One problem I keep running into: trying to make a deal work even though it clearly lacks specific criteria that make the search model attractive for someone stepping into business ownership for the first time. I wanted to share my current thinking to see if anyone has a similar thought process or has had success with different priorities. Here's my current pyramid of priorities with reasoning. I think 1-4 are the must haves with 5 and 6 being nice-to-haves. 1. Reason to Exist / Value Proposition (Qualitative) The business must have an enduring value proposition that will continue to exist The business must have a reason to exist outside of its current customers The business must have a reason not to be replaced by internal teams/tech/etc. 2. Concentration Risk (Quantitative) The business (or via deal structure) must be able to withstand the loss of any key customer without endangering the ability to pay debt service Customer Concentration: Ideally <10% for largest customer, 10-20% would be cautionary but potentially doable, >20% would be a pass Employee Concentration: Key employee agreements in place, 10+ "replaceable" employees Supplier Concentration: Alternates identified for any key suppliers (large or necessary) Why this is #2: I placed this above industry trends because while the Law of Averages only works in the aggregate, a PG would exist on my business specifically and the statistics won't pay debt service. 3. Industry & Market Trends (Quantitative) Ideal: Growing >2x GDP (6%+) Doable: >GDP growth (3-6%) Pass: <GDP growth (<3%) Why this is #3: Even with predictable revenue, I don't want to bet on being a better operator in a declining industry fighting to maintain growing market share. 4. Predictable Revenue (Quantitative and Qualitative) A large percentage of reasonably predictable revenue from recurring contracts, recurring service needs, etc. Specific quantitative filters depend on the price to be paid Predictable revenue allows focus on growth instead of worrying about payroll and debt service 5. Margins & Unit Economics EBITDA Margins: Ideally 20-30% High EBITDA to Free Cash Flow conversion High Operating Leverage: Should be well above breakeven and capturing benefits of scale These numbers should make financing work and allow the business to capture the benefits of revenue growth 6. Size & Reasonable Growth Business should be large enough to throw off sufficient FCF to permit meaningful investment after payment to all stakeholders (working thumbrule: $700k EBITDA) Combination of size and reasonable growth should allow for a meaningful exit Would love to hear from others if I'm way outside the sandbox on any of these.