The seven flags that end a business deal.
This is one full chapter from the ClarIQ guide book, free to read. It is the checklist we run before anyone signs anything, and the math behind it never changes: walking away from a bad business costs you a few months, and closing one costs you years. Here is what makes a careful buyer stop.
Chapter 8, shared in full. The rest of the 44 pages walk the whole buy, from finding a company worth owning to closing it clean.
Seven things that end the conversation
Most deals do not blow up at the closing table. They blow up months earlier, inside a document nobody read closely. These are the seven flags that, on their own, are usually enough to walk. None of them is about a bad feeling. Each one is something you can see in the numbers, the contracts, or the seller's behavior, long before you spend a dollar on diligence.
- 1The owner is the business. Customers ask for them by name, they hold the key licenses, they price every job, and the best employees are loyal to them personally. When they leave, the earnings walk out behind them. You would be buying an introduction, priced as a company.
- 2One customer is over roughly 20% of revenue. A single phone call can cut the company in half, and the caller knows it. Concentration reprices a deal at best. Usually it should end it.
- 3Revenue has declined for multiple years. You are not buying a turnaround with borrowed money, and every month of a decline has a loan payment attached. No momentum, wrong price.
- 4The books do not match the tax returns. Whatever the explanation, the lender will hear it too, and lenders finance documents, not stories. Two sets of numbers means no reliable number exists.
- 5Meaningful cash revenue that is not on the books. Unprovable earnings do not exist for valuation, and a seller who hid income from the government will not become honest for you.
- 6The lease or licenses do not transfer. A location business without a secured lease, or permits that die with the seller, is not a company yet. It becomes one when the transfer is signed, not before.
- 7The seller is rushing you. Real sellers of real companies respect diligence. Pressure to skip steps, phantom other buyers, deadlines that move whenever you comply: all of it is information. Believe it.
And you can always walk away. That is the whole advantage a buyer has, and it is the one most buyers forget to use. When a flag still holds after a fair look, the disciplined move is to pass, keep your capital, and find the next one. There is always a next one.
Seven flags is the short version.
The full guide book walks the entire buy, from finding a business worth owning to structuring the money and closing it clean. 44 pages, plain language, no jargon, written for people spending real money on a company for the first time.
Questions first? hello@clariqadvisory.com