5 BIGGEST Mistakes That Kill Online Business Acquisitions
Updated on February 26, 2026
Transcript
What’s up everyone? In this video today, I’m going to talk about the big mistakes that buyers make—usually newbie buyers who are just starting out and want to go acquire a profitable business.
Now, sometimes those people are working a 9 to 5. They’re middle management. They come to a platform like Empire Flippers. They try to get at least that sweet, sweet, bitter juice that is entrepreneurship by acquiring a business.
Or maybe they’re an entrepreneur themselves. They built up a business that is doing well, but they’ve never actually bought a business. And they might be making mistakes that are pretty common, even with the 9 to 5 guys who may not own a business yet.
So let’s cover these five mistakes that I have seen play out to either “you got lucky” or absolutely disastrous results. So let’s get into it.
The first mistake is overleveraging. Now, buying a business is one of the greatest shortcuts I know to making some incredible wealth and having a leverage system to do it that allows you to live a pretty amazing lifestyle once you get the hang of what you’re doing.
Buying a business allows you to skip a lot of the zero-to-one problems that a lot of people get absolutely stuck in—an endless hell/purgatory type of environment trying to get that startup off the ground. So buying a business has tons of advantages.
But one thing that is quite common, and I think it’s going to become increasingly common, is buyers trying to buy a business with too much leverage. Now, when I talk about leverage, I’m mostly talking about money, but there’s also things like skill leverage and tech leverage.
So if you buy a software company that really needs a CTO—really needs someone that’s tech-enabled—and you are not, then you might be overleveraging in the skill department. Like, your main engineer leaves, you’re kind of screwed unless you have good documentation to back it up. But I’m mostly talking about financing here.
I see this growing as a problem because there are a lot of gurus on YouTube, TikTok, wherever you hang out, that talk about buying a business with no money down. And I have discussed this topic many, many times on this channel alone.
And the truth is: those deals do exist. You can buy a business with $0 down out of your own pocket, right? People will poo-poo on me all day and say, “No, that’s not true,” but it absolutely is true. You absolutely can do it.
The real question people need to ask is: should you do it? And that’s a very different question.
Because usually these no-money-down kind of deals are really “no money out of pocket” kind of deals. That means you are not taking any money out of your wallet, but you are still giving the seller a ton of money, usually through creative financing, an SBA loan, or some kind of mix of capital leverage.
The issue is, you can go ahead and do that, and I have friends that do it, and they are comfortable with that kind of risk. But if you’re a brand-new buyer, this is a situation where you’re setting yourself up for failure, most likely.
Because the more debt you put onto a business, the more leverage you have on the business, the more your profit margin shrinks. And when your profit margin shrinks, that means the business has less of an opportunity to weather some pretty chaotic storms that you may not see coming on the horizon.
So you always want to maintain as thick of a profit margin as you possibly can when you go and acquire a business, because that is the way you will have some breathing room if a storm does happen. You can start adapting and changing and trying to figure things out versus being underneath this high pressure from paying this debt or paying investors.
In general, you don’t want to overleverage super, super hard when you buy these businesses because you want to protect that profit margin. It’s your shield when you go into battle with your acquisition.
Now, I’m not saying don’t ever use leverage. In fact, I actually recommend using leverage. I think that’s a good thing. Just like buying a piece of real estate, you’re not shelling out all cash for that piece of real estate. You’re usually getting some kind of mortgage, right? That’s financing or using leverage.
There’s nothing wrong with leverage. I think it can be an amazing tool. But buyers wanting to get this crazy good deal where they spend none of their own personal money often kind of buy themselves into a corner that is very difficult to win from, because your profit margin shrinks so low.
Now, what is a safe amount of leverage? Well, it really depends on your risk tolerance. I have friends that will leverage it to the gills—like 100% leverage—and they’re totally okay with it. They are very experienced entrepreneurs and they know what they’re doing. So for them, it’s not that risky. They understand the risks involved and how to handle those risks, and how to handle that business they’re acquiring.
