14 Red Flags of a BAD BUSINESS Buy

Dec 5, 2023Buying Businesses

Much discussion and most articles about business selling revolve around the key ingredients of a good listing. The flip sides of course are the obvious red flags or warning signs that the listing might be bad and at best a marginal listing. My company does buyer valuation work on individual deal reviews. The following are a few red flags:

The business has been listed for sale for an extended period.

The facilities, equipment, and vehicles show deferred maintenance.

The seller wants to list the business at a price well beyond a reasonable price range.

There has been considerable employee turnover.

Employee morale is low.

Financial records are unorganized, questionable, or show repeated periods of substantial losses.

The seller spends most of the initial meeting in the “Land of Potential” as opposed to the “Land of Reality”.

The seller is unwilling to consider even a small amount of owner financing.

The seller does not want to tell partners or family members working in the business about the potential sale.

The seller wants you to represent “unreported” income to potential buyers.

The business’ main products or services are in a dying industry.

The seller is getting a divorce, or it is a partnership dissolution. It’s hard to sell a business when the parties spend much of the time disagreeing and fighting.

The seller has a low level of motivation to sell.

The seller treats you disrespectfully and doesn’t value your time, knowledge, or advice.

I make money by listing and selling good businesses not wasting time on the bad and marginal ones.