How I read a listing
A listing is an advertisement, and the seller pays somebody to write it well. For 14 years that somebody was me. Owners hired me to sell, I read their numbers first, and then I wrote the listing myself. That came to 82 deals. I now read the listing for the man who is about to pay for it.
A listing is the seller’s best case
The seller is selling, and the broker earns his fee when the sale closes. So the seller works out his price from whichever profit number looks biggest. That number is what the multiple is applied to. A cost that appeared three years in a row is still labelled a one-off. The twelve months in the listing begin where they look best. Every one of those moves comes from the incentives of a sale, not from dishonesty.
Every online business holds three versions of the truth. The bookkeeping, the tax filing, and the record the payment processor keeps. Where those three disagree, the profit in the listing is too high.
So the asking price is an opening claim. I read the listing to find out what sits under it, before you send anybody money.
Three words, and two rules
Every check ends in one of three words.
PASS. The listing shows proof for this line.
PROBE. Ask the seller one question before you go further.
WALK. Do not bid.
Two rules decide the listing.
Any single WALK means do not bid.
All PASS means you proceed, to real diligence rather than to money.
Six questions, before I open a spreadsheet
These six take about five minutes and I run them while I am still browsing. Any hit and I stop there.
- Does the revenue ride on the owner’s own face, voice or name?
- Is there proof a person outside the business can check?
- Do the accounts that carry the revenue come with the sale? The ad account, the marketplace account, the app store account.
- Does the asking price only make sense against gross revenue?
- Does the listing admit one dependency above 30 percent, and still call the business diversified?
- Would a market salary for the owner’s stated hours erase the profit?
A hit on any one of those six is a WALK. Nothing further down the listing changes it.
Twelve checks, in the same order every time
The order never moves. So I cannot argue myself into a softer order for a listing I like. Four of the twelve are here.
Check 1. Which profit is the multiple on? A seller can quote a multiple on three different profit figures, and each one gives a different price. The first thing I do is find out which figure sits under his number.
Check 4. What did the seller add back to the profit? Every cost he takes out lifts the profit, and the multiple lifts the price on top of it. So I read each add-back and I ask who holds the paper for it.
Check 8. What single event takes 30 percent of the revenue away? One customer, one channel, one supplier, one marketplace. I look for the one thing that can leave, and I count what leaves with it.
Check 12. Why is he selling? The listing gives a reason. The revenue line, the costs and the dates give one too. When the two disagree, I put the question to him in writing.
Eight more checks sit around those four. They read the profit figure itself, and the twelve months the seller chose to show. They read the money the business already owes its customers, and the working capital the listing never mentions.
A shop, a content site and a software business break in different places
Content and affiliate
The traffic arrives because an algorithm sends it. I look at what happened the last time that algorithm changed. I also look at what the business spends to keep its pages current. Then I look for a commission rate that moved mid-year. When a seller turns six months into a full year, he rounds in his own favour.
eCommerce
A margin is only real when the cost of getting the goods to the customer sits inside it. So I look for the full cost of getting the product to the customer, shipping and duty included. I also look for the real share of orders that came back. I look for stock written off in more than one year. Last, I look for a marketplace fee change that has not yet run a full twelve months.
SaaS
Annual prepayments make a monthly revenue figure say more than it should. I set the churn trend against the revenue trend. Then I ask who writes the code after the founder leaves, and what that person costs every month.
Five EU checks where EU rules apply
VAT and the one-stop shop. Where the business owes VAT, and whether it registered where it sells.
Share purchase or asset purchase. What you buy decides what you inherit with it.
The customer list. Personal data moves under rules, and consent does not always survive a change of owner.
Platform reporting. Marketplaces file a report about their sellers every January, under DAC7.
The accounts themselves. Ad accounts, marketplace accounts and app store accounts do not all transfer, and some cannot transfer at all.
What a screen cannot do
A screen reads claims. It cannot prove them. Everything here runs on the listing the seller published and the profit and loss he attached to it.
Proof happens later. After you sign a letter of intent, the seller hands over his records. Bank statements, processor exports, filed accounts. To read those records is a different job. Its name is Verification, and it is the only part of this work that touches evidence.
A clean screen means the listing has earned the cost of real diligence, and nothing more.
Four steps. You stop where you want to.
The six cases
You read six real listings and decide on each one. My decision comes under yours, with my reason. Free, about five minutes.
Before You Bid
The book. The kill pass, twelve checks, three lenses, five EU checks and the verdict sheet, in the order I run them. You run them yourself, on any listing.
The Deal Screen
You send me one listing. I send back the claimed profit beside the profit that survives. My verdict and the questions for the seller come with it, 48 to 72 hours from the invoice.
Verification
After the letter of intent. I read the seller’s records before you pay him. About two weeks.
What this site never does
I never name a live listing. I never publish a price target for a business, and I never tell you to buy one. I read what the seller published. I mark what he proved and what he did not. The decision stays yours.
I’m Zhivko Stoychev. In 14 years I completed 82 deals, and I wrote the listing in every one of them. I work from Burgas in Bulgaria, and my clients are wherever their business is.
Start with six listings you have never read
You decide on each one before I say anything. Then my decision comes under yours, with my reason.
