Red Flags to Watch for When Reviewing Listings.

Good morning Buyers!

You’re scrolling through listings, looking for that diamond in the rough. But sometimes, what looks like a good deal is just a well-polished problem.

This week, we’re walking through the Red Flags to Watch for When Reviewing Listings—so you can spot the warning signs before wasting time (or worse, money) on a bad deal.

“Risk comes from not knowing what you’re doing.” — Warren Buffett

💡Deal Tip of the Week: Trust, but Verify

A listing is a marketing document. Treat it like a job interview—it shows the business in the best light. Your job is to dig deeper.

🚩 Top Red Flags in Business Listings

1. Vague or Missing Financials
If a listing doesn’t include basic financials (like revenue, SDE, or net profit), proceed with caution. At best, it’s sloppy. At worst, it’s hiding something.

2. “Seller Handles Everything”
This might sound like dedication, but it often means no systems, no delegation, and high risk for a new owner.

3. Declining Revenues or Profits
A dip in sales or margins isn’t always a deal-breaker—but if the trend is down and there's no solid explanation, dig deeper.

4. Unusually High Owner Add-Backs
Watch out for listings that boost SDE with aggressive or questionable add-backs (e.g., one-time expenses that oddly happen every year).

5. “Great Potential” with No Evidence
If the listing leans heavily on future upside but can’t back it up with market data or a real growth strategy—it’s probably not as promising as it sounds.

🧠 Think Like a Buyer, Not a Believer

Don’t fall in love with a listing. Fall in love with cash flow, processes, and proof.

Ask:

• Why is the owner really selling?

• What happens if I step in tomorrow?

• Can this business run without the current owner?

🗯Expert Soundbite 

“Every red flag you ignore now becomes your responsibility later.”
— David Barnett, Business Broker & Author of 21 Stupid Things People Do When Trying to Buy a Business

🔍 Red Flags You Might Miss

• High Employee Turnover – If employees are constantly cycling out, expect instability

• No Digital Presence – In 2025, a business without a website or Google listing is behind the curve

• Lease About to Expire – A bad lease (or no lease) can make your business homeless overnight

📉 Mini Market Watch

• Seller Financing Is Rising: More listings are offering financing, which often signals slower buyer demand—or a business that banks won’t touch.

• Increased Listings: With more Baby Boomers retiring, listings are up—but not all are quality. Vet aggressively.

• Time on Market: Businesses sitting unsold for 6+ months may have hidden flaws or unrealistic pricing.

🔜 What’s Next?

Next week: “The Pros and Cons of Buying a Distressed Business”

Forward this to a friend who's browsing listings—or reply with the shadiest listing you've come across (we might feature it!).

Until next week,

— The Practical Buyer Team 

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_{Keep in Mind: Practical Buyer is for informational purposes only and does not constitute financial, legal, or investment advice. While we strive for accuracy, all content is provided "as is" and may not reflect the most current industry practices or regulations. Always consult with a qualified attorney, accountant, or advisor before making any business acquisition decisions.}

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