The first two things I check before spending any more time on a deal

Happy Tuesday!

If you’re going to find a great business to buy, you’re going to look at a lot of businesses that aren’t great first.

One of the most valuable skills you can develop is learning to rule things out quickly.

The faster you can identify a deal that doesn’t meet your criteria, the more time you have for the ones that do.

Here are the first two things I check on any business.

David and Shawn bought a $1.25M landscaping company in Northern Colorado as 50/50 partners and immediately faced drama.

The seller left after one month instead of six, his sons went behind their backs to undercut them with clients, and the family made the transition toxic.

Instead of giving up, they rebuilt.

They hired a phenomenal GM, doubled the staff, landed a major snow removal contract worth $175-225K for just 3 months of work, and are expanding into maintenance with a plan to triple their crews by spring.

They went from firefighting family drama to building a scalable operation positioned for serious growth.

👉 Want to learn how to handle the ups and downs of acquiring your first business in the Acquisition Ace community? Book a call with our team here.

Don’t close the door on the deal

The first number I look at is the profit margin, and I’m looking for something in the 15-35% range.

Below 15% is too thin.

That’s not enough cushion to absorb a meaningful disruption, like a lost customer, cost increase, or slow quarter.

Above 35% is a different kind of concern.

Margins that high usually mean the owner is deeply embedded in the day-to-day work of the business.

You’re not really buying something that runs without them, so the multiple should reflect that.

This check alone eliminates the majority of businesses worth skipping.

(In Acquisition Ace, members learn how to apply this screening framework consistently, so they’re minimizing time spent on bad deals. To learn more about the tools you can access in our community, book a call with our team here.)

The three fundamentals

Every business I look at seriously has to clear three bars.

The first is recession resistance.

Does this business serve a genuine need that people continue to pay for regardless of economic conditions?

The second is recurring revenue.

Are customers coming back more than once a year, ideally on a predictable schedule?

Businesses with recurring revenue are more stable, more predictable, and significantly easier to own and grow.

The third is barrier to entry.

Is there something - a license, a capital requirement, an established reputation, a long-term customer relationship - that makes it difficult for a new competitor to show up and take market share?

Without that friction, you’re always exposed.

Tomorrow, I’ll cover the valuation check and the red flags that end most conversations before they start.

If you’d like help developing this kind of evaluation discipline as part of a structured search process, the Acquisition Ace community is where that work gets done.

To see if we’d be a good fit…

👉 Book a call with my team here and let’s talk.

This is the tool I use to find deals: SMBMarket.com