Why I Evaluate Businesses as an Operator Before I Look at the Numbers
By Steven Bickers
Founder, Draymoor Ventures · draymoorventures.com
When I evaluate a business for acquisition, the spreadsheet is the last thing I open. Not because the numbers don’t matter. They matter enormously. But because the numbers only tell you what happened. They don’t tell you why it happened, whether it will continue, or what breaks when the current owner walks away.
The operator evaluation comes first because it answers the question the P&L can’t: is this business durable, or is it dependent on a single person, a single relationship, or a single market condition that could change tomorrow?
What the Spreadsheet Doesn’t Show
A business can show $800K in EBITDA and still be fragile. The three most common sources of hidden fragility are customer concentration, owner dependency, and process informality.
Customer concentration is the most obvious risk but the most frequently rationalized. A business where 40% of revenue comes from one account is not a diversified business. It’s a business with one customer and several supplementary relationships. If that customer leaves, the economics collapse overnight. Sellers know this. They will present it as a “strong relationship” rather than a concentration risk. The operator’s job is to see through the framing.
Owner dependency is harder to measure but more common. In many small businesses, the owner is the sales team, the customer relationship manager, the quality control system, and the institutional memory all at once. The P&L reflects the output of that person’s effort. Remove the person, and the output changes in ways the financial model can’t predict.
Process informality is the gap between “we have a process” and “the process is documented, repeatable, and can be executed by someone who wasn’t here six months ago.” Most small businesses operate on informal processes carried in the owner’s head. That works fine for a founder. It breaks for a new owner.
The Walk-Through Tells You More Than the CIM
The Confidential Information Memorandum is a sales document. It is designed to present the business favorably. The facility walk-through is the audit.
When I walk through a business, I’m looking at specifics. How organized is the floor? Is equipment maintained or patched? Are processes visually evident, or does everything require someone to explain how it works? Are employees engaged, or do they look up nervously when the owner brings a visitor through?
The state of the physical operation tells you how disciplined the business is. A clean, organized facility with labeled equipment and clear workflow patterns signals an owner who invested in systems. A chaotic floor with workarounds and improvised solutions signals a business that runs on firefighting, not process.
Neither is disqualifying. But the second business will require significantly more operational investment after acquisition, and that investment needs to be reflected in the purchase price, not discovered after closing.
People and Process Before Profit
The first 90 days after acquiring a small business are about operational continuity, not optimization. The question is not “how do I improve this business?” It is “what happens if I change nothing for 90 days?”
The businesses worth buying are the ones where the answer to that question is: “It keeps running.” The employees know their jobs. The customers keep ordering. The systems function without the previous owner intervening daily. If the business requires the owner to be present for it to operate, you’re not buying a business. You’re buying a job.
I specifically look for businesses where the employees have been there for years. Low turnover in a small business is one of the strongest signals of operational health. It means the culture is functional, the compensation is reasonable, and the work is sustainable. High turnover means something is broken that the financials haven’t captured yet.
What I Avoid
Over-levered or distressed businesses attract a certain type of buyer who believes