YES! 40% of the deals I worked on in 2023 had fraud. And I saw one of the most blatant cases I’d ever seen…

The deal was for a professional services company.

We ask for invoices to support the revenue. Easy ask…NO! The invoices add up to $1M less than reported revenue. We ask…and ask….and ask… for invoices. 4 weeks later - no invoices.

We heard every story. The invoices are on paper. They’re in his office. He can’t go get them. Blah, blah, blah. You see where this is going. The invoices never surfaced.

So the question of the whole QoE is: “Where exactly did that million dollars come from?”

It was FRAUD. And I’ll die on this hill. The Seller had deposited $1M into his bank account - called it revenue - and had no invoices to support it. He was hoping he didn’t encounter the King of QoE (lol).

Had we not pressed, this client would been RUINED. Buying a business you think has $1M of EBITDA to find out it as ZERO is instant bankruptcy. BIG BAD.

Here’s the scary part —

If the QoE provider had just done the bare minimum—took a look at QuickBooks and bank statements without checking invoices—they wouldn’t have seen this BLATANT fraud.

That would have been a $3 million dollar crater (3x that $1 mil) that ANY buyer could have walked into.

Don’t let up folks! QoE or not, if you smell something is off, press for the backup data. Be patient enough to wait for it. Don’t believe that the invoices are in “27 boxes on paper that can’t be scan nor sent”. You know a pile of dung when you see it.

Trust but verify. Keep verifying until you’re ok with a million dollar guarantee. If you never get there, that’s not your deal. Kill it. Live to buy another day!

Key takeaways:

➡️ There are legit cases of fraud in the #SMB marketplace.

➡️ Diligence should go deeper than financials.

➡️ Always check the seller’s work. Income statements can lie.