For you, if you’re brand new, I wouldn’t recommend putting more than 50% of the net profit into leverage. Now, what I mean by that is: if you buy a business that’s making, say, 60 grand a month in profit, you should not have debt payments that exceed 30 grand a month. That way you always have a nice, cushy $30,000 in net profit to actually use to grow the business and pay yourself.
Now, in that situation, you still run risk, right? If you drop below where you can’t handle that debt repayment, there are going to be problems, obviously, with your lender. But the business needs to drop pretty significantly for that to happen. So you’re setting yourself up to be a little bit more conservative.
If that seems like too much risk for you, just lower your leverage. That’s totally fine. People buy businesses all the time with 100% cash, so there’s nothing wrong with that either.
But I know a lot of people don’t typically have a cool million dollars just burning in their wallet to go buy a business, right? So usually leverage is part of the game when you start acquiring bigger businesses. You shouldn’t be afraid of it. You should use it as a tool. Just don’t get super hyped up on all these guru videos telling you to leverage to the hilt, because that’s most likely going to be a bad move for most people.
The second mistake I see people make is related to the first, which is no working capital.
If you buy a business for, let’s say, a million dollars—perfect, you got a business. It’s probably making around 30 grand profit per month. But now you need to buy the inventory. You probably didn’t think about that part, right?
Some business brokers include the inventory in the price. Some business brokers do not. Like, we don’t include it in the business price, so we don’t take a commission on the inventory. There might be some caveats where we have done that in the past, but usually we don’t.
Let’s say it’s $200,000 to buy the inventory. Now, okay, you can work out a deal with the seller where you pay them for that inventory over a period of time as it sells. That’s very, very common.
But what happens when you need to invest another 30, or 50, or 60 thousand dollars into scaling up how much inventory you have, running a new marketing campaign, changing up your infrastructure, maybe needing to hire a few A players—or several C players?
All that kind of stuff you need to consider, because just because you bought the business and you spent that money doesn’t mean you’re done spending money. In fact, you’re probably spending even more money over the lifetime of owning the business than you did to acquire the business.
The key is you want the business to grow—grow beyond what you bought it for—ideally, right? But a lot of buyers, especially brand new buyers, just think, “Oh, I only need a million dollars and I’ll be making $30,000 a month. Awesome.” But that’s not really how it works.
So you have to take some of that 30 grand a month and put it back into the business to keep it growing, keep the engines running. Maybe at 30 grand a month, you’re paying yourself 5 or 10 grand a month. It depends on the business. I have friends that pay themselves everything, but they have different businesses than an Amazon FBA business.
But you want to always consider: what is the working capital needed to run this business, not only sustainably, but on a growth trajectory? So always think about that before you acquire the business.
The next mistake I see is buyers just not being adaptable. And this actually is a mistake that sellers have too, to be honest. It’s not just a buyer thing. In fact, I would say the problem might be even worse with sellers than it is with buyers.
But in general, you want to be adaptable. You want to be flexible. One of the ways that I see this—and I have personal experience with this—is: you go buy a business, you think you have the financing lined up, and then that gets pulled out from you. Well, what now?
If you only had one way to acquire that business, then the seller might be like, “Hey man, unless it’s all cash, this sounds kind of risky. I don’t know if it’s going to work,” blah, blah, blah. “I’m going to go talk to these buyers; they seem to have better acquisition systems than you.”
So we always want to get leverage in there if we can. But let’s say the lender backs out at the last minute. Now, is there another way to do the deal?
What I would recommend is having multiple ways to get a deal done. Cash is obviously king, but depending on the size of the business, that might not always be realistic.
So maybe you have some cash, you have some debt, and maybe you’re also selling off some equity to some private investors who want to get in on the business. Or maybe you’re partnering up with someone who is providing the cash injection as well, and they’re going to help you operate the business.
