Deal CPA

I told the buyer to either raise prices on consignment to cover the financing cost or restructure the deal to get paid faster. High margins on financed sales are an illusion. Always subtract what working capital costs you from gross profit. That's your real number.

Turns out the buyer would be financing half a million dollars in working capital (cash tied up in inventory waiting to get paid). That 77% margin was fake. It didn't account for the cost of lending money to customers or the risk of products sitting unsold. The real unit economics (profit per sale after all true costs) were deeply negative.

Had a supplier deal where 60% of revenue came from consignment sales. Customers got three months free, then paid monthly. The margins looked incredible—77% gross profit (the money left after product costs). But something felt off.

Then it clicked. Post-close, that inventory means nothing to the seller anymore. Non-compete kicks in. Customer relationships belong to the buyer now. So we used that excess stock as a real negotiation point backed by actual numbers. Buyer got better terms and a lower inventory price. The excess became his biggest bargaining chip.

So here's what kept me up: the seller wanted the buyer to pay full price for all that dead stock. Over a year of excess inventory sitting there. Obsolescence risk (products becoming outdated or unsellable). Cash tied up. But the seller priced it like none of that mattered. $3.5M total with no discount.

Had a buyer walk in last month ready to close a $2M supplier deal. Looked good on paper until we dug into the balance sheet: $1.5M in inventory. Red flag. The owner had stockpiled way more than the business actually needed based on its cash conversion cycle (the time it takes to turn inventory into actual cash).

Here's what saved the deal: we didn't change everything at once. We kept existing customers on consignment to avoid blowing up relationships, but shifted new customers to tighter payment terms and early payment discounts. It tested the market, compressed the cash cycle, and showed the buyer where the real profit actually was. Strong margins mean nothing if you're broke.

They paid suppliers upfront with long lead times, then gave customers 3 months free inventory on consignment and waited 60 days to get paid. That negative cash conversion cycle (the gap between when you pay out cash and when you collect it) meant this "profitable" business actually needed $500K plus just to operate. There was $1M in excess inventory sitting there too.

Had a buyer walk into a $2M deal on a regional supplier. Margins looked incredible at 55 to 58 percent. But when I dug into the cash, I found something that almost killed the whole thing. The owner was financing the entire supply chain.

That 5x gap exists because small business M&A is harder to predict and harder to fix than real estate. Lower multiples aren't a buying opportunity unless you actually understand what risk you're taking on. Most first time buyers don't.

I had to tell him the gap wasn't a discount. It was risk. Real estate has been standardized for decades. Small businesses are messy. One key employee leaves and revenue tanks. Customer concentration means losing one client tanks profits. Quality of Earnings (a financial audit checking if profits are real) matters way more here.

Had a real estate guy walk in last month shocked that small businesses were selling for 3 to 4x EBITDA (earnings before taxes, interest, and depreciation). In real estate he'd been buying at 20x multiples. He thought small business was either a steal or a trap.

Once we proved the fee would keep happening post-close, lender moved forward. Lesson: document your recurring vendor payments now or watch your lender question every line item later. Quality of Earnings (the financial audit checking if your profits are actually real) starts with clarity on what's normal and what isn't.

Nobody had documented it upfront. The broker finally clarified it was a recurring fee arrangement with an appliance vendor, standard practice in that industry. But without that paper trail, the lender couldn't tell the difference between a real operating cost and a phantom expense. That's how deals stall.

Had a buyer walk into financing last month and the lender flagged a $15,000 referral fee buried in the vendor payments. No explanation attached. Lender immediately got suspicious. Was this normal business or something one-time they could add back? Deal momentum just stopped.

I told him to stop and rebuild from day one. Set up QuickBooks Online, map every asset, reconcile everything before the damage spread. It cost time and money upfront but saved him from a tax nightmare later. Bad seller records aren't just messy. They're expensive.

The real problem hit me after close. No one knew the actual basis of assets (what the buyer paid for them originally), depreciation recapture (taxes owed when you sell something you've written off) was a black box, and cash flow forecasts were basically guesses. One month in, chaos.

Had a buyer close on a services business last month with zero QuickBooks, scattered receipts, and the seller couldn't tell us what equipment cost or when it was bought. I knew we were walking into a mess.

We brought in a one time cleanup to get it right from day one. Turns out they didn't even owe quarterly estimated taxes (payments you make throughout the year) in 2026 if they lost money in 2025. One decision made all the difference. Get your accounting foundation right before you scale.

Their chart of accounts (the list that organizes where every dollar goes) was set up wrong. Their equity structure (who owns what percentage of the company) didn't match reality. They had no idea how to fix it and now they're staring at tax filing errors and missed payments down the road.

Had a buyer close on a high volume business doing 10 transactions a week. First thing they wanted to do was move everything into QuickBooks in house. Seemed smart until their accountant flagged something was broken.