FROM MIKE'S DESK
A buyer came to me last month with a deal he was ready to close. Commercial cleaning company in the Southeast. $2.4 million asking price, $485K in SDE, owner retiring after 22 years. On paper, it looked like a layup.
He had already talked to his SBA lender. Already told his wife he was putting in his notice. Already started thinking about business cards. The broker's CIM was polished - revenue trending up, margins healthy, a loyal client roster. The kind of deal that makes you lean forward in your chair.
I asked him one question: Did you reconcile the seller's add-backs against the bank statements and tax returns?
Silence.
So we did it together. Took about two hours. The seller had $147K in add-backs that could not be verified by a single deposit, a single return, or a single cancelled check. That is not an accounting disagreement. That is fiction. When you strip the unverifiable add-backs out, the real SDE drops to roughly $338K. The purchase multiple jumps from 4.9x to over 7x. The DSCR falls below 1.2. The deal goes from a smart acquisition to a ticking time bomb.
Here is the hard truth that 35 years has drilled into me: the broker's financials and the bank statements almost never match on the first pass. That is not because every seller is dishonest. It is because sellers are emotionally invested in the number they want, and brokers are paid on commission. Nobody in that transaction has an incentive to show you the real number except you.
That buyer? He walked away from the deal. Painful in the moment. But $340K in phantom cash flow would have eaten him alive inside of 18 months. The Bulletproof criteria exist for exactly this reason - they force you to verify before you commit, not after. Every test in the method is built around one principle: trust the math, not the pitch.
If you are evaluating a deal right now - or thinking about starting - the worst thing you can do is rely on the numbers someone else prepared for you. Run them yourself. Verify every add-back. And if you want to see exactly how I score and stress-test every deal before I commit a dollar, I put the whole method in a free 28-minute masterclass.
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