A prospective buyer wants us to carry a large seller note as part of the transaction, but we are worried about their ability to run the business. How do we evaluate their operational capability before signing?

Question

Tyler Smith · Accepted Answer

Carrying a seller note means you are essentially acting as the buyer's lender. If they mismanage the company post-sale, they may default on the note, leaving you with unpaid proceeds or a broken business to reclaim. To protect your hard-earned wealth, you must run due diligence on the buyer's operational capability. Treat the buyer's operational review with the same rigor they apply to your financials. Start by assessing their conative styles and leadership experience. Ask them to share their operational playbook. Do they run on an established operating system like EOS®? How do they plan to handle the weekly management of the team? If they do not have a clear structure for running Level 10 Meetings™ or tracking key scorecard metrics, their execution risk is high. Evaluate their self-awareness and alignment by asking deep questions about their post-close plans. If they have a high-risk, aggressive growth strategy but lack the operational discipline or the right team on the Accountability Chart to execute it, you should be extremely cautious about carrying a significant note. Remember that trust requires vulnerability but must be verified by capability. If the buyer resists sharing their operational plans or lacks a structured system to run the business, you should either renegotiate the deal to reduce the seller note or look for a more capable buyer.