Worcester Business Journal

wbjournal.com | March 9, 2026 | Worcester Business Journal 21 BY KRISHNA ABBURI Special to WBJ M ost business owners assume deals fall apart because buyers cannot secure financing or because market conditions suddenly shi. In reality, many small and midsize business exits fail for a simpler reason: Buyers lose confidence in the financials. e numbers may look strong on the surface, but once buyers dig deeper, inconsistencies, informal practices, or unclear assumptions oen appear. When that happens, valuation drops quickly or the deal dies altogether. is issue is more common than owners realize. Industry data suggests only 20-30% of businesses that go to market actually sell, meaning most never complete a transaction. A large share of those failures happen during financial due diligence, when buyers move beyond summary reports and start validating earnings. When a profitable business fails to sell Consider a common lower middle market scenario. An insurance agency generates roughly $5 million in annual revenue and reports $800,000 in EBIT- DA. e owner expects strong buyer interest and a premium valua- tion. Early con- versations go well. During diligence, buyers discover personal expenses flowing through the business, in- consistent revenue recognition practic- es, and one customer representing more than one-third of total revenue. None of these issues alone would nec- essarily kill a deal. Together, they create uncertainty. e business remains prof- itable, but buyers struggle to confidently project future performance. Deals rarely fail because the business lacks revenue or customers. ey fail because risk becomes difficult to measure. How buyers evaluate financial risk Buyers are not purchasing last year's profits. ey are purchasing confidence profits will continue aer ownership changes. When financials require exten- sive explanation, buyers begin to ques- tion sustainability. ey may assume earnings are overstated, expenses are understated, or customer relationships are too owner-dependent. Even if those assumptions are incorrect, uncertainty alone leads to valuation discounts. at is why sophisticated buyers focus less on headline EBITDA and on how EBITDA is generated, adjusted, and supported. Where buyers look first Many owners believe buyers start with growth projections or market opportunities. In practice, experienced buyers usually start with financial reli- ability. ey evaluate cash flow quality, revenue consistency, working capital needs, and balance sheet accuracy. ey want to confirm that reported earn- ings align with actual cash generation, revenue is diversified and repeatable, and assets and liabilities are properly recorded. Why this issue is now more common Today's buyers are more disciplined and data-driven than ever. Private equity firms, search funds, and strategic acquirers increasingly rely on third-par- ty firms to perform quality-of-earnings analyses. Poor diligence preparation is consistently cited as a major contributor to failed M&A. When issues surface late in a deal process, negotiations become strained and price reductions become likely. At the same time, many business owners are nearing retirement age. Without early financial preparation, otherwise strong businesses risk failing to sell simply because they are not dili- gence-ready. What successful sellers do differently Owners who complete successful exits treat financial reporting as a stra- tegic asset, not just a tax requirement. ey maintain accrual-based financial statements, separate personal and busi- ness expenses, reconcile balance sheet accounts regularly, and document key accounting policies. Just as importantly, they review financials with advisors who understand transaction standards, not just compliance reporting. Final thought Strong profits attract buyers. Credible numbers close deals. Businesses that invest early in finan- cial clarity consistently achieve smooth- er transactions and stronger valuations. e difference between a successful sale and a failed process is oen not the business itself. It is whether the num- bers tell a story buyers can trust. Krishna Abburi is senior transaction advisory services at Citrin Cooperman Advisors, which has a Worcester office. BY TIMOTHY MURRAY Special to WBJ I n last November's Worcester municipal election, 74.8% of voters endorsed the idea that Worcester's private local col- leges be required to invest 0.5% of their endowments into a fund to advance needed economic development, housing, and community projects, for which they would receive a return on investment. Moreover, in September 2024, Mayor Joseph Petty and City Councilor Candy Mero-Carlson filed an order unani- mously supported by the City Council, requesting the City of Worcester estab- lish an institutional zoning ordinance similar to Cambridge and Boston. An IZ ordinance requires large institutional nonprofits to file with the municipal- ity a 10-year master plan outlining their growth and construction plans for a 10-year period. is would ensure government officials, neighbor- hood residents, and business owners are not surprised by property acquisitions or expansions that could negatively disrupt neighborhoods and business districts. e IZ ordinance would create a new level of transparency for neighborhood residents and business districts and ensure City officials have predictability for City planning and finances. e genesis of the IZ ordinance and municipal ballot question by the City Council was a result of Worcester Poly- technic Institute, MCPHS University, and the College of the Holy Cross acquiring major pieces of property and existing businesses in 2024 with little or no notice to City officials, residents, and businesses. e consequences of these and previous acquisitions, more oen than not, result in properties being taken off the municipal tax rolls because of the colleges' nonprofit status. e tax burden is shied onto remaining residential and business taxpayers' real estate tax bills. e IZ ordinance approved by the City Council was forwarded to Worces- ter's legislative delegation to be adopted by the legislature as a home rule petition in September 2025, where it is still pending on Beacon Hill. City Manager Eric Batista has reported to the Council and the public on several occasions over the past 18 months that he is in negotiations with the colleges on a potential resolution to the IZ ordinance issue, the establish- ment of a community impact fund, and/ or new PILOT agreements. In the past two months, the Boston Globe reported the City of Boston has negotiated new and substantial PILOT agreements with Northeastern University and Went- worth Institute of Technology. Meanwhile, Worcester's residential, commercial, and industrial taxpayers wait. e voters and Worcester City Council have been clear we need a balanced and fair partnership between Worcester residential and business taxpayers and our large institutional nonprofits. Our state legislative and federal legislative delegation should be mindful of this when these same institu- tional nonprofits seek taxpayer support from the state or federal government for programs and/or infrastructure. Timothy Murray is president and CEO of the Worcester Regional Chamber of Commerce. Worcester taxpayers are still waiting Timothy Murray e No. 1 deal killer when selling a business Krishna Abburi ADVICE & OPINION THE CHAMBER CORNER KNOW HOW W W

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