Having multiple different ways, or multiple different deal structures, thought out before you make the offer—and as you get deeper into the offer—can really help you get the deal done.
One, it shows the seller, like, “Hey, he’s flexible.” He’s really thought this through: what happens if X happens, or Y happens, or Z happens? And he has A, B, C to meet those problems head-on.
You might still lose the deal, even having multiple ways to acquire it, but the seller is more likely to be open to working with you if you do something like this.
Now, mistake number four—which is a personal pet peeve for business brokers (and I think I can speak for all business brokers on this), and probably even more so for a seller—is taking too long during due diligence.
Due diligence is the process: you’ve signed the NDA, you sign the letter of intent, and the exclusive DD period has begun. Exclusive DD typically means it’s just you now looking at the business. No one else can look at the business. You and the seller are often talking, probably on a weekly cadence, all that kind of stuff, and you’re just making sure the business is legit. It matches not only what you want, but it actually is a legitimate business too.
At Empire Flippers, we do vetting. Sometimes we miss stuff, but usually we’re pretty good on it. This is like your version of vetting, right?
Most of the time, depending on the size of the business, an exclusive due diligence period may be between 30 to 90 days. Now, I’ve seen it stretch on much longer than that, and this is the problem.
If buyers are not motivated to move quick, they will sometimes go much longer than that 30- or 90-day period. So let’s say you and the seller agree to 90 days of due diligence to buy a $3 million business. Now we’re on day 91, and you need another two or three months.
This is bad because not only are you telling the seller you could not get the thing done in time as agreed upon—so now you’re becoming unreliable—but the seller is also putting in a lot of extra effort and not getting anything from you yet, while supplying you with really intimate data.
They’re opening up their kimono to you—trusting you that you are going to be able to do the deal. So it feels disrespectful to the seller.
Now, you might say, “Well, they just have to deal with it.” But here’s another issue: you might end up actually paying a whole lot more money for going beyond this due diligence period.
There have been many, many times at Empire Flippers over the years—and we’ve sold 2,500 businesses—so we’ve seen a lot of this. This is not the majority, by the way, so don’t worry, my sellers, but it does happen.
A buyer will go sometimes six months into due diligence, get the seller to keep agreeing, keep agreeing, and then we finally get it done. The buyer’s ready to go, the lawyers are all good, it’s locked and loaded, and the seller says, “Hey, hold on a minute. This business is fundamentally different than what it was six months ago. I am now making way more profit than I was six months ago, yet you’re still going to buy me at the price from six months ago? No. We’re repricing it to where the business is actually valued today.”
Now, depending on how the buyer is going to buy the business, that might be no problem. Maybe they’re like, “Hey, okay, whatever. I get it.” Another way a buyer might respond is like, “No way. I’m not buying it now.”
Sometimes buyers will use this due diligence waiting trick to see if the business grows because they think in their mind they got it locked in at a certain price, but they don’t—unless that was something the seller agreed to before that DD began.
So the seller is totally in their right to back out of the deal, because they don’t want to leave a bunch of money on the table. Which means you end up paying a lot more money.
We actually had a very funny experience years ago where a business, every single month, was increasing its profit pretty dramatically. The buyer thought he was being smart by waiting to make the seller more desperate—“I know I’m buying my business, I’m going to get it for lower,” right?
But every single month, when we repriced it—unlike other brokers, we tend to reprice all of our businesses every single month—it just kept going up and up and up. I think by month three he finally just bought the business because he didn’t want the price to keep going up on him. That backfired on him.
Another area where this could be a real, terrible situation for you as a buyer is if you are using financing. If you’re using traditional financing, like an SBA loan, for example, to acquire an Amazon FBA business, and at the end of your DD the seller’s like, “No, I want to reprice this to the actual reality of the business,” because so much time has passed—guess what you’ve got to do again?
