The Contract That Was Two-Thirds Of Her Business

The situation

Genevieve had spent eleven years building a small business out of a job she started doing on her own. She trained as a personal support worker, began picking up private clients on evenings and weekends, and eventually incorporated so she could bill properly and take on staff. By the time she decided to sell, her corporation employed six other personal support workers who provided in-home care across Pembroke and the surrounding area, and she was ready to step back from the scheduling, the payroll, and the phone that never stopped ringing.

A buyer came along faster than she expected. Tharshini, a landscaper looking to move into a more stable, less weather-dependent line of work, had saved enough to buy a small service business outright and wanted something with existing staff and existing clients rather than a business she would have to build from nothing. The two agreed in principle on a purchase price of roughly $165,000 for the company's business assets — its client contracts, its staff, its equipment and goodwill — and signed a letter of intent. Genevieve came to us to review the agreement of purchase and sale before it was signed, expecting a fairly routine transaction.

What the buyer's due diligence found

Before a business changes hands, the buyer's side typically reviews the seller's financial records, contracts, and client list in a process called due diligence — essentially, checking that the business is what it has been represented to be before money changes hands. Tharshini's advisors asked for a breakdown of revenue by client for the past two years. Genevieve provided it without hesitation; she had nothing to hide and did not think much of the request.

The breakdown showed something Genevieve had never really added up herself. A single referral contract with a local retirement residence — under which her corporation supplied personal support workers for residents needing extra care beyond what the residence's own staff provided — accounted for close to two-thirds of the company's total revenue. Her other clients, private individuals and families she had served for years, made up the rest, spread across dozens of smaller accounts.

This is what is known as customer concentration, and it matters enormously in a business sale. A business with one dominant client is really selling a single relationship, not a diversified operation. If that client leaves — because the residence changes management, brings care in-house, or simply chooses a different supplier — the business can lose most of its revenue overnight, and there is very little the new owner can do about it. Buyers who discover this kind of concentration late in a deal often walk away entirely, or come back asking for a very different price. Tharshini's side did the latter.

What we did

1. Reviewed the contract itself before responding. We asked Genevieve for the referral agreement with the retirement residence and read its terms closely — how it could be ended, on what notice, and whether it required the residence's consent to transfer to a new owner. It turned out the contract could be cancelled by either side on relatively short notice, which made the concentration risk worse, not better.
2. Treated the finding as legitimate rather than fighting it. Genevieve's first instinct was to argue that the relationship was strong and unlikely to end. We advised against downplaying a real risk in negotiation — a seller who tries to talk a genuine finding away tends to lose credibility on everything else in the deal, including the parts that were never in question.
3. Negotiated a price adjustment tied to the actual exposure. Rather than accept an open-ended discount, we worked from the numbers: if two-thirds of revenue depended on one contract, the purchase price needed to reflect that concentrated risk specifically, not the business as a whole. The parties settled on a reduced price of roughly $140,000, down from the original $165,000.
4. Structured part of the price as a holdback tied to the contract surviving closing. A holdback is an amount of the purchase price withheld at closing and paid later if agreed conditions are met, rather than handed over all at once. We proposed that roughly $20,000 of the price be held back for six months, released to Genevieve only if the retirement residence contract remained in place and in good standing through the transition period.
5. Added a transition covenant requiring Genevieve's involvement. Because the residence's decision-makers knew Genevieve personally after years of dealing with her, we negotiated a clause requiring her to personally introduce Tharshini to the residence's management and remain available for questions during the transition, giving the relationship its best chance of surviving the change in ownership.
6. Confirmed the representations in the agreement matched reality. The agreement of purchase and sale included seller representations — statements about the state of the business that the seller confirms are true. We made sure the revised agreement described the concentration accurately rather than in general terms, so Genevieve would not later be accused of having misrepresented the business after the fact.

The outcome

The deal closed roughly seven weeks after the concentration issue came to light, at the reduced price with the holdback structure in place. Genevieve received about $120,000 at closing, with the remaining $20,000 held in trust pending the six-month review of the retirement residence contract.

The contract did survive the transition — Genevieve's introductions and continued availability during the handover period appear to have mattered — and the holdback was released to her in full once the review period passed. But the outcome was still a real loss measured against where the deal started: roughly $25,000 less than the original agreed price, plus a six-month wait for part of what remained. Genevieve had built a business worth having, but she had also built it around a single relationship without fully realizing how much weight that relationship was carrying, and the sale price reflected that gap once someone else looked closely enough to find it.

What kept the loss contained rather than compounding was how the finding was handled once it surfaced. Genevieve disclosed everything asked of her, did not contest the substance of what the diligence review found, and agreed to a structure that gave Tharshini real protection without collapsing the transaction. Deals that fall apart at this stage usually do so not because a concentration problem was found, but because the seller's response to the finding damaged trust beyond repair.

Genevieve later said the whole experience changed how she thought about the business she had built. She had known, in a vague way, that the retirement residence contract was important, but she had never sat down and worked out exactly how important until a stranger's due diligence request forced the question. For a sole owner running day-to-day operations, that kind of blind spot is common — the person closest to a business is often the last to see it the way an outside buyer will.

What you can learn from this