Most business owners assume a signed contract makes their company more valuable.

Sometimes it does.

Sometimes it does the opposite.

Because when a buyer evaluates your business, they are not only asking:

“Do you have contracts?”

They are asking:

“Can those contracts come with the business?”

That distinction can change the entire deal.

A Contract Is Only Valuable If the Buyer Can Benefit From It

In my 6 P Method, contracts fall under Proprietary.

Proprietary assets can make your company more valuable because they create competitive advantage and help protect future cash flow.

That can include patents, trademarks, databases, trade secrets, intellectual property—and contracts.

But there is a catch.

A contract that cannot be transferred may be far less valuable to a buyer than you think.

And in the wrong situation, it can stop a transaction in its tracks.

That is why simply having an agreement is not enough.

You have to understand the terms inside the agreement.

The Question Most Owners Never Ask

Imagine you have spent years building a relationship with a major customer.

They represent significant recurring revenue.

You have a signed agreement.

You look at that contract and think:

“This is one of the strongest assets in my company.”

Then you decide to sell.

The buyer wants the relationship.

The buyer is counting on that revenue.

Due diligence begins.

And someone discovers that the agreement cannot automatically be assigned to the new owner.

Now what?

You may have to go back to the customer and ask for consent.

That can create delays.

It can create leverage for the customer.

It can create uncertainty for the buyer.

And it can create a major problem for the seller.

Michelle’s proprietary material specifically warns that one of the biggest mistakes business owners make with contracts is failing to include transferable language. Without that language, contracts may not move to the purchaser, which can derail the deal.

A Real Example From Exit Rich

In Exit Rich, I share the story of a company in the energy space.

The business had something a strategic buyer desperately wanted:

A relationship and master service agreement with BP.

The strategic buyer had been trying for years to get its foot in the door with BP and saw enormous potential in acquiring the company.

There was just one problem.

The BP agreement was not transferable.

The sellers tried to get the agreement revised.

They could not.

The buyer still wanted the company badly enough that a transition service agreement was created so the acquisition could proceed.

But the book makes an important point:

That was a risky situation, and not every buyer would be willing to accept that risk.

Think about that.

You can have the right buyer.

You can have strong revenue.

You can have strategic synergies.

You can even have a signed customer contract.

And one paragraph buried inside that contract can suddenly become one of the biggest issues in the transaction.

Buyers Don’t Pay Premiums for Uncertainty

A buyer is purchasing future economic benefit.

They want confidence that the customers, revenue streams, supplier relationships, licenses, and other critical agreements supporting the company will still be there after closing.

When they do not have that confidence, they start protecting themselves.

That may mean:

A lower purchase price.

More seller financing.

Holdbacks.

Contingent payments.

Representations and warranties.

Or terms that reduce future payments if a critical customer disappears.

Exit Rich provides another example where expiring customer contracts led a buyer to negotiate price adjustments if those contracts could not be renewed.

This is why deal value is not just about EBITDA.

It is about the quality and transferability of the assets producing that EBITDA.

This Goes Beyond Customer Contracts

And owners should not stop with customers.

You need to examine agreements across the entire company.

Critical vendor agreements.

Licensing agreements.

Distribution agreements.

Franchise agreements.

Leases.

Employment arrangements.

Technology agreements.

Exclusive relationships.

Intellectual-property agreements.

Anything a buyer will depend on after closing deserves scrutiny.

Even the structure of the transaction can matter.

Exit Rich explains that an asset sale and an equity sale can produce different issues because certain contracts, licenses, or other agreements may not transfer to a new entity.

That is why this work should happen before your business goes to market.

Not after you already have an LOI.

Run a Contract Transferability Audit

If you are thinking about selling within the next few years, start with your most important agreements.

Ask:

Which contracts are essential to our revenue?

Which customers would materially affect EBITDA if they left?

Which agreements require consent before assignment or transfer?

Which licenses or agreements are tied specifically to the current entity?

Which vendor relationships would be difficult for a buyer to replace?

What happens to these agreements in a change of ownership?

And most importantly:

Would a buyer discover anything during due diligence that I should already know today?

Do not assume.

Verify.

And because contract interpretation is a legal matter, this is where the right transaction attorney needs to be involved well before a sale.

The Bigger Lesson

One of the central principles in Exit Rich is that buyers pay more for businesses that are sustainable, scalable, and sellable.

Transferability is at the heart of sellability.

Your people have to transfer.

Your processes have to transfer.

Your customer relationships have to transfer.

Your intellectual property has to be transferred.

And your important contracts have to support, not obstruct, that transition.

A contract does not create enterprise value simply because it exists.

It creates value when it strengthens the business and that value can survive a change in ownership.

So here is the question:

If someone bought your company tomorrow, would your most important contracts go with them?

If you do not know the answer, find out before the buyer does.

Build to sell, even if you never plan to sell.

Pull your three most important customer, vendor, or licensing agreements this week.

Ask your transaction attorney one question:

“What happens to this agreement if I sell the company?”

That answer could be worth far more than the cost of asking.