Most people who buy a business for the first time focus almost entirely on the financials. Revenue. EBITDA. Multiple. They do the math, they decide the price makes sense, and they buy. Then they find out three months later that the previous owner was personally running every sales call and half the customers follow him out the door.

Financials tell you what happened. They don't tell you why, or whether it'll happen again once you own the business. That's what operator diligence is for.

I spent two years buying home service businesses at CERTUS. This is the checklist I used, the things I looked at before I ever let a deal get to an LOI.

1. Understand the cash flow before you touch the multiple

The "price" of a business is a multiple of cash flow, usually SDE (Seller's Discretionary Earnings) for smaller businesses, EBITDA for larger ones. But buyers make the mistake of accepting the seller's add-back schedule at face value. Don't.

Every add-back is a claim. "Owner took $80K in personal expenses through the business." "One-time equipment write-off." "Non-recurring legal expense." Some of these are legitimate. Some of them are not. Go through every line item. Ask for receipts on the large ones. Have your CPA review the three-year P&L before you make an offer.

A 10% reduction in true SDE changes a deal significantly. At 3x SDE, it reduces the price by 30 cents on every dollar. That math matters.

2. Map the revenue

Not just the total, the structure. Where does it come from? How consistent is it? What keeps it coming back?

Specifically, ask:

  • What percentage of revenue is recurring (subscription, annual contract) vs. call-in (one-time service)?
  • What is the customer churn rate over the last three years?
  • What is the average revenue per customer? Is it growing or declining?
  • Does any single customer represent more than 10% of revenue?
  • What percentage of revenue comes from the top 10 customers?

A business with 70% recurring revenue and 8% annual churn is fundamentally more valuable than one with 30% recurring revenue and 20% churn, even if the total revenue is the same today.

3. Find the owner dependency

This is the question most buyers don't ask clearly enough, and it's the one that matters most. Ask the owner: "If you left today, what would happen?"

Then watch how they answer. If they start describing the management team and the SOPs and the trained lead technician, good. If they start listing everything they personally do (quotes, complaint calls, key account relationships, scheduling), that's a dependency you're buying with the business.

Owner dependency shows up as a deduction in your valuation model (the earnout that ties part of the price to whether the business performs after you take over), but more importantly it's an operational risk you need a plan for before you close.

4. Ride the routes

Before you make an offer on any home service business, spend a day in the field. Ride with a technician. Watch what actually happens when the business operates. Does the tech know what they're doing? Is the equipment maintained? Are customers happy to see someone from this company, or do they have complaints?

I've killed deals on route rides. Customers who hadn't been serviced in months. Trucks with broken-down equipment. Technicians who didn't know the products they were applying. None of that was in the P&L.

5. Check the team

Ask about tenure. How long has the senior technician been there? What does turnover look like year over year? Is there anyone on the team who could run the business in the owner's absence, or in yours while you're getting started?

High turnover in a home service business is expensive (recruiting, training, vehicle damage, productivity loss), and it signals something about the culture you're inheriting. Low turnover with experienced people is worth something real. Ask how people are paid, whether there are any non-competes, and whether anyone has mentioned leaving.

6. Evaluate the equipment and infrastructure

Ask for a fleet list with vehicle ages and mileage. Ask about maintenance records. Ask when equipment was last replaced. Find out what's leased vs. owned and what the obligations are.

Deferred maintenance is a price reduction. If you're buying a fleet where every truck has 180,000 miles and the owner hasn't replaced anything in four years, you're going to spend real money in your first 18 months on capital expenditures that aren't in the projections.

7. Understand the competitive position

Who else is operating in this geography? Have any large nationals or PE-backed platforms entered the market? Is the seller losing contracts to a competitor? Is there a price war happening that's compressing margins?

A business that looks healthy on paper but is operating in a geography being consolidated by a Rollins or an Anticimex is in a different competitive position than one that has dominated a market for 15 years with no meaningful competition.

One more thing

The best protection against a bad acquisition isn't a longer due diligence checklist. It's working with someone who's been on both sides of enough deals to know what the red flags actually look like in practice, not just what they look like in the documents.

That's what I bring to buyer clients at Trivie. The operator's eye on a deal that looks good on paper, so you know what you're actually buying before you sign.