[EP 300] Red Flags or Deal Leverage? What Buyers Need to Know – Part 2

Introduction [00:00:00]:
Ladies and gentlemen, good evening. Are you ready? Okay, here we go. You’re listening to the Deal Room Podcast. Join us as we bring you the inside scoop on business, sales and acquisitions. Get across trends in the area and hear the industry’s best recount their real life tips, traps and experiences. Now, here’s your host, Joanna Oakey.

Joanna Oakey [00:00:24]:
Hi, it’s Joanna Oakey here and welcome back to the Deal Room Podcast, a podcast proudly brought to you by our commercial legal practice, Aspect Legal. Now we’re picking up right where we left off in part one of this two-part series where we are continuing the conversation with our two fantastic guests, Brett Goodyer and Alex Gilchrist, as we explore what to do when red flags pop up in a business purchase and how to turn risk into a strategic advantage. Alex from Seek Business brings real world insights from his work with brokers and buyers around Australia. And Brett is a valuation specialist and forensic accountant with over 30 years of experience in assessing risk, value, and deal readiness.

In this episode we talk about what to watch out for in listings and financials and when to dig deeper, how excessive add backs or losses affect business value, and ways buyers can negotiate smarter deals to manage risk as well as a whole lot more. P.S. if you missed the live webinar that triggered this Q&A episode, don’t worry, it’s now available on demand.

Joanna Oakey [00:01:38]:
You’ll find the link in the show notes and on our website. And just a little side note, this is our 300th episode of the Deal Room Podcast. So just want to take this opportunity to say a very huge thank you to you, our listeners, for listening, learning and being part of the journey. Whether you’ve been tuning in from day one, which was around about six or seven years ago, I think, or whether you’re new here, we’re so grateful to have you along for the ride. A big thank you as well to our guests for helping us mark this milestone with such practical and insightful conversations. All right, well, without further ado, let’s get now into part two of this special 300th episode of the Deal Room Podcast. Here we go. I want to jump into another question that we had here.

Joanna Oakey [00:02:34]:
This is an interesting one from one of the attendees. Question over to you, Alex. This attendee said, “I’m interested in the answer to this. I think many viewers would also be interested.” Is the weekly revenue shown on the Seek Business portal accurate or is it possibly posted just to attract buyers? Now of course, Alex, you can’t verify everything that sellers put in there.

Alex Gilchrist [00:03:11]:
We don’t actively screen to make sure it’s completely accurate, but we encourage all our sellers to fill out all parts of the ad to attract the right and relevant buyer. From our data, we do see that people who put that information in get a significant uplift in inquiry to help sell their business. I would hope that it’s true. Our terms state everything has to be true and accurate, but I would still take it with caution. I would still talk to your financial advisors and partners to make sure it’s accurate. Saying that, if sellers do fill out that section, the listing will get promoted into a more relevant position. Our job is to provide as much information as we can in an easy, digestible way for buyers to find it.

Joanna Oakey [00:03:59]:
Right, that you can access all of that information. But the big message here is buyer beware. Don’t take anything at face value—you’ve got to undertake your own investigations.

Alex Gilchrist [00:04:13]:
What our team will do is look at all ads. I’d say the vast majority of ads that go live—and if they look suspicious, they’ll be taken down. Particularly with franchises, if it’s not matching what our audience wants to see, it won’t get onto the site.

Joanna Oakey [00:04:32]:
What sort of suspicious stuff do you see, Alex?

Alex Gilchrist [00:04:36]:
Sometimes people try to advertise pyramid schemes or non-genuine opportunities. It could have a false ABN or be someone from overseas trying to take someone’s money. There is a strict process where everyone is spoken to before going live. I can’t give a specific example right now, but if it doesn’t look relevant or real, it won’t appear.

Joanna Oakey [00:05:10]:
Love it. Good one. Okay, thanks, Alex. There are so many questions here—we could write a book from this. Here’s another one.

