I’ve made mistakes buying assets. Everyone who buys enough does. The goal isn’t to never make one — it’s to avoid the expensive, predictable ones. Here are twelve I’d want any first-time business buyer to know.
1. Buying a job instead of a business
If the business only works because the owner works sixty hours a week, you’re not buying a company — you’re buying that job. Ask what the owner does every day and whether anyone else could do it.
2. Trusting adjusted numbers
Sellers and brokers often present “adjusted” earnings with add-backs — personal expenses, one-time costs, owner perks. Some are legitimate. Some are wishful. Test every one against documentation. See seller’s discretionary earnings.
3. Not tying the numbers to tax returns and bank deposits
Profit-and-loss statements are easy to edit. Tax returns and bank deposits are much harder. If they don’t reconcile, find out why before you go further. See financial due diligence.
4. Skipping a quality-of-earnings review
On meaningful deals, an independent review of earnings is cheap insurance. Under current SBA rules, it’s required for first-time acquisitions above a set purchase-price threshold.
5. Ignoring customer concentration
If one or two customers account for a large share of revenue, losing one after the sale can break the business. Understand every big customer relationship and whether it’s tied to the seller personally.
6. Ignoring key-person risk
It’s not only the owner. A lead technician, an office manager who knows everything, a salesperson with all the relationships — if they leave, value leaves with them. Plan retention before closing. See how to keep employees after buying a business.
7. Too much debt
Debt that works in a good year can crush you in an average one. Model a bad year and make sure you can survive it.
8. No working capital
Buyers spend everything on the purchase and have nothing left to run the business. Make sure the deal delivers enough working capital and that you have reserves. See working capital in a business sale.
9. A vague seller transition
“The seller will help for a while” isn’t a plan. Put the transition in writing: duration, availability, responsibilities, relationship introductions. See seller transition period.
10. Changing too much too fast
New owners often arrive with big plans and change prices, people and processes in month one. Employees panic, customers notice, and the very things that made the business work start breaking. Listen first. See post-acquisition integration.
11. Skipping legal diligence
Leases that can’t be assigned, licenses that don’t transfer, liens, pending lawsuits, unpaid taxes. In South Carolina, buyers can inherit a seller’s unpaid state taxes unless they get a certificate of compliance. See legal due diligence.
12. Falling in love with the deal
The emotional commitment comes early, and then every red flag gets explained away. Decide in advance what would make you walk — and honor it.
A simple pre-LOI checklist
Before you submit an offer, confirm:
- The business fits your buy box.
- The seller’s reason for selling makes sense.
- Earnings tie roughly to tax returns.
- No customer or employee could single-handedly sink the business.
- You have a financing path and reserves.
- You know what the owner does every day.
- You have an attorney and CPA ready.
What I look for as a buyer
As an operator, I care most about two things: whether the earnings are real, and whether the business can run on a system instead of on one person. If the first is true and the second can be built, there’s usually a good business to buy. If the first isn’t true, nothing else matters.
Next steps
Read the due diligence checklist and red flags when buying a business. If you’d like an operator’s second opinion on a deal, talk to me about acquisitions.
Mistakes after closing count too
Some of the costliest errors happen in the first months of ownership: not communicating with employees, losing touch with key customers during the handoff, ignoring cash flow while learning the business, and letting the seller’s transition time slip away without capturing what they know. Plan the first hundred days before you close, not after. A written plan — who you’ll meet, what you’ll keep the same, which numbers you’ll watch weekly — turns a nervous handoff into a steady one.
When to walk away
Walking away is a skill. If diligence reveals earnings that don’t hold up, a seller who won’t answer straight questions, a key customer who’s leaving or a lease you can’t get, it’s usually better to lose the time you invested than to buy a problem. The best buyers I know walk away from far more deals than they close.
Questions people ask
What is the biggest mistake when buying a business?
Overpaying for earnings that aren’t real or aren’t transferable — usually because the buyer trusted adjusted numbers and an owner-dependent business without verifying both.
How can a first-time buyer reduce risk?
Use a clear buy box, verify financials against tax returns and bank records, get a quality-of-earnings review when appropriate, avoid customer concentration and heavy owner dependence, keep debt conservative, and negotiate a real seller transition.