The first things I check before spending any time on a business

Happy Tuesday!

Here’s something most first-time buyers find out the hard way:

You’re going to look at a lot of businesses before you find the right one.

Twenty to thirty is a reasonable expectation before you make two or three serious offers.

Which means how efficiently you can rule out bad deals is just as important as how well you can evaluate good ones.

Here are the first two steps I run on any business before I invest real time in deeper analysis. 👇

Adam bought a $1.85M stucco company while keeping his full-time W2 job…

And he’s on track to make over $300K in cash flow this year while working just 5-10 hours per week.

He structured the deal with 80% SBA, 10% seller note on full 10-year standby, and brought just $250K to close.

The previous owner had done zero marketing for 20 years and ran everything on paper.

Adam brought on a business development manager, implemented new systems, and is already lining up enough work to double last year’s revenue, all while keeping his day job.

👉 Want to buy a business without needing to quit your W2? Book a call with our team here.

Start with the margin check

The first number I look at is the profit margin.

I want to see something in the 15-35% range.

Below 15% means the business is running too thin, and there’s not enough cushion to absorb normal business variability.

Above 35% sounds attractive until you look more carefully, and in most cases, margins that high mean the owner is doing an outsized portion of the work themselves.

This one check alone eliminates the majority of deals worth skipping.

Scan for immediate dealbreakers

Next, I do a quick pass for red flags that typically end a conversation before it starts.

Revenue declining over the last three years tells you the business is heading in the wrong direction regardless of how it looks in any given year.

Consistent growth is what you're looking for.

Customer concentration - where a single client represents more than 10% of total revenue - also signals fragility that doesn’t show up in the numbers until that client leaves.

Personal expenses mixed into the business financials make it genuinely difficult to know what the business is actually earning, which can become a problem for both valuation and lending.

And an asking price above 4x cash flow warrants real scrutiny.

It doesn’t automatically mean you should walk away, but it does mean the seller needs to justify the premium clearly.

(In Acquisition Ace, members learn how to apply this screening framework quickly and consistently, so they’re spending time on deals that actually have a chance. If you’d like to know more about our community and how it can help you secure your first business deal, book a call with our team here.)

Why this matters

Many buyers skip these early checks and dive straight into full analysis on businesses that were never going to work.

They spend weeks reviewing financials, talking to sellers, and running numbers, only to find a dealbreaker that would have been obvious in the first 15 minutes with the right framework.

The goal here is to be efficient.

Getting to a clear “no” quickly is how you protect the time you need for the deals that actually deserve your attention.

Tomorrow, I’ll share the quick valuation math I verify on every deal before going further.

If you’d like to start applying a structured approach like this to your own search, the Acquisition Ace community is a great place to build that skill.

To see if it’s a good fit…

👉 Book a call with my team here and let’s talk about how we can help you on your journey to acquiring your first business.