Sign in Subscribe

Reality Check...

Last updated on 

In this post, I shall share what has allowed me to quickly determine a good deal vs a bad deal for business acquisitions.

You don’t need a full data room to spot a bad deal.

With just three numbers headcount, average order value, and customer reviews, you can filter out 90 percent of the noise before ever requesting a P&L.

Great deals are obvious.

Red flags are louder than spreadsheets.

Learn to read the signals that actually matter.

The 3 numbers.

When most buyers evaluate a business, they do what they were taught:

Build a spreadsheet, open 20 tabs, demand every financial report under the sun, and bury themselves in data rooms for weeks.

But here’s the thing, bad deals can hide in perfect data.

Great deals don’t need it.

The best buyers don’t ask for more data. They look for better signals.

Before I even ask for any financials, I check three numbers.

These aren’t random.

These are red flag detectors.

And if they don’t check out, I’m out…no pitch deck, no LOI, no wasted time.

Here’s what I look at:

  1. Headcount
  2. Average order value
  3. Reviews

Headcount:

This tells me how bloated or efficient, the operation really is.

If a business is doing $400K a year in revenue with 15 employees, that’s not a business.

That’s a chaotic job being run with expensive overhead.

Measure the revenue per employee if possible.

Too many people usually means too many problems: decision bottlenecks, cultural friction, low margins.

But if a $1M business is being run by a tight 3-person team? That screams efficiency, clarity, and profit. Headcount is one of the fastest indicators of operational maturity. A lean org chart often signals that the systems are strong and the founder isn’t duct-taping everything behind the scenes.

AOV- Average order value

This tells me the economic engine of the business.If the AOV is low and they're spending on paid traffic, I already know the math doesn't work.

Customer acquisition costs (CAC) are rising across every platform.

If they're paying more to acquire a customer than that customer spends on their first purchase, you can't fix that with scale.But if the AOV is substantial or premium-level? Now you've got room for paid media, affiliates, agency fees, and still margin leftover.

High AOV tells me the business understands its positioning, offers real value, and has pricing power, which almost always translates into more flexibility when scaling.

Reviews (or testimonials/endorsements)

This is more critical for B2C but does apply to B2B is some industries.

Don’t read the mission statement.

Read the reviews.

This is the fastest, clearest proxy for customer experience, retention, and product-market fit.

If a company is doing $5M a year but has two stars on Google, something’s rotten underneath the surface.That revenue might be held together by churn, refunds, or false promises.On the flip side, a business with glowing reviews even modest revenue, signals something valuable…trust.And trust is an asset you can’t fake.It compounds.You can build on it.You can expand it. You can even pay more for it because it’s a moat.

You want to know if customers are happy?

These three numbers can be found in minutes. No NDAs. No Zoom calls. No data rooms and they tell me way more than any spreadsheet ever could.

Because here’s what most buyers don’t realize, clean data doesn’t mean clean business.

I’ve seen more disasters hiding in polished decks than I can count.

You get three versions of financials, updated every week. You ask a simple question and get an evasive answer. You request clarity and get confusion. All signs that the numbers don’t tell the full story.

Good businesses are transparent. Great sellers are clear. If it takes you three weeks to figure out how they make money, you already know too much and not in a good way.

Here’s what I’ve learned after speaking with many executives, brokers and investors..

  • More data is not better.
  • More clarity is better.
  • Great businesses reveal themselves fast. Bad ones hide behind data.

So next time you’re tempted to deep-dive into a 50-page deck with financial projections through 2030, hit pause.

Ask yourself:

  • Is this team bloated or lean?
  • Do the economics work on every sale?
  • Are the customers happy or screaming in the reviews?

If those don’t check out, you don’t need to know anything else.

That’s the filter. It’s fast. It’s brutal. And it works.

So I’ll ask you…what’s your number one red flag?

Because if mine show up early…

I'm gone in a flash..