Short answer
- In Axial's 2024 data, diligence findings, QoE gaps and financing caused half of failed deals.
- Pricing above what a lender will finance is the most common avoidable cause on small deals.
- Pre-sale diligence and a detailed LOI prevent most failures.
What the data says
Axial studied 65 lower-middle-market deals that died after a signed LOI in 2024. The top reasons, as a share of those failures:
| Reason the deal died | Share of failed deals |
|---|---|
| Diligence findings (non-financial) | 21.5% |
| Quality of Earnings showed lower EBITDA | 15.4% |
| Buyer couldn't get financing | 13.8% |
| The business underperformed during the deal | 12.3% |
| Renegotiation broke down | 10.8% |
Smaller Main Street deals fail for the same reasons, usually faster.
The seven reasons I see most
1. The price was set above what a lender will finance
Most Florida buyers under about $5M use SBA loans. The lender caps the debt at an independent valuation and needs 1.25x coverage on historical earnings. A price above that line doesn't get financed. It gets retraded or it dies.
2. The earnings didn't survive diligence
Add-backs without support, cash revenue that isn't on the books, owner pay below market. When the Quality of Earnings number comes in lower, the price follows, and sellers who anchored on the listing walk.
3. The business slipped while the owner was selling
A sale takes six to twelve months. Owners who spend that time on the deal instead of the business hand buyers a reason to cut the price.
4. Customer deposits and working capital surprises
Especially in construction and home services, unearned deposits become a credit to the buyer at closing. If no one modeled it, the seller's cash at closing shrinks and the deal stalls.
5. The lease or a key contract couldn't be assigned
Landlords and major customers can say no, or ask for new terms. Start those conversations early.
6. Licenses and key people
Florida contractor licenses belong to a qualifying individual, not the company. If the owner is the qualifier and leaves, the company has 60 days to replace them. Key employees who learn about the sale late sometimes leave first.
7. The seller's taxes
Florida buyers can be liable for a seller's unpaid state taxes under s. 213.758. Unresolved sales tax or reemployment tax issues create holdbacks that sellers resist.
How to keep your deal alive
- Price on earnings after replacing yourself, tested against SBA coverage. Try the free calculators.
- Run your own pre-sale diligence, ideally with a sell-side QoE on deals above $2M.
- Settle working capital, deposits, seller financing and your transition in the LOI.
- Talk to your landlord, licensing plan and key people before you go to market.
- Keep running the business like you're not selling it.
FAQ
Why do business sales fall through?
Most often diligence findings, earnings that don't survive a Quality of Earnings review, failed financing, the business underperforming during the sale, and renegotiations that break down.
How can I keep my business sale from falling apart?
Price on earnings a lender will finance, do your own diligence first, settle working capital and seller financing in the LOI, and keep running the business at full speed.
Sources
- Dead Deal Report 2024 (Axial)
- SBA SOP 50 10 8.1 summary (Accredited)
- Qualifier rules (Douglas Firm)
- Successor liability, s. 213.758 (Brewers Law)
This guide is general information, not legal, tax or lending advice. SBA rules and Florida law change; confirm current terms with your lender, attorney and CPA.