How do we value a business when a business owner is deliberately showing a loss? What’s your approach to valuations in this situation?

Brett Goodyer [00:06:07]:
It’s not always about cash, but this is one of those red flags. Often businesses making losses year on year continue to fund themselves with large Division 7A loans (deemed dividends or loans to owners that are never repaid). We look at how much money comes in, what expenses deliver that service, and the profit we can attribute to the enterprise.

The books and records are kept for tax purposes only. Many businesses expense everything—cars for family members, sheds built in their backyard, motor vehicles, travel, buildings—all expensed to reduce taxable income. Sellers will later give me a long list of add backs.

As a valuer, I include those adjustments but note “as advised by the owner.” The first red flag is when financials need 30 lines of normalisation adjustments to reach true profitability. That means I can’t rely on the official records and must rely on the seller’s word. If they’re willing to misrepresent to the tax office, why not to me, the buyer?

I might still consider the business if attractive enough but would spend proper time and money on due diligence. If I had three similar businesses and one had massive add backs, that’s the one I’d cull.

Joanna Oakey [00:09:28]:
Another common question is about businesses under management and how that impacts the multiple. Typically, you’d expect a higher multiple, but you really need to check if it’s truly fully managed.

Brett, comments on valuations?

Brett Goodyer [00:10:32]:
There’s usually a significant uplift when the business is genuinely hands-off for the owner. If the owner only works strategically or as a board member, that’s truly arm’s length. But if they’re still doing reconciliations or day-to-day tasks, it’s not fully managed. Often what sellers say differs from reality—so due diligence is key. Ask what tasks they personally do daily, then decide if you need to change your offer.

Joanna Oakey [00:11:58]:
Alex, can buyers search for fully managed businesses on Seek?

Alex Gilchrist [00:12:06]:
Yes, it’s a keyword search and our seventh most popular. But often when buyers inquire, they find it’s not fully managed. Definitions vary, so you need to dig deeper.

It’s also interesting because it shows trends—why people buy businesses.

We’ve also seen a spike in offshore traffic (Singapore, Hong Kong) for accommodation/tourism businesses in regional areas. These buyers often move with their families and hold the business long-term. Traffic is still small but growing.

Joanna Oakey [00:14:24]:
We’ve talked valuations, trends, and red flags. A final question—what do you do when you find red flags? Do you walk away, or can you negotiate?

From my perspective, a red flag doesn’t mean walk away. It means adjust the deal structure so risk is priced in—maybe multiple payment steps based on confirming value.

Brett Goodyer [00:16:08]:
Exactly. A red flag is just an indicator to look deeper. Drill down—it may turn out harmless or a negotiable issue. Something sitting on Seek for months might actually be an opportunity to negotiate.

Do basic due diligence to ensure financials match claims. Some buyers may accept higher risk for lower price, especially if diversifying or merging with an existing business. Red flags don’t preclude a deal—they require closer analysis or expert help.

Alex Gilchrist [00:18:07]:
From Seek’s side, not all red flags are equal. Some are deal-breakers (fraudulent reporting), others are inefficiencies that can be opportunities for improvement.

Joanna Oakey [00:18:48]:
So the answer is—buy at the right price and terms.

Brett Goodyer [00:18:52]:
Yes, exactly. Negotiate smartly.

Joanna Oakey [00:18:57]:
Tonight, I want to say a huge thank you to you both. We had a very interactive audience—if you weren’t there live, come next time!

Check your notes for download links, get the Seek Market Insight report, and a link to Brett’s book.

Brett Goodyer [00:19:32]:
Thank you for having me.

Alex Gilchrist [00:19:33]:
Wonderful to be here, thank you.

Joanna Oakey [00:19:35]:
Great. Thanks, guys. Bye. That’s it for this episode of the Deal Room Podcast. Head to our website for a transcript, contact details, and more information.

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