You’ve got to go through the entire SBA underwriting process again, because that changes all the numbers. It changes everything.
An SBA loan can easily take two to three months to really be done and cleared, and the money sent, and everything is over. It can be a Herculean process to get through one of those. This also applies to other loans as well, not just SBA, but usually more traditional loans.
They need to underwrite those numbers, and those numbers need to be locked in. They don’t care that the business is way more profitable now—they have to redo the entire underwriting process.
That buyer will now probably have to come up with more of a cash injection for the loan as well. So it creates all sorts of wrenches in your plans if you take too long to do diligence.
You should be doing due diligence on a very clear timeline: this is what I’m doing at week one, this is what I’m doing at week two, this is what I’m doing at week three.
And you should be in communication with the seller and with the broker. If you’re buying a business with us, you should be telling us what is going on, because it’s very, very important that there’s not radio silence. That’s the last thing you want to do during due diligence.
Let’s say something did come up. Be like, “Hey, I need another month to do DD because X, Y, Z. I just want to make sure we’re still locked in at this price, and I get that time to do that extra month. Otherwise, maybe we need to call the deal.”
It’s better for you to be the one to say something like that versus the seller, because you’re controlling your own acquisition timeline that way.
That’s a big mistake I see a lot of buyers make, even experienced buyers. Sometimes buyers think they’re going to get an amazing deal by doing this—by waiting—and in my experience, that is not what happens.
All right, the final mistake that buyers make is no post-acquisition planning.
Again, this kind of goes back to the working capital thing. Like, “Oh, I bought the business, it’s over.” No, it’s not over. In fact, you just finished the prologue of your journey with this book of business you’ve just started reading. Now you’re at the helm of the seat. Now you can start doing stuff with the business you’ve acquired.
You’d be surprised at how few people have a cohesive post-acquisition plan for the thing they bought.
There was a business we sold years ago for almost purely a $1 million business. The buyer bought that business, put the website on hold, and had a little placeholder that says, “New redesign coming soon.”
I remember thinking, what a strange thing to do. You could have just kept the site as-is and still be making money while you’re working on the redesign, so it’s not this massive interruption to the business.
I fast-forward like two years, I go back to the website, and it still says, “New redesign coming soon.” Wow. This guy bought a million-dollar business and did nothing. He did nothing but probably destroyed the entire business. I have no idea what the plan was there. Sometimes people are weird. You think, how could someone waste that much money? But it is what it is.
That is an extreme example. What I mean is: you should have a post-acquisition plan. What are you going to do to the business? How are you going to improve upon the business? What are the steps? What are the timelines?
When you first acquire a business, I often say you shouldn’t do anything for 30 days except run the business as the seller was running it. Because this is a new thing for you, right? Even if you’re an experienced entrepreneur, you’re new to running the business.
So you should really learn the ins and outs and establish a normal benchmark before you start changing around those benchmarks and doing other stuff with it.
Usually, I recommend the first 30 days you do basically nothing. But then you should have a 90-day plan, 180-day plan. What’s your end goal? Are you trying to flip this business—trying to sell it down the road for 3.4x of what you bought it for? Or is it going to be part of some kind of strategic acquisition? Is it part of a synergistic portfolio you have with your holding company?
How does this business grow for you? What are you going to do to grow that business? Very, very important.
And again, the reason why this happens is because buyers get so thrilled with the idea of buying a business—and it is really fun buying a business—that they forget this whole other thing called running the acquisition that you acquired.
So there you have it: five mistakes I see newbie buyers, all the way up to even veteran buyers. I’ve seen equity people make these mistakes as well.
So I’m not at all saying just because you’re still working a 9 to 5 or whatever that these private equity people are better than you. They make all these same mistakes as well. So you’re in good company if you’re making one of these mistakes.
But now that you know, you know not to make those mistakes.
So come on over—come on over to empireflippers.com. Let’s help you buy a business. Talk to you soon.
