Do Not Quit Your Job When You Sign The Letter Of Intent.

The most expensive decision most buyers make has nothing to do with a business. It is the day they hand in their resignation.

I talked to a guy last year, eighteen years in corporate operations, good salary, more than enough saved for a down payment on a business in the range he was hunting. He got an accepted letter of intent on a distribution company and resigned that same week. He told his wife they would be closing by the end of the quarter. He wanted to walk in on day one as a full-time owner, not a guy squeezing calls in between meetings.

I understood the impulse completely. It was still the wrong move, and it cost him about eleven months.

The Timeline Nobody Puts In Front Of You

A clean SBA acquisition runs sixty to ninety days from signed letter of intent to funding, and that is the good version.

Ninety to a hundred twenty days is common. Anything with a messy set of books, a landlord who will not return calls, a lender who is not a preferred lender, or a valuation that comes back light adds weeks on top of that. And all of those numbers assume you already found the business.

Measure the whole thing instead, search through close, and the median runs closer to a hundred seventy days. Almost six months. That is the median, which means half of buyers take longer, and it counts only the people who eventually bought something. The ones still looking are not in that number at all.

Now layer on the part everybody forgets. You are going to pass on deals. If you are doing this right you will pass on most of what you look at, which means the first letter of intent you sign is usually not the one that closes. His did not.

Day seventy, the lender came back with a valuation that would not support the price and a customer concentration issue that had not been visible in the summary financials. Nobody did anything wrong. That is just what diligence is for. The deal died and he was unemployed with a savings account he had already started spending.

Your Down Payment Is Being Watched While You Spend It

Here is the mechanical problem, and it is the one nobody warns you about.

An SBA lender does not just look at the business. It looks at you. Your personal financial statement, your credit, your background, and specifically your equity injection, which has to be sourced and seasoned. That means the lender wants to see where the money came from and see that it has been sitting in your account rather than showing up the week before closing.

So the same account that funds your down payment is the account paying your mortgage and your groceries the entire time you are unemployed. It is being examined while it shrinks. Six months of living expenses out of a down payment fund is not a small dent, and if it takes the balance below what the deal requires, you do not have a financing problem you can solve with a better lender. You have a deal you can no longer do.

You cannot spend your down payment and put it down.

There is a second-order version too. Losing your income mid-process is a material change to the file the lender already started underwriting. It does not automatically kill anything, but it is a conversation you now have to have, and it is a conversation you get to have from a weaker chair than the one you were sitting in a month earlier.

The Part That Actually Kills The Deal

The money is the smaller problem. The bigger one is what a shrinking runway does to your judgment.

In month one he was a disciplined buyer. He had criteria. He walked from two deals over customer concentration without much agonizing, because walking was cheap when there was a paycheck behind him.

By month six the paycheck was gone, the savings were down, his wife was asking reasonable questions at the dinner table, and he was looking at a business with a five year old set of books and one customer worth forty percent of revenue and finding reasons it might work. Same buyer. Same brain. Completely different set of standards, and he could not see it happening from the inside.

After 35 years of watching people do this, that is the pattern that costs the most money. Not a bad deal that looked good. A good buyer who ran out of time to be picky.

And sellers can feel it. A buyer with a job and a timeline is a buyer who can walk away, and everyone at the table knows it. A buyer who has been out of work for seven months is negotiating from a chair with a clock attached to it. That shows up in price, in terms, and in how hard the other side pushes on the things you asked for.

Your ability to walk away is a term in the deal, whether or not anybody writes it down.

He did eventually buy something, about eleven months after he resigned. A smaller business than he originally wanted, at a price he was not thrilled with, because by then he needed a deal more than he needed the right deal. It is doing fine. He would tell you himself he paid a tax for that resignation letter and the tax was not tuition.

What I Would Actually Do

Stay employed through the commitment letter. That is the line.

Not through the letter of intent, not through diligence, not when the lender says things look good. The commitment letter is the point where a lender has underwritten the deal and put conditions in writing, and it is the earliest moment where the thing in front of you is real enough to plan a life around. Even then, give notice in a way that gets you to funding rather than out the door on Friday.

Before any of that, decide what your runway actually is in months, and write the number down while you still have a paycheck and clear eyes. That is the number that tells you when you are at risk of negotiating from need rather than from analysis. And keep your criteria somewhere outside your own head, because the whole failure mode here is that your standards move without you noticing. Running every deal through the same Bulletproof criteria has a quiet second benefit: the bar does not care how long you have been looking.

The job is not the thing standing between you and owning a business. Most of the time it is the thing making it possible.

What This Means For You

If you are hunting right now, do not resign until you have a commitment letter in hand, and write down today how many months of runway you have so you know when your judgment is about to start drifting. If you have already quit, treat your remaining runway as a hard constraint you tell your advisor about, not a private worry you carry into the negotiation.

The discipline to keep your standards when the clock is running is most of what separates the buyers who do well from the ones who just do a deal. I go through the whole framework, including how to hold a line under pressure, in the free 28-minute masterclass.

See you Tuesday.

Mike

Want to see how I stress-test every deal against cost shocks, revenue dips, and hidden liabilities before I'd put a dollar at risk? I walk through the entire Bulletproof method in a free 28-minute masterclass.

Forward this email. Tell them to grab Mike's free book - Real Estate Is for Suckers: Buy a Business Instead. Same framework Mike uses to stress-test every deal.