Last month a buyer came to me with what he called "the cleanest deal I've ever seen." Commercial cleaning company in the Midwest. Asking $1.2M. Seller-reported SDE of $385K. On paper, the multiple was solid. The cash flow looked strong. He was ready to sign the LOI that week.

I told him to slow down.

Not because the deal looked bad. Because the deal looked too neat. Thirty-five years in this business and the one pattern I can set my watch to is this - when the broker's numbers are perfectly round and perfectly tidy, something is hiding underneath them.

So we pulled the bank statements. Not the P&L the broker packaged. Not the tax returns the seller's accountant "cleaned up." The actual bank deposits, month by month, for 36 months.

The revenue matched. That wasn't the problem.

The problem was $220K in add-backs that didn't exist. The seller had listed his wife's salary as an add-back - except she managed the company's largest account and the client had a personal relationship with her. Remove her, lose the account. That's not an add-back. That's a cost of doing business. There was another $85K in "one-time repairs" that happened every single year for the last four years. At some point, recurring expenses stop being one-time.

Real SDE wasn't $385K. It was closer to $165K. And at $165K, the deal math falls apart completely. The DSCR drops below 1.2x. The purchase multiple jumps above 7x. This isn't a deal - it's a debt trap.

Here's the lesson, and it's one that could save you six figures: add-backs are the most manipulated number in every deal you'll ever look at. Sellers believe their own add-backs because their broker told them they're standard. Brokers believe the add-backs because that's how they hit the listing price the seller wants. Nobody is lying on purpose. But the result is the same - you're buying a business based on cash flow that doesn't actually exist.

Smart buyers verify every single add-back against bank statements. Not tax returns. Not P&Ls. Bank statements. If the cash didn't move through the bank, it's not real.

That buyer? He passed on the deal. Took him about ten minutes to see it once we laid the real numbers side by side. He closed on a different business two months later - one where the math actually worked.

This is exactly the kind of situation I walk through in the free masterclass - including how to pressure-test every add-back before you sign anything.

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