If you shop for companies the way some people browse vintage shops, you know the thrill of finding a gem and the dread of realizing it is costume jewelry. The smartest favor you can do for your future self is to polish your diligence lens until it sees through sparkle.
We buy with clear criteria and a plainspoken checklist, because confusion is expensive and surprise is rarely the good kind. As a holding company we look for patterns that repeat, then we walk when too many of them rhyme for the wrong reasons.
Financials that look squeaky clean on the surface but wobble under a calculator are classic trouble. Margins that round to the same whole number every month suggest the spreadsheet has been cuddled. When accruals drift without an audit trail, or when revenue gets booked before delivery under the banner of optimism, that optimism will return later as cash shortfalls. Healthy numbers breathe, vary, and reconcile.
Customer concentration is the corporate version of a single point of failure. If one client pays half the bills, you are not buying a business, you are buying a relationship with someone who is not obligated to like you. When that client has a sweetheart discount or is mid renewal, your model belongs in pencil.
Skyward charts are adorable until you ask what powered them. Inorganic blips, price hikes that outpaced value, or churn tucked inside net revenue retention can turn a hero story into a balloon without a knot. Trace the engine, separate mix from real demand, and see if cohorts age with grace.
We love founders, and we love sleep. A company that runs because one superhero never takes a vacation will steal both. If the owner approves every quote, closes every sale, and keeps the playbook in their head, you are not buying a machine, you are buying lessons you will learn the hard way. Look for standard work and managers who make decisions without permission.
A brittle culture shows up as polite meetings with no conflict and no follow through. People whisper agreement and then do what they have always done. If incentives celebrate activity instead of outcomes, expect a busy calendar and a quiet bank account. Process should be clear, documented, and boring in the best way.
Mid level leaders who cannot read a P and L or a sales leader who cannot forecast ruin nice models. You do not need a navy of geniuses, but you do need a few people who can steer when the water gets choppy. If titles outnumber responsibilities, the org chart is a costume.
Adjustments exist for a reason, yet some are fiction. If add backs include normal salaries, recurring marketing, or the entire IT budget labeled as one time, you are looking at earnings that vanish the moment you take the keys. True add backs should be rare and obviously non recurring.
Capex holidays, delayed hires, and software upgrades that should have happened last year often hide behind tidy profit. The moment you modernize the stack or catch up on repairs, margins revert to their natural state. Model the business as if the adults already showed up.
Companies that collect slowly and pay quickly turn buyers into lenders. If DSO creeps up while inventory looks heroic, you can bet the warehouse is full of hope sizes and discontinued colors. Healthy businesses convert profit to cash with minimal drama.
A moat is not a long contract with penalties. Real stickiness lives in switching costs that customers would gladly pay to avoid. If migration is easy and comparables are cheaper, the moat is a puddle. Ask what customers would miss tomorrow morning.
If the company has not raised prices in three years and blames the market, the issue is value. Strong products create room to nudge price without panic. Weak products survive by hiding inside bundles and long renewals that nobody wants to reopen.
Auto renew clauses that lock in discounts, customer friendly SLAs with unlimited credits, or Most Favored Nation clauses provisions that cap your upside take the shine off revenue. The worst flavor is a contract that requires your future consent for any change. You want the freedom to improve without begging.
A modern company that runs on spreadsheets, mystery macros, and one laptop named Server needs more than a handshake. If backups are a rumor and access control is a shared password, you are buying a technology project first and a business second. Tools should be integrated, observable, and replaceable.
When the dashboard says one thing, the CRM says another, and the bank balance chooses a third option, prepare for a long weekend. Without a single source of truth, every meeting turns into a debate about which number is real. Data governance is not glamorous, but it makes money.
Security should be a posture, not a poster. If the last penetration test predates the last major release, or if vendor questionnaires are answered with a shrug, assume gaps. Breaches do not send calendar invites. They show up at 3 a.m. with a legal bill.
When the seller cannot describe what happens in the first week after close, expect confusion. Payroll, email, and customer communication need names and dates. You do not have to redesign the company on day one, but you do have to keep the lights on.
If nobody owns the scorecard, nobody owns the results. Decide who watches pipeline, churn, net promoter, cycle times, and cash. A small business does not need a NASA console, it does need a shortlist of numbers that matter.
Teams that twitch at every new idea will not enjoy integration. The way to spot it is small, repeated sarcasm and the phrase this is how we do it here. Healthy teams are curious, even when tired.
We do not collect red flags because we like saying no. We collect them because they guide better questions that lead to better deals. A single concern is a conversation. A cluster is a map. When more than three clusters overlap, we step back, thank everyone, and pass.
The point of diligence is to avoid buying problems that do not want to be solved. We prefer deals that look attractive after you subtract luck and soften the forecasts. Clarity beats charisma, so we keep asking until the story and the numbers shake hands. Integration loves simple, well tested plans.
Smart diligence is the art of subtracting wishful thinking until the business that remains is sturdy in daylight and boring on Tuesdays. Red flags aren’t trophies; they’re instructions. If they lead you to tighter questions, cleaner numbers, and simpler plans—and the answers hold—you’ve likely found something that compounds.
If they stack into a chorus, walk. There will always be another deal; there won’t always be another shot at focus, cash discipline, and a team that can execute without a pep talk. Buy what works on paper and in practice, then let time and operational excellence do the heavy lifting.
Ryan Schwab serves as Chief Revenue Officer at HOLD.co, where he leads all revenue generation, business development, and growth strategy efforts. With a proven track record in scaling technology, media, and services businesses, Ryan focuses on driving top-line performance across HOLD.co’s portfolio through disciplined sales systems, strategic partnerships, and AI-driven marketing automation. Prior to joining HOLD.co, Ryan held senior leadership roles in high-growth companies, where he built and led revenue teams, developed go-to-market strategies, and spearheaded digital transformation initiatives. His approach blends data-driven decision-making with deep market insight to fuel sustainable, scalable growth.
