What makes a "bad" business?

searcher profile

April 09, 2023

by a searcher from Illinois State University in Denver, CO, USA

I hear so many businesses never sell and that 90% of what gets listed is junk.

What makes a business bad? What kind of red flags are you looking for?

I'm working on developing my "filter out" and pass criteria and would like to get others input.

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commentor profile
Reply by a professional
from Rice University in Jeffersonville, West Norriton, PA 19403, USA
I think it is because many deals are first time transactions (for buyer or seller or both) and people trying to accomplish something outside of their competency is a challenge. Buying/Selling is a skill like operating any business is a skill. And skills are enhanced through experience and repetition. That is why it is so important for buyers and sellers to seek experience buy side/sell side consultants who can assist in navigating the waters.

Think of it in the following (exaggerated) example... what if this website was created for people that wanted to do self-operated hip replacements. The posts would "has anyone replaced their hip" or "hey I replaced my hip and it is swelling pretty bad, anyone have the same issue...Naturally that website doesn't exist because no one would perform their own hip replacement...when there are professional called "Doctors" available.

So replace hip replacement with buying/selling a business and replace doctor with consultant... and i think that 90% wasted deal number would be dramatically reduced. Have any interest to discuss buy side/sell side strategic consultation - just DM me, glad to chat.
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Reply by a searcher
from Harvard University in Westchester County, NY, USA
Most are bad. I’d focus on what makes it good! Does it generate CASH? Does it solve an enduring problem, that is, do you think it’ll be around in 30 years? Can you explain the business model to someone uneducated in business? Are the margins great but not impossibly great? Do the customers keep coming back? Can just anybody copy what they’re doing? Can it handle a recession under new management? Can you price by capturing value rather than just “cost plus”? Most businesses fail at least a few of these, and the more they fail, the more quickly I filter.
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