Why I Focus on Transferable Value in Every Deal

When I buy a business, I don’t just care about how profitable it is today. I care about how much of that profitability and stability will survive the transition from the seller to me. That concept is what I call transferable value, the portion of the company’s value that actually transfers to a new owner.

This idea has become central to how I evaluate deals. A business can look great on paper, but if most of its value disappears when the seller steps away, then it’s not really worth buying. On the other hand, companies with strong transferable value continue to generate cash flow, retain customers, and keep employees even through major ownership changes.

In this article, I’ll explain what transferable value means, why it matters so much, how I evaluate it during due diligence, and the mistakes I’ve made when I underestimated it.

What Transferable Value Really Means

Transferable value is the difference between the business as it exists today and the business as it will exist without the seller. It’s not just about assets or financials; it’s about whether the systems, people, and relationships that drive performance can function independently.

For me, transferable value answers the question: If the seller walked out tomorrow and never came back, what would remain?

Why Transferable Value Matters

A business with high transferable value is resilient. It continues to operate smoothly, employees know their roles, customers stay loyal, and vendors trust the company. A business with low transferable value is fragile. It relies on one person for everything, and when that person leaves, value evaporates.

As a buyer, I’m not interested in paying for value that won’t survive the transition. That’s why I focus so much on this concept.

Signs of High Transferable Value

Over time, I’ve learned to recognize the signs of strong transferable value:

• Documented systems and processes. The company doesn’t depend on tribal knowledge.
• Strong management team. Leadership is distributed, not concentrated in the owner.
• Customer loyalty to the company, not the owner. Relationships survive leadership changes.
• Diverse customer base. Revenue doesn’t depend on one or two key clients.
• Contracted or recurring revenue. Cash flow is predictable and legally secured.

These features make me confident that the business will perform after closing.

Signs of Low Transferable Value

I also look for warning signs that transferable value is weak:

• The owner handles all major customer relationships.
• Employees rely on the owner for every decision.
• Processes are undocumented or inconsistent.
• Revenue depends heavily on the owner’s reputation or personality.
• Key vendors extend credit only because of personal trust in the seller.

If I see too many of these red flags, I either walk away or discount the valuation significantly.

My Early Mistakes

In one of my first deals, I underestimated how much value was tied to the seller. Customers were loyal to him personally, not the company. After he left, sales dropped quickly. On paper, I had bought a profitable business. In reality, I had bought a fragile job.

In another deal, I failed to notice how much undocumented knowledge lived in employees’ heads. When two staff members left shortly after closing, we lost critical expertise that wasn’t written down anywhere.

Both experiences taught me to evaluate transferable value with as much rigor as financials.

How I Evaluate Transferable Value

During due diligence, I test transferable value through several lenses:

People

Who actually runs the business? Can managers make decisions, or does everything flow through the owner?

Processes

Are there SOPs, manuals, and documented workflows? Or does everyone “just know” how to do things?

Customers

Do contracts or subscriptions exist, or is revenue based on handshake deals and personal relationships?

Vendors

Are vendor terms tied to the business entity, or are they extensions of trust to the owner personally?

Culture

Does the culture encourage loyalty to the company, or is everything centered on the seller’s charisma?

These questions reveal how much of the value will transfer and how much will disappear.

How I Increase Transferable Value After Buying

Sometimes I buy businesses with weaker transferable value if I see an opportunity to improve them. My playbook for strengthening transferable value includes:

• Documenting all core processes within the first 90 days.
• Building a stronger management team by promoting or hiring leaders.
• Meeting key customers personally to transfer loyalty to the business.
• Negotiating contracts where none existed.
• Training employees to operate independently of ownership.

By doing this, I turn fragile businesses into durable ones.

Why Transferable Value Impacts Valuation

Businesses with high transferable value sell for higher multiples. Buyers like me will pay more because the risk is lower. Businesses with low transferable value command discounts because so much of the “value” is really tied to the seller.

That’s why I think about transferable value not just as a diligence tool, but also as a growth strategy. The more transferable value I build, the more valuable the company becomes in the future.

Final Thoughts

I’ve learned that transferable value is one of the most important concepts in acquisitions. It separates businesses that survive transitions from those that collapse. It also determines whether I’m paying for something durable or something fragile.

That’s why I focus relentlessly on transferable value in every deal I evaluate. Because at the end of the day, I don’t just want to buy revenue or assets, I want to buy a business that continues to thrive long after the seller is gone.

I continue sharing my acquisition frameworks, strategies, and lessons at DrConnorRobertson.com, where I document the real playbook I’ve built deal by deal.