You've found a promising acquisition target. The financials look solid, the owner is motivated, and the business fits your thesis. Then due diligence begins — and everything changes. Here are 7 red flags that kill deals before they close: **1. Revenue Concentration Risk** If one customer represents more than 20% of total revenue, you're not buying a business — you're buying a dependency. Losing that anchor customer post-close can erase your entire investment thesis. **2. Owner-Dependent Operations** When the seller IS the business — handling key relationships, institutional knowledge, and daily decisions — expect revenue to walk out the door alongside them. Ask: can this run without the founder? **3. Inconsistent or Restated Financials** Discrepancies between tax returns, P&L statements, and bank statements signal either poor bookkeeping or deliberate misrepresentation. Neither is acceptable. **4. Undisclosed Liabilities** Unpaid payroll taxes, pending litigation, or personal guarantees buried in footnotes are dealbreakers. Always run a UCC lien search and verify all liabilities independently. **5. Employee Churn Patterns** High turnover — especially in management — often reflects culture problems, compensation issues, or an owner who's been checked out for years. Dig into exit interviews and tenure data. **6. Deferred Maintenance and CapEx Gaps** Artificially high EBITDA through deferred spending looks great on paper. Model out true maintenance CapEx before adjusting your valuation. **7. Vague Customer Contracts** Month-to-month agreements with no renewal clauses mean your projected revenue is entirely discretionary. Prioritize businesses with multi-year contracts or subscription models. Spotting these flags early saves you time, legal fees, and capital. The best deal you ever do might be the one you walk away from. Use a structured due diligence checklist on every deal — without exception.