If you’re thinking about buying a business, there isn’t one mistake you need to avoid — there are dozens. https://youtu.be/mZBIFjTAsKk
I get asked this question constantly:
“What’s the one thing I should watch out for?”
“What’s the biggest mistake buyers make?”
“What common pitfalls should I avoid?”
So I finally sat down and started writing a list.
It didn’t stop at five.
It didn’t stop at ten.
It went past twenty.
That’s why I eventually wrote the book, 21 Stupid Things People Do When Trying to Buy a Business. But before I explain that, let me give you a snapshot of the kinds of mistakes I see over and over again.
Mistake #1: Not Understanding How Businesses Are Valued
This is a huge one.
People routinely pay too much because they don’t understand:
What cash flow is actually available
What kind of return investors require
How risk affects value
Without this foundation, everything else falls apart.
Mistake #2: Ignoring the Value of Their Own Labor
I see buyers say things like:
“The business makes $120,000 a year — that’s great!”
But they never stop to ask:
How many hours will I work?
What wage am I effectively paying myself?
Is this actually a good investment after I account for my time?
If you don’t value your own labor properly, you will overpay.
Mistake #3: Getting Operating Capital Wrong
Many buyers value the business correctly — but then forget that:
Inventory
Accounts receivable
Cash buffers
…are required to operate the business.
They end up buying the business but not the enterprise, and that mistake can cost tens or hundreds of thousands of dollars.
Mistake #4: Overcommitting Cash Flow to Debt
This one kills businesses.
Buyers stretch debt payments to the limit, leaving no margin for:
Seasonality
Repairs
Slowdowns
Mistakes
A business can look profitable on paper and still collapse under too much debt.
Mistake #5: Failing to Get the Right Help (or Any Help at All)
Some buyers get no help.
Others ask the wrong people.
Lawyers, accountants, friends, and family often mean well — but many of them have never bought a business themselves.
Even worse, some buyers rely entirely on brokers who only get paid if the deal closes.
One of the advantages of working with me is simple:
I will tell you not to buy a business if it’s a bad deal.
Other Common Mistakes I See All the Time
Just to give you a sense of how deep this goes, buyers regularly fail to:
Make realistic financial projections
Budget for capital expenditures
Perform proper due diligence (this alone spans pages)
Hold sellers accountable for their claims
Research franchisors properly
Understand the power a landlord holds
Maintain adequate cash reserves
I’ve even seen franchise deals where the franchisor itself was at serious risk of insolvency — a disaster waiting to happen for the franchisee.
Why This Keeps Happening
Most people have never bought a business before.
They pick up a little information, gain some confidence, and move forward with far more bravado than understanding. The reality is that learning to navigate business acquisitions properly can take years.
That’s why education has to come first.
If you want to learn the full three-step process I use to help people buy businesses — starting with education — visit BusinessBuyerAdvantage.com
And if you’re serious about buying a business, do yourself a favor and read 21 Stupid Things People Do When Trying to Buy a Business before you write your first offer.
It might be the cheapest mistake prevention you ever buy.
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