We have over $50bn of transaction experience globally
We have over $50bn of transaction experience globally
Selling an online business can be one of the most rewarding and stressful chapters in your entrepreneurial journey. You’ve put in the long hours, built something valuable, and now the finish line is in sight. But what many first-time sellers don’t realize is that serious buyers come in sharp and a long checklist. And if they find certain red flags, they won’t just negotiate harder — they may walk away entirely.
Let’s walk through four things we’ve seen repeatedly fail deals. These are the most common red flags that scare off buyers or drag your valuation down. If you can fix these before you go to market, you’ll be in a much stronger position when the offers start coming in.
A buyer gets excited about your brand. The revenue looks good. They ask for your P&L and… you send over an Excel file with half-filled rows, a bunch of Stripe screenshots, and a note saying “the accountant is still working on it.”
That’s a red flag. For many buyers, that’s the red flag. Because the only earnings that count are the earnings you can prove. Buyers want confidence in the numbers, the trends, and the growth story. If your financials are incomplete or unclear, it signals risk. The evidence is brutal — no investor will even consider your deal if you can’t show your financials. We see many founders trying to market their businesses without this and they always fail.
We get it, if you’ve seen cash come in consistently for years, why bother with bookkeeping? But in the world of M&A, it’s not optional, it’s a prerequisite. We always tell our clients to put themselves in the buyer’s shoes: would you invest in a business solely on someone’s word, or would you want clear evidence to back up the claims?
What to do: Make sure to have a three-year monthly profit and loss statement where all revenues and costs are captured in the correct month. If you also have a balance sheet and cash flow statement in this format, even better, though end-of-year versions are acceptable if monthly is too difficult.
Break down your revenues by product or service so buyers can analyze gross margins. Your marketing spend should be categorized by channel to gauge efficiency. Operational expenses should be split between staff and other costs. If “other” becomes a big number, break it down further — the rule of thumb is: if it’s large, it deserves its own line.
At a minimum, prepare a 12-month forecast showing your best estimate for future performance. And finally, make sure everything ties back to your sources and documentation.
You can do this through your bookkeeper or a professional services firm. Expect startup costs of around $5,000 and monthly retainers from $600. A tip from the DEX team: always hire an M&A-savvy accountant, not a generalist. They can build a buyer-proof databook that stands up to even the toughest due diligence.
One of the setbacks of a founder-led business is that founders are their business. They manage the ads, talk to suppliers, respond to customer emails — even package orders in some cases. That’s fine when you’re growing. But when you’re selling? It’s a problem.
Buyers don’t just buy cash flow — they buy systems. If your business can’t run without you, it becomes risky, especially for strategic buyers or funds who don’t want to step in and do founder-level work.
We had a client running a successful content and coaching business — great product, loyal customer base. But he was still doing all the coaching, content creation, and customer service himself. Many buyers walked. Once he trained a VA, created standard operating procedures (SOPs), and delegated key tasks, he closed a deal in under two months.
What to do: Make sure to document all your processes — and test them, repeatedly. It’s important to show clear evidence that the business runs without you. Automate what you can. Build a team, even if it’s lean. Show buyers they’re acquiring a machine, not a one-man show. Even if a deal is still possible without this, expect the buyer to require that the majority of the deal be structured as an earnout (or similar) with only a small portion paid upfront in cash.
Negative reviews, refund requests, and customer service complaints might not show up in your EBITDA — but they scream loud and clear during due diligence.
There’s more to customer reviews than meets the eye. Buyers analyze them to uncover issues related to product quality, safety, marketing claims, intellectual property infringement, pricing, and everything in between. A weak customer review profile can be seen as a signal of unresolved operational or reputational problems.
That’s why it’s critical to have a clear remediation plan. We always say: a problem without a solution is a deal breaker, but a problem with a good solution can be a deal maker. Buyers are willing to overlook past issues — if they see things improving.
One way to demonstrate this is to show how your most recent reviews on Trustpilot or other consumer rating platforms are trending positively. It sends a strong message that your corrective actions are working. Buyers ultimately buy the future, not the past — but they also want to know the past won’t come back to haunt them.
What to do: Take a hard look at your customer experience. If there are consistent complaints, categorize them and identify the low-hanging fruit you can address quickly. Ask happy customers for reviews to help balance out older negative ones. Fix your return policy, shipping delays, or product quality issues — or, at the very least, increase transparency on your website to manage expectations.
If 80–90% of your revenue is coming from a single traffic or sales channel — like Facebook Ads, Amazon, or Google Ads — your business is one algorithm update, account ban, or cost-per-click increase away from a major downturn. Even if your numbers look great today, this kind of reliance makes your business look fragile.
We come across many e-commerce businesses that generate a large part of their revenue through Google Ads. But what happens when Google changes its policies, and your webshop suddenly violates them? You may disappear from search results overnight. Or what happens when the algorithm changes or Google increases their ad costs by 30%? Your revenue drops, your ROAS collapses, and your acquisition funnel gets squeezed.
We see that many financial buyers are typically put off by these types of risks. Heavy reliance on paid ads can also signal weak customer retention and loyalty, making customer acquisition a costly and unsustainable endeavor. While we’ve been able to close deals in these situations, they often trade at a discount compared to businesses with a diversified marketing mix.
What to do: Take stock of your traffic and revenue sources. If one channel is doing the heavy lifting, start diversifying — even gradually. We regularly advise founders in the early stages of preparing for exit to start building out organic traffic strategies and invest in customer experience to improve retention. Introduce SEO content, or experiment with other paid channels like TikTok, Meta, Pinterest, or affiliate programs. As long as your marketing mix isn’t overly reliant on one channel, your business will be seen as more resilient. Even showing a trend toward diversification can ease buyer concerns and protect your valuation.
Selling your business isn’t just about showcasing what’s working. It’s also about fixing what’s not — before buyers find it. These four red flags come up again and again in deals. The good news? They’re fixable. And if you address them early, you’ll not only improve your valuation, you’ll also speed up your sale.
Thinking of selling? We help founders prepare, price, and position their business for a smooth exit. Book a free call with our M&A team at Deal Execution Academy and let’s talk about how to get your business deal-ready.