Welcome back to the Mid Market Insider!

Today, I’m walking through the 5 red flags buyers spot almost immediately, often in the first meeting or facility tour, long before diligence even begins.

These aren’t subtle issues, and even one of them can quietly kill a deal before it ever gets started.

Most business owners think deals fall apart during diligence.

In reality, many deals are effectively dead before diligence ever starts.

Buyers form opinions fast, often in the first meeting or during a facility tour. And there are a handful of red flags they spot immediately that quietly change how they view the business, the risk, and the price they’re willing to pay.

Here are 5 I see over and over:

When buyers see car payments, family cell phones, or home internet running through the company, they struggle to understand what the business actually earns.

This doesn’t automatically kill trust. But it does make the buyer’s job harder.

They now have to normalize earnings, ask more questions, and make assumptions. And anytime a buyer has to assume, they price in risk.

Clean financials don’t need to be perfect, but they do need to clearly separate business from personal.

During a tour, buyers pay close attention to who does what.

If they see the owner quoting jobs, handling customer calls, solving production problems, and approving every decision, one conclusion is obvious:

The business doesn’t work without you.

That’s not a business a buyer can easily step into. It’s a high-paying job with a support team.

Owner involvement isn’t bad, but owner dependency is.

Buyers walk the shop floor with a very different lens than owners.

When they see machines that should have been replaced years ago or deferred maintenance everywhere, they’re already doing math in their head.

Repair costs. Replacement timelines. Capital expenditures.

Those numbers don’t get discussed politely later, they get subtracted quietly from the offer.

When buyers ask for SOPs and hear, “It’s all in our heads,” they don’t hear flexibility.

They hear risk.

If critical knowledge lives with a few people instead of in documented processes, the business becomes much harder to transfer. Training takes longer. Mistakes increase. Continuity suffers.

Documentation isn’t about bureaucracy, it’s about making the business survivable without specific individuals.

Buyers look closely at the org chart.

If the best machinist is 64, the production manager is in their 60s, and no one is being trained behind them, buyers see a succession crisis waiting to happen.

That doesn’t mean older employees are a problem.

It means lack of planning is.

And again, that uncertainty shows up in price and structure.

These aren’t issues buyers uncover deep in diligence.

These are things they notice immediately.

Often in the first meeting.

And any one of them can quietly kill a deal… or force a buyer to protect themselves before the process even begins.

If you’re planning to exit in the next few years, these are worth addressing now.

Because by the time a buyer points them out, they’re already costing you value.

That’s all for today’s newsletter! Thanks for reading!

In next week’s edition, I’ll break down the most expensive mistakes business owners make before a deal even starts, often in the very first conversation with a buyer.

We’ll talk about how buyers form opinions early, why trust matters more than valuation at that stage, and what the best sellers do differently from the very beginning.

Keep building,
Nick