Owner-led businesses are some of the best acquisitions available. They are often profitable, loyal to their customers and underpriced compared with larger companies. They also carry a risk that is easy to miss: much of the value can sit with one person, and that person is leaving.
The teaser and the management accounts won’t show you this. These seven questions will.
1. What happens to revenue if the owner stops showing up?
Ask the owner to walk you through a normal month. Who wins new work? Who sets prices? Who approves exceptions? If the honest answer to most questions is “I do”, you are buying a business that needs rebuilding, and the price should reflect that.
2. Which customer relationships are personal?
List the top ten customers and ask who each one calls when something goes wrong. Where the answer is the founder, the relationship may not transfer. Speak to a sample of customers before signing, and plan the introductions as part of the deal.
Two of the top three customers renewing with the founder, not the company, is a pricing issue, not a footnote.
3. Are the earnings repeatable?
Owner-led accounts often include add-backs: personal costs run through the business, a below-market salary, one-off projects. Some are fair. Others make the business look stronger than it is. Test each add-back and each large contract, and price only the profit you expect to repeat.
4. What does the owner do every week that nobody else can?
Beyond customers, look for know-how held in one head: supplier terms, pricing logic, technical expertise, regulatory relationships. Each one needs a named successor and a handover period written into the deal.
5. How reliable are the numbers?
Ask how long month-end takes, who does it and when the accounts were last reviewed by someone independent. Slow or informal reporting is common in smaller businesses. It is fixable, but you need to know before you rely on the figures to set a price.
6. What will working capital look like at closing?
Sellers can collect receivables early or delay payments ahead of a sale, which flatters cash. Agree a normal level of working capital based on a full year, and build an adjustment into the price so you aren’t funding the gap after you take over.
7. Why is the owner selling now?
Retirement and new projects are common and healthy reasons. But timing can also reflect a contract about to end, a key employee leaving or a change in the market. Ask directly, then check the answer against what diligence finds.
What to do with the answers
None of these findings has to end a deal. Most can be handled through price, structure or the handover plan: an earn-out tied to customer retention, a longer transition period for the founder, or a working capital adjustment. What matters is finding them before you sign, while you still have the leverage to act on them.