Your customer and vendor agreements are the foundation of your business. They define your revenue, supply chain, and operational stability — and they’re among the first things buyers scrutinize during due diligence.
When preparing for a sale, taking time to review, clean up, and even renegotiate key agreements can dramatically improve buyer confidence and valuation. On the other hand, outdated, inconsistent, or risky contracts can trigger delays, retrades, or price adjustments.
At Legacy Advisors, we’ve seen founders win — and lose — millions in deal value based on the quality of their customer and vendor relationships. The contracts behind those relationships tell buyers how durable your business truly is.
Why Buyers Care About Customer and Vendor Agreements
Buyers look at your contracts to evaluate stability, transferability, and concentration risk. They want to know:
- Are your top customers locked into long-term agreements?
- Are your vendors reliable, compliant, and assignable?
- Are your contract terms fair and sustainable post-sale?
If customers can walk away with 30 days’ notice or if critical vendor relationships can’t be transferred, buyers see risk — and they’ll discount accordingly.
In The Entrepreneur’s Exit Playbook, I wrote: “Strong contracts are silent deal-makers. Weak ones become loud liabilities.”
Common Issues Found in Contracts During Diligence
Even strong companies run into recurring contract challenges. The most common include:
- Short-term or auto-renewal terms that limit visibility into future revenue.
- Missing assignment clauses, which prevent transfer of contracts during a sale.
- Revenue concentration, where too much income comes from one or two customers.
- Verbal or unsigned agreements that can’t be enforced.
- Vendor dependency, where critical suppliers have leverage or vague terms.
- Unbalanced pricing models that may not hold up post-sale.
Each of these issues raises questions about reliability, compliance, and predictability — all of which affect valuation.
Lessons from Experience
When I sold Pepperjam, one of our biggest priorities was strengthening our top customer contracts before going to market. We extended terms, added assignment clauses, and documented verbal agreements in writing. By the time buyers reviewed our contracts, every major relationship was clean, assignable, and defensible.
On the Legacy Advisors Podcast (https://legacyadvisors.io/podcast/), Ed and I often discuss deals that slowed down due to poor contract hygiene. In one case, a client had two unsigned customer renewals representing nearly 40% of revenue. The buyer insisted on new agreements before closing, delaying the deal by three months. Another company had a key supplier contract without a transfer clause — forcing emergency renegotiation mid-diligence.
These issues are preventable — if you start early.
How to Review and Renegotiate Your Agreements
Here’s how to prepare your contracts before you go to market:
1. Identify your top contracts.
Focus on agreements that drive the majority of revenue or operational stability.
2. Review expiration and renewal terms.
Extend or formalize agreements that are short-term or near renewal.
3. Check for assignment clauses.
Ensure all contracts can transfer to the buyer without requiring consent.
4. Eliminate verbal or expired deals.
Get everything in writing and signed. Buyers will not rely on handshake agreements.
5. Evaluate vendor leverage.
Negotiate fair, long-term pricing and terms that reduce risk of disruption post-sale.
6. Document performance and compliance.
Keep proof of on-time payments, delivery records, and service levels.
7. Work with legal counsel.
Have an attorney review every major agreement for transferability and risk exposure.
This process isn’t about rewriting everything — it’s about tightening what matters most.
The Valuation Advantage
Clean, well-documented, and assignable contracts tell buyers that your business is reliable and built for continuity. They reduce perceived risk and allow buyers to forecast revenue with confidence.
When buyers know that your key customers are secured under enforceable terms — and that your vendor network is stable — they’re more likely to pay a premium. In contrast, unclear or risky agreements give buyers leverage to push down price or demand additional warranties.
Strong contracts don’t just support your valuation — they protect it.
Final Thoughts
Contracts are the operating DNA of your business. They define trust, predictability, and performance. Reviewing and renegotiating them before an exit ensures that every relationship you’ve built adds value instead of introducing risk.
Exits don’t happen when you feel ready — they happen when your business is ready. And readiness means every agreement is current, assignable, and structured for long-term stability.
Find the Right Partner to Help Sell Your Business
At Legacy Advisors, we help founders review and strengthen customer and vendor contracts before going to market. We identify risks, negotiate improvements, and prepare your documentation for seamless buyer review.
Visit legacyadvisors.io to connect with our team, listen to the Legacy Advisors Podcast (https://legacyadvisors.io/podcast/), and explore insights from The Entrepreneur’s Exit Playbook. Together, we’ll make sure your business relationships are assets — not obstacles — when it’s time to sell.
Frequently Asked Questions About Contract Readiness in M&A
Why do buyers care so much about customer and vendor agreements during diligence?
Because these contracts show how dependable your business really is. Buyers want predictable revenue streams, secure customer relationships, and stable supply chains. If your customer or vendor agreements are short-term, unsigned, or can’t be transferred, buyers see risk. They worry that key accounts could leave or that suppliers could change terms post-sale. Clean, assignable, long-term contracts reassure buyers that your business can operate smoothly after the acquisition — and that stability protects your valuation.
What types of contracts should I focus on before going to market?
Prioritize material contracts — those that significantly impact revenue or operations. That includes top customer agreements, supplier and vendor contracts, distribution deals, and real estate or equipment leases. These documents often represent the bulk of your company’s recurring value. Review them for term length, termination clauses, assignment rights, and pricing consistency. Buyers will scrutinize these agreements first because they reveal how secure your business is once ownership changes hands.
How do I handle contracts that don’t have assignment clauses or require consent?
If a contract doesn’t include an assignment clause or requires consent to transfer, start addressing it early — ideally six to twelve months before selling. Contact the counterparty to amend or renew the agreement with assignment language that allows transfer upon change of ownership. If consent is needed, secure it before diligence begins. Delays in obtaining consent can hold up closing or give buyers leverage to renegotiate. A proactive approach demonstrates preparedness and professionalism.
Should I renegotiate contracts that are short-term or outdated before selling?
Yes — as long as it strengthens your position. Extending customer contracts, improving vendor terms, or formalizing handshake deals adds measurable value and buyer confidence. Avoid making major structural changes right before going to market, but do clean up renewals and documentation. Buyers like to see predictable revenue under enforceable agreements. Even simple updates, such as converting month-to-month contracts into one-year terms, can improve how buyers perceive your company’s stability.
How can Legacy Advisors help me prepare customer and vendor contracts for sale?
At Legacy Advisors, we help founders identify, review, and strengthen key contracts before buyers ever see them. We work with your legal team to confirm assignability, resolve risky terms, and ensure your agreements tell a story of stability and reliability. Drawing on insights from The Entrepreneur’s Exit Playbook and conversations on the Legacy Advisors Podcast (https://legacyadvisors.io/podcast/), we help you turn your contract portfolio into a competitive advantage. The goal is simple: eliminate friction, build buyer trust, and protect your valuation from day one.