The Strategic Buyer's Lens
How Acquirers Think About Risk
What felt like strength
You’ve built a business over twenty years. It pays well, provides jobs for dozens of people, and you’re ready to step away. You sit down with a serious buyer who has the capital, experience, and interest to close. The conversation seems to go smoothly…until they begin to probe into details you never thought twice about. Why are key contracts tied to you personally? What happens if your biggest customer walks? How do you guarantee that recurring revenue really recurs? Suddenly, what felt like strength begins to look like vulnerability.
That moment is what separates an owner’s view from a buyer’s view. Sellers see value in the years of sweat equity, market position, and growth potential. Strategic buyers see risk. And the more risk they see, the less they are willing to pay—or the more contingencies they will build into the deal.
Here’s the uncomfortable truth: buyers don’t just pay for what you’ve built. They pay for how transferable and resilient that business will be once you’re out of the picture.
The silent tax on valuation
This plays out in many different ways. A manufacturer with strong sales but all decision-making concentrated in the founder’s head. A services firm with great margins but customer relationships tied to one or two rainmakers. In both cases, buyers were interested…but they discounted heavily because too much of the value walked out the door with the owner. Contrast that with a medical practice I helped advise, where the physician had already built out management, standardized systems, and diversified referral sources. Later on (before I became a business broker), that business sold quickly, at a premium, because the buyer saw strength without dependence.
Think of risk as a silent tax on your valuation. Customer concentration, key-man dependence, regulatory exposure, margin volatility…all of these add up in a buyer’s mind. And unlike your internal optimism, buyers don’t discount these risks lightly. They model them, assign probabilities, and adjust their offer accordingly.
Here’s the lens most strategic buyers use: risk isn’t just a factor. It’s the factor.
Your biggest opportunities
But here’s the intrigue: the very things buyers view as risks are also your biggest opportunities to build transferable value. That’s where smart owners flip the script. Instead of waiting until due diligence to be surprised, they address these risk factors years in advance.
A common misconception I hear from sellers is: “The buyer will figure it out.”
They’re right: buyers will figure it out, but not in the way the seller hopes. They’ll figure it out as a discount, a holdback, or worse, a deal that dies in diligence.
Imagine instead that you walk into a negotiation able to demonstrate: recurring revenue backed by contracts, diversified customers, leadership beyond the founder, clean financials, and documented systems. A buyer looking through their risk lens sees certainty. Certainty translates directly into a higher purchase price, smoother closing, and better terms for the seller.
This isn’t theory. In 2023, BizBuySell reported that businesses with recurring revenue sold at nearly a 20% higher multiple than comparable businesses without it. Why? Predictability reduces risk. Strategic buyers pay up for confidence they can project into the future.
The positive future
If you want to harvest maximum value, don’t just focus on revenue growth or profitability. Focus on risk reduction as buyers define it. Doing so doesn’t just make your business more attractive to acquirers; it makes it stronger, more resilient, and easier to run today.
The solution is straightforward but rarely easy. Start with a candid assessment of your business through a buyer’s lens. Identify the risks you’ve normalized. Build systems, diversify dependencies, and institutionalize knowledge. What feels like “extra work” is actually the highest-leverage investment you can make for your exit.
Because in the end, buyers don’t pay for what you’ve built. They pay for the certainty that it will endure without you.
David Hermann, CEO of hermanngroup and M&A Advisor/Broker at Sunbelt Business Brokers of Colorado
David Hermann is a transformative advisor and strategist who turns complex business challenges into extraordinary successes. Known for driving over $500 million in documented financial improvements for clients, David partners with C-suite leaders to unlock their full potential. With 60+ speaking engagements, numerous publications, and a spot in the top 1% of Consulting Voices and top 1% of the Social Selling Index on LinkedIn, he’s passionate about making strategy, change leadership, and operations insightful and accessible.