When I first started exploring acquisitions, I made every mistake you can imagine. I was eager, curious, and overly optimistic. Looking back now, I realize that learning to spot businesses worth buying is not something you can find in a checklist. It comes from experience, pattern recognition, and asking the right questions about both the numbers and the people behind them.
What I want to share here is my personal framework for how I developed the ability to recognize a good business early, why certain industries lend themselves to stronger acquisitions, and what I wish someone had told me before I made my first offer.
Understanding the DNA of a Good Business
The first lesson I learned is that financial statements are only the surface. A business can look profitable on paper and still be dysfunctional underneath. Early on, I bought into the myth that revenue growth alone was enough to signal opportunity. I now know better.
A good business shows consistency in three areas: operations, leadership, and customers. When I walk into a company I’m evaluating, I look for evidence that these three elements support each other. If operations are efficient but leadership is fractured, the company won’t sustain growth. If leadership is strong but customer churn is high, profitability will fade. The DNA of a good business is alignment across all three.
Why Industry Selection Matters More Than Timing
A mistake I see new buyers make is chasing timing, trying to buy just before a trend explodes. I did that once, too, and I learned how risky it can be. Markets change quickly. What matters more is industry structure.
I’ve built a rule for myself: I focus on industries that serve everyday needs. Restoration services, construction supply, and even affordable housing all fall into this category. They may not be glamorous, but they’re resilient. That resilience is what allows an acquisition to compound over time.
For example, when I see a company that generates recurring demand regardless of the economy, I pay closer attention. It’s not about timing the market. It’s about owning something people will still need 20 years from now.
Evaluating the People Behind the Numbers
Another insight I’ve developed is the importance of the seller’s mindset. I used to underestimate this, assuming numbers told me everything I needed to know. But after sitting across from dozens of sellers, I realized the person you’re buying from matters almost as much as the business itself.
If a seller is burned out, disorganized, or hiding behind vague explanations, I see red flags. But when I meet an owner who has genuine pride in what they built, even if the company isn’t perfect that’s a business I want to learn more about. Seller psychology often reveals the true health of an organization.
Red Flags I Learned the Hard Way
Every acquisition comes with lessons. Some of mine were expensive. Here are a few red flags I learned to recognize:
- Overreliance on one customer. If more than 40% of revenue comes from a single source, I pause. That’s not stability, that’s risk.
- Owner dependency. When the seller is the business, and no systems exist without them, walking away is often the best option.
- Unclear books. If I can’t get clean financials within the first week of diligence, it’s usually a sign of deeper operational issues.
- No path to scale. I look for businesses where small improvements can drive outsized results. If growth requires a complete overhaul, the acquisition becomes a gamble.
How I Developed Pattern Recognition
The truth is, I didn’t wake up one day with the ability to spot good businesses. I built it by looking at hundreds of deals. I kept a personal database of every business I reviewed, including why I passed. Over time, I started to notice recurring signals.
Now, I can often tell within the first conversation if a business deserves a deeper dive. It’s not magic, it’s pattern recognition. The more you expose yourself to deals, the faster your instincts sharpen.
Why This Matters for Future Buyers
I share all this because I believe entrepreneurs and aspiring buyers need transparency. Too many people romanticize acquisitions, thinking every deal is a win. That’s not reality. The truth is, most deals don’t make sense, but the ones that do can change your life.
If you want to start spotting businesses worth buying, my advice is simple:
- Look at deals constantly. The volume will train your brain.
- Talk to sellers even when you’re not buying. Every conversation sharpens your perspective.
- Write down your lessons. Over time, your own playbook emerges.
Final Thoughts
I learned to spot businesses worth buying through trial, error, and persistence. What I value now is not just the companies I’ve acquired, but the knowledge gained from the ones I didn’t. Each “no” gave me a sharper lens for the next “yes.”
If you’re serious about acquisitions, start immersing yourself in the process. The patterns will reveal themselves. And when the right deal comes along, you’ll know it, because you’ll feel the alignment between operations, leadership, and customers. That’s when you’ve found a business truly worth buying.
For more of my thoughts on acquisitions, private equity strategies, and real estate, I share insights regularly on DrConnorRobertson.com.