with prioritized investments.

You don't need to implement everything, but having a clear plan with associated costs shows buyers you're not hiding potential expenses.

Here's the reality most advisors won't tell you:

Fixing these issues takes time, often 12-24 months. But addressing them proactively can easily add 20-30% to your purchase price.

The best time to identify and address these silent killers was years ago.

The second best time is today, before they become deal-breakers during due diligence.

Featured Blog 📰

Entity Purchase Agreement - All You Need to Know

What happens to your business if you or a co-owner experiences a significant life-changing event?

Without proper planning, you could lose ownership or see your business taken over by external buyers.

Our latest blog explores how entity purchase agreements can serve as a clear exit strategy, ensuring business continuity with minimal disruption.

Inside, we cover:

• What exactly an entity purchase agreement is, and when to use one

• How these agreements function in different business structures

• How to handle non-death triggers like divorce or retirement

• The role of life insurance in funding these agreements

Check out "Entity Purchase Agreement - All You Need to Know" on our blog to learn how to protect your business beyond your ownership.

M&A Tips from Brian Dukes 💡

Want to know the real secret to a successful exit?

Start preparing now.

Not when the buyer shows up at your door, and not when you're ready to sell. Now. Because the best exits happen when your business is already buyer-ready.

Read the full post on LinkedIn to learn more about what that looks like.

That's all for this week!

Remember, the best exits are built on addressing problems before they become deal-breakers.

Best,

Brian Dukes