--- title: "Red flags in business-for-sale listings, explained" url: https://firstpassmemo.com/flags/ updated: 2026-10-07 publisher: FirstPass Memo (hello@firstpassmemo.com) --- Red flags explained # Red flags in business-for-sale listings, explained Short answer: the free FirstPass Memo checker applies 33 plain rules to a listing's own numbers and text. Each page below explains one rule: when it fires, why it matters, a composite example run through the checker, what to check and the questions to send the seller. The rules are also published as rules.json (https://firstpassmemo.com/rules.json). Updated 7 October 2026 · 33 rules · How often each one fires (https://firstpassmemo.com/data/#flag-frequency) ## Price and earnings - No asking price (https://firstpassmemo.com/flags/no-asking-price/) High Why the checker flags a listing with no asking price, what payback and multiple need, and what to ask the seller before you spend time on it. - No profit figure (https://firstpassmemo.com/flags/no-profit-figure/) High Why the checker flags listings that give revenue or MRR but no profit, how it works out payback in that case, and what to ask for. - Zero or negative profit (https://firstpassmemo.com/flags/zero-or-negative-profit/) High Why the checker flags a business that states zero or negative profit, what you would actually be buying, and the questions to ask. - Priced below one year of profit (https://firstpassmemo.com/flags/priced-below-one-year-of-profit/) Medium Why the checker flags listings priced under one year of profit, the common reasons, and what to ask before you treat it as a bargain. - Multiple above the typical range (https://firstpassmemo.com/flags/asking-multiple-above-typical-range/) Medium Why the checker flags an asking multiple above the middle half of comparable listings, and what evidence can justify a higher price. ## Trend - Last month at or below zero (https://firstpassmemo.com/flags/last-month-profit-zero-or-negative/) High Why the checker flags a listing whose most recent month broke even or lost money while the average looks positive, and what to ask. - Last month below the average (https://firstpassmemo.com/flags/last-month-profit-below-average/) Medium or high Why the checker flags a last month more than 20% below the average profit, how to rework payback on recent months, and what to ask. - Revenue declining (https://firstpassmemo.com/flags/revenue-declining/) Medium or high Why the checker flags a listing that reports a revenue decline of 20% or more, why declines tend to continue, and the questions to ask. - Short averaging window (https://firstpassmemo.com/flags/earnings-averaged-over-short-period/) Medium Why the checker flags profit averaged over fewer than 12 months, how a short window can hide seasonality or a peak, and what to ask for. ## Numbers that disagree - ARR and MRR disagree (https://firstpassmemo.com/flags/arr-and-mrr-disagree/) Medium Why the checker flags a SaaS listing whose ARR differs from MRR times 12 by more than 15%, and how to find out which figure is current. - ARR far above trailing revenue (https://firstpassmemo.com/flags/arr-far-above-trailing-revenue/) Medium Why the checker flags ARR more than 1.5 times trailing 12-month revenue, what it says about growth or optimism, and what to ask. - MRR above collected revenue (https://firstpassmemo.com/flags/mrr-above-revenue-collected/) Medium Why the checker flags MRR more than 15% above the revenue collected last month, and how failed payments, discounts and refunds explain the gap. - Monthly and annual revenue disagree (https://firstpassmemo.com/flags/monthly-revenue-does-not-match-annual/) Low Why the checker flags monthly revenue × 12 that differs from annual revenue by more than 10%, and how to find which months each figure covers. - Profit higher than revenue (https://firstpassmemo.com/flags/profit-higher-than-revenue/) High Why the checker flags a listing whose profit is higher than its revenue, what usually causes it, and what to ask the seller to correct. - Margin above 90% (https://firstpassmemo.com/flags/very-high-margin/) Medium Why the checker flags profit margins above 90%, the costs most often left out, and how to rework payback with them included. ## Customers and retention - No churn figure (https://firstpassmemo.com/flags/no-churn-figure/) Medium Why the checker flags a recurring-revenue listing