What are the red flags in a six-figure listing?
The short answer
The serious warning signs in a six-figure listing are revenue that cannot be shown live, a recent spike doing the heavy lifting, costs that are missing rather than low, a price justified by projections, and any pressure to move outside a structured transfer. Each has a question that resolves it quickly.
Which red flags actually matter?
The ones that matter are the ones that change whether the business exists as described, rather than the ones that change the price. A weak codebase, high churn or a single acquisition channel are all priceable problems, and a good buyer solves them with arithmetic. Revenue that cannot be shown on a live dashboard is a different category, and no discount makes it acceptable.
Sort what you find into two piles as you go. Pile one adjusts the offer. Pile two ends the conversation. Buyers get into trouble by putting pile two items into pile one because they have already fallen for the business.
What are the money red flags?
Money red flags are anything that makes the revenue harder to observe than it needs to be. The table lists the ones worth reacting to, and the question that settles each.
| What you see | What it usually means | The question that resolves it |
|---|---|---|
| Screenshots offered, screen-share declined | The figures were assembled rather than reported | "Fifteen minutes with the dashboard open, whenever suits you?" |
| A spike in the last three months carrying the trailing average | A launch, a promotion or a one-off that will not repeat | "Show me monthly revenue for 24 months, not 12" |
| Costs listed as unusually low or missing entirely | Expenses the seller pays personally and has not counted | "What is the total of every card the business touches?" |
| MRR that does not match the subscription list | Annual plans counted in the month they landed | "Export the customer CSV while we are on the call" |
| High refund or dispute rate | Quality problems, or a processor account under strain | "Show me refunds and disputes for the same twelve months" |
| Revenue from a related company or the seller's other product | Revenue that stops the day you take over | "Who are the five largest customers, and how do you know them?" |
| A price justified by next year's projections | Trailing profit does not support the ask | "What is the price as a multiple of trailing annual profit?" |
None of these means the seller is dishonest. Each means you have not yet seen the business, and you should not proceed as though you have.
What are the business red flags?
Business red flags are the ones that say the revenue is real but will not survive the transfer. The most common is a founder who personally is the acquisition channel, where signups arrive because of their audience, their posts or their reputation in a community. That revenue is not transferable and should be priced at close to nothing, whatever the trailing figures say.
Watch for three patterns alongside it. One customer above 25% of revenue, with no written contract and a relationship that lives in the seller's inbox. Traffic that comes almost entirely from one search term, one integration directory or one app store position. And a product whose continued existence depends on another company's API, policy or review process, where a single decision elsewhere halves the business.
Falling revenue is not automatically a red flag, and it is frequently mispriced in the buyer's favour. A business down 15% over twelve months with a clear reason and a fixable cause can be a good purchase at the right number. A business down 15% where the seller describes the trend as seasonal without evidence is a different proposition.
What are the legal and technical red flags?
Legal red flags are anything suggesting the seller does not fully own what they are selling. A codebase with contributions from contractors who never signed an IP assignment is the most common and the most fixable, provided you find it before close. A copyleft licence deep in the dependency tree, a domain registered to a former agency, a departed co-founder with no written separation, or customer terms that prohibit assignment all belong in the same category.
Technically, the flag to watch is the seller's reluctance to let you run the thing. A buyer at six figures should be able to clone the repository under NDA, build it, deploy it to staging and read it properly. Where that is refused, or where production has drifted so far from source control that nobody can reproduce it, you are buying an unknown at a known price.
What are the counterparty red flags?
Counterparty red flags concern the person rather than the business, and they end deals fastest. Watch for a seller who will not identify themselves, will not appear on video, communicates only through one channel, or whose account details do not match the name on the business. At six figures, establishing who you are dealing with comes before everything else, and a pre-screened listing has already done the first pass on that.
Three behaviours deserve an immediate stop:
- Pressure and manufactured urgency. Another buyer who appears exactly when you ask a hard question, or a deadline the seller cannot explain.
- Any suggestion of moving the payment outside a structured transfer with escrow, for speed, fees or any other reason.
- A change of bank details late in the process, which is the single most common fraud pattern in online business transfers and should always be confirmed by voice on a number you already had.
How should you handle a flag you find?
Raise it directly, early, and in writing, then judge the answer rather than the flag. Most red flags on a real listing have dull explanations: a spike was a Product Hunt week, the missing costs were on a personal card, the contractor was a friend who will sign whatever you send. A seller running a real business answers plainly and provides the evidence without being asked twice.
What you are reading is the shape of the response, not its content. Straight answers with documents attached mean keep going. Partial answers, changed subjects, rearranged calls and offence taken at reasonable questions mean stop. A price is a negotiation and evidence is not, and the buyers who lose money at this size are almost always the ones who accepted a discount instead of an answer.
Related: how-to-avoid-fraud-when-acquiring-online-business, how-to-verify-a-sellers-revenue, due-diligence-for-a-100k-deal
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