Slow the deal, or walk, if you see any of these. One of these is rarely fatal. Three or more, and you should step back.
1. Seller refuses to share bank statements. Recurring revenue is verifiable. A refusal is either incompetence or hiding.
2. Account list doesn't reconcile to deposits. Variance >5% needs explanation. Variance >15% is usually disqualifying.
3. Churn spike in the most recent quarter. Sellers know when the books are about to look worse and rush to list. A trailing 3-month churn that's 2x the prior 12-month average should be investigated.
4. Heavy reliance on one large customer. Any single account >15% of revenue is concentration risk. >25% is existential.
5. Seller won't commit to a transition period. Even 14 days is short. A seller who wants out the day of close is selling you trouble.
6. Pricing well below market without a clear reason. Distress is sometimes legitimate (health, divorce). But "I just want to be done" at a 30% discount usually means there's a problem you haven't found yet.
7. "Cash deals" or off-the-books revenue claims. Off-platform revenue does not transfer. Don't pay for it. If the seller is loose with the IRS, they'll be loose with you.
8. Recent customer complaints on Google or Yelp. A 3-star average with recent angry reviews is a brewing churn event you'll inherit. Read every review from the last 12 months.
9. Equipment included is in poor condition. Discount or remove from the deal. Don't pay equipment value for liability.
10. Vague or missing documentation. No CRM, no SOPs, no written customer notes, you're paying for a head full of knowledge that walks out on close day.
11. The seller has sold a route before. Not automatically bad, but ask why. Serial sellers sometimes flip routes that are accumulating problems they don't want to fix.
12. Pressure to close fast. "Another buyer is making an offer Monday." "I need to wire by Friday." Real deals tolerate diligence. Manufactured urgency is almost always a tactic.
Soft red flags (note them, don't fail them):
- Seller refers to the route as "easy money" rather than "hard work."
- Seller hasn't taken a real vacation in 5 years (founder-dependence).
- Seller's spouse has never met the customers (succession risk if seller is unavailable).
- The truck has religious or political bumper stickers, small thing, but you may inherit reputation by association.
The "what would have to be true?" test. If the deal looks too good for the price, ask: what would have to be true for this to be a great deal *and* still be priced this low? If you can't find a coherent answer, you don't know enough yet.
Walking away from a bad deal is the cheapest decision you'll ever make. There will be more routes.