Transferability Checks

Three Quick Checks Buyers Use to See If Your Business Is Transferable

When a serious buyer looks at your company, they don’t start with a full due diligence or complex models. Before any of that, they run a few fast, practical tests: can this business work without the owner, is there a real management “machine”, and does the cash flow look strong enough to carry debt?

I focus on buying one understandable SME at a time in Poland and nearby markets, committing my own financial resources alongside bank financing and then staying responsible for the company through a management team. That experience has taught me a simple rule: if a business fails these three quick checks, most disciplined buyers will step back long before a detailed conversation about price.

This article turns that buyer filter into a 30–60 minute self-check for owners — no Excel, no reports, just a few honest questions.

Why buyers start with transferability

From the seller’s side, it can feel like the main question is “what multiple of EBITDA will I get?” From the buyer’s side, there is a question that comes even earlier:

If the current owner steps back, does this company still behave like a business — or does it fall apart?

If the honest impression is “it falls apart”, several things happen:

• A serious buyer is unlikely to invest months of work into the deal.

• Any bank that might support the acquisition will be very cautious.

• Negotiations, if they happen at all, get stuck in fear and heavy conditions.

That’s why the first filter is not a full legal or financial review. It’s three fast, practical checks on:

1. Dependence on the owner

2. Management and systems

3. Cash flow and ability to carry debt

You can run exactly the same checks on your own business in under an hour.

Quick Check 1: Owner dependence

The first question is simple: how much of the business is still “wired” directly through you?

Buyers don’t expect the owner to be invisible. But they want to see that the company can function if you disappear for a while. A quick way to test this is to imagine you are gone for 3–6 months and answer a few concrete questions.

Key questions to ask yourself

Take a piece of paper and write down:

• Clients:
  Who actually manages relationships with your top 10 customers?

  • Are they used to dealing with a specific account manager or project lead?

  • Or do they call you personally whenever something important comes up?

• Suppliers:
  When there is a shortage, a price change or a delivery problem,

  • who does the supplier call first — your purchasing / operations person, or you?

• Decisions:
  For changes in prices, payment terms, credit limits, key hires, large purchases:

  • can someone else decide without asking you?

  • are those limits written down, or only in your head?

• Crisis mode:
  If a big client threatens to leave or a quality problem appears,

  • does the team have a clear playbook,

  • or is the real plan “we call the owner and they fix it”?

If most arrows still point directly to your phone, buyers see a red signal on transferability. It doesn’t mean the business has no value, but it does mean the discussion will be about risk and dependency, not about a clean, stand-alone asset.

If, on the other hand, you see that:

• key clients know at least one non-owner decision-maker,

• suppliers are used to dealing with defined roles,

• and the team can handle most issues without you,

then this first check is closer to green.

Quick Check 2: Management and systems

Even if you step out of daily decisions, there is still a second question: is there a real management “machine”, or just a group of people who happen to work together?

A buyer is looking for signs that the business can be run, not just “held together” by the owner’s presence.

The second-line test

Ask yourself:

• Second line:
  Can you clearly name 1–3 people who are responsible for:

  • sales and key client relationships,

  • operations / delivery / production,

  • finance / admin / cash?

  Do your staff recognise these people as real decision-makers, or do they still think “nothing counts until the owner says yes”?

• Meetings and rhythm:
  Are there regular, structured discussions of numbers and priorities (weekly, monthly),

  • with simple agendas and clear follow-ups,

  • that can happen even if you are not in the room?

• Basic processes:
  For core activities — taking orders, scheduling work, handling complaints, approving credit, purchasing —

  • is there at least a simple, written description or checklist?

  • or does everyone just “know how we do it here” based on memory?

• Systems:
  Does your team use a basic CRM, ERP or accounting system that shows:

  • pipeline and orders,

  • stock and capacity,

  • receivables and payables —
    and can more than one person pull those reports without your help?

A buyer is not expecting a big corporate structure. But if there is no second line, no rhythm and no shared view on numbers, the message is clear: the business is not yet a machine, it is still an extension of the owner.

If, instead, you see that your managers can live in calendars, meetings and simple reports without you, the second check moves towards amber or green.

Quick Check 3: Cash flow and ability to carry debt

The third quick test is about how steady and predictable the cash flow is, and whether it looks capable of supporting debt safely.

In many SME sales, the buyer relies on a mix of their own capital and bank financing. That means both the buyer and any bank they speak to need to believe that the business generates enough cash to pay down a loan over time and still function normally.

Cash flow reality check

Look at the last 3–5 years and ask:

• EBITDA level and stability:
  Does your business show a reasonably stable EBITDA (operating profit before interest, tax and depreciation), or does profit swing violently up and down from year to year?

  • A modest but steady EBITDA is often more attractive than one “fantastic year” surrounded by weak ones.

• Margins:
  Have your margins been in a similar range over time,

  • or did a one-off contract, subsidy or unusual pandemic effect create a spike that is unlikely to repeat?

• Working capital:
  Does your cash position suffer regularly because:

  • customers pay late,

  • stock sits for too long,

  • or you are always “catching up” with suppliers?

• Concentration:
  Do 2–3 clients make up 40–60% of your revenue?
  If one of them reduces volumes, what happens to your ability to pay salaries, suppliers and a loan?

A simple way to think about this is: if you imagine a realistic annual loan repayment and compare it to your typical annual free cash flow after investments and normal owner salary,

• does it feel comfortably covered,

• or does it already feel tight even before any shock?

If cash flow looks relatively steady and not overly dependent on one or two relationships, buyers see room to safely use bank debt. If not, this third check is another warning signal.

Putting the three checks together

These three quick filters are exactly what many buyers run in their heads in the first days or weeks of looking at a company:

1. Owner dependence – will the company still function if the owner steps back?

2. Management and systems – is there a basic machine that someone else can run?

3. Cash flow stability – does the business realistically look able to service debt?

If all three are strongly negative, it is rare for the process to move forward to serious discussions about price and structure. There is simply too much uncertainty.

If some are green and some amber, there is room for a deal, but also a clear agenda: where to strengthen before or after a transaction.

And if most answers are already green, you have something quite rare on the SME market: a business that is not only profitable, but also truly transferable.

Using this as a 30–60 minute self-diagnostic

You don’t need to wait for a buyer to run these checks on you. You can do it yourself:

1. Block 30–60 minutes without interruptions.

2. Draw three columns: Owner, Management & Systems, Cash Flow.

3. Under each, write the questions from this article and answer honestly in short bullet points.

4. Mark each block red / amber / green based on how you truly feel, not how you wish it looked.

This one page will already tell you:

• where a buyer will see the most risk;

• which topics will come up in the first real conversation;

• and what you might want to stabilise in the next 12–24 months if you’re planning a sale or refinancing.

It’s not an exam. It’s a way to see your business the way a disciplined buyer would, before anyone else does.

If This Sounds Like Your Business

If you recognise your company in this three-part check and are somewhere between “not yet” and “maybe in a few years” about a sale, you don’t have to decide anything today. You can start quietly with the short confidential seller form on my site: outline your business in a few fields, and if there’s a potential fit, we’ll use it as a calm, non-binding first step to see how a buyer would read your numbers and transferability.

👉Seller Form Step-1 link here>>