We missed our quarterly financial target by five percent while under a Letter of Intent because we fired an unprofitable client. How do we present this variance during the closing process to prove it actually strengthens our operating margin and protects our valuation?

Question

Tyler Smith · Accepted Answer

Missing a financial target while under a Letter of Intent is a high-stress scenario that often leads to buyers demanding a price reduction. However, if the miss was caused by a deliberate strategic decision, such as firing an unprofitable, high-maintenance client, you can turn this variance into a proof point of your operational discipline. Do not try to hide the miss or wait for the buyer to discover it during due diligence. Address it immediately in your next progress update. Present the data clearly, showing the revenue impact alongside the corresponding reduction in operating costs. Explain that removing this client freed up capacity on your Accountability Chart and eliminated a major source of team frustration. Show how this decision has already improved your gross margin percentage, even if it temporarily lowered your top-line revenue. By proving that you are actively managing the business for long-term profitability rather than artificially inflating short-term revenue for the sale, you reinforce your credibility. This proactive transparency demonstrates that your business operates on a disciplined operating model, which protects your valuation multiple far better than a defensive explanation during the final hours of closing.