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To date, my work has been exclusively focused on supporting business owners preparing for the sale of their business. I have recently decided to expand my work into helping buyers become successful entrepreneurs through the acquisition of an existing business. With that in mind, I am publishing this newsletter today.
That said, for owners considering a future exit/sale of their business, this content will be enlightening to you too.
On paper, the deal looked like textbook Entrepreneur Through Acquisition (ETA) gold:
- $2.1M in revenue
- ~$900k in SDE (Seller’s Discretionary Earnings)
- Established HVAC business in rural Colorado
- Attractive 1x revenue / 2.3x SDE multiple funded with 10% down and senior debt
In Episode 559 of Built to Sell Radio, searcher Dan Burnside candidly broke down what happened next. Within two years of acquiring Parker Mechanical, operational blind spots, staffing crises, licensing bottlenecks, and hyper-dependence on the outgoing owner pushed the business to a standstill—eventually leading to personal bankruptcy.
Dan’s story is a stark reminder for every acquisition entrepreneur: financial due diligence only confirms past performance; operational due diligence determines whether that cash flow is actually transferable.
What Standard Due Diligence Misses
When you evaluate a target business through spreadsheets and Quality of Earnings (QofE) reports, you verify the numbers. But the real post-close threats hide in operational friction:
- Owner Discretion vs. Documented Systems: A business doing $900k in SDE often relies heavily on the owner's personal relationships, technical licenses, and ad-hoc troubleshooting. When the founder walks out, the operating system walks out with them.
- Hidden Key-Man & Staffing Fragility: In trade and field-service businesses, culture shock and unvetted middle management can lead to rapid technician turnover post-acquisition, crippling fulfillment while debt payments remain fixed.
- Transferable Value vs. Historical Revenue: True enterprise value isn’t just top-line volume; it is recurring revenue, process automation, customer diversification, and autonomy from key individuals.
If you don't audit the structural value drivers before waiving contingencies, you risk buying a high-paying, high-stress job wrapped in personal guarantees.
De-Risk Your Next Acquisition
Before signing an LOI or finalizing your financing package, ensure you are testing the target's underlying transferable value, not just its tax returns.
Are you currently conducting due diligence on an acquisition target?
Protect your capital, your equity, and your personal guarantee. Reach out today to request a 360-Degree Buyer Due Diligence Audit—a comprehensive operational and transferable-value evaluation that exposes structural vulnerabilities before you close.
Stay safe, be well, and do good.
Mark Mraz | Exit Engineer
Crossing the Goal Partners
mobile/text: 702-209-1726
email: MarkM@CrossingtheGoalPartners.com
LinkedIn / Alignable
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