that gives no churn rate, why churn decides the price, and what to ask for. - Churn above 5% a month (https://firstpassmemo.com/flags/monthly-churn-above-5-percent/) Medium or high Why the checker flags monthly churn above 5%, the arithmetic behind it, and how to judge whether new sales will keep up after the sale. - Few paying customers (https://firstpassmemo.com/flags/few-paying-customers/) Medium Why the checker flags subscription businesses with fewer than 25 paying customers, what it means for risk, and what to ask the seller. - Top customer above 25% (https://firstpassmemo.com/flags/top-customer-over-25-percent/) High Why the checker flags a single customer, sponsor or partner above 25% of revenue, and how to check whether that revenue will stay after the sale. - Concentration not disclosed (https://firstpassmemo.com/flags/concentration-not-disclosed/) Low Why the checker raises a low-severity flag when a listing does not say how much revenue comes from its largest customer or partner. ## Traffic and platforms - Search-dependent traffic (https://firstpassmemo.com/flags/organic-search-over-half-of-traffic/) Medium Why the checker flags sites with more than 50% of traffic from organic search, how often Google updates land, and how to check a site's history. - One channel above 60% (https://firstpassmemo.com/flags/one-channel-over-60-percent-of-traffic/) Medium Why the checker flags a single non-search channel above 60% of traffic, such as paid ads, social or email, and what to ask about it. - SEO claim versus the data (https://firstpassmemo.com/flags/claims-seo-growth-but-search-is-small/) High Why the checker flags a listing that credits SEO for its growth while its own traffic figures show less than 20% from organic search. - Platform dependence (https://firstpassmemo.com/flags/depends-on-a-platform/) Medium Why the checker flags businesses that rely on Amazon, YouTube, an app store, an ad network or another platform, and how to judge the risk. - No traffic data (https://firstpassmemo.com/flags/no-traffic-data/) Medium Why the checker flags content, affiliate, ad-supported and YouTube listings that give no traffic figures, and what data to ask for. ## Verification, age and operations - No connected data source (https://firstpassmemo.com/flags/no-connected-data-source/) Medium Why the checker flags listings that mention no verified or connected data source such as Stripe, PayPal or analytics, and how to check the numbers. - Business age not stated (https://firstpassmemo.com/flags/business-age-not-stated/) Medium Why the checker flags listings that do not say how old the business is, and why history length matters for judging the numbers. - Under 6 months old (https://firstpassmemo.com/flags/under-6-months-of-history/) High Why the checker flags businesses with less than 6 months of history as high severity, and what to ask before buying a very young business. - Under 12 months old (https://firstpassmemo.com/flags/under-12-months-of-history/) Medium Why the checker flags businesses between 6 and 12 months old, what a missing full year hides, and how to ask for the history there is. - Owner hours not stated (https://firstpassmemo.com/flags/owner-hours-not-stated/) Medium Why the checker flags listings that do not say how many hours a week the owner works, and how to price the owner's time into payback. - More than 10 hours a week (https://firstpassmemo.com/flags/owner-works-over-10-hours-a-week/) Medium Why the checker flags sellers who work more than 10 hours a week, how that time lowers real profit, and how to rework payback. - Passive, but staffed (https://firstpassmemo.com/flags/called-passive-but-relies-on-staff/) Medium Why the checker flags listings described as passive or hands-off that also mention writers, VAs, developers or other contractors. - Generic reason for sale (https://firstpassmemo.com/flags/generic-reason-for-sale/) Low Why the checker raises a low-severity flag for vague reasons for sale such as "other opportunities", and what to ask instead. Try it on a listing. The red-flag checker (https://firstpassmemo.com/checker/) runs in your browser and sends nothing you paste. --- FirstPass Memo is informational screening, not investment, legal, tax, accounting or valuation advice, and not an audit. Seller figures are not independently verified. HTML version: https://firstpassmemo.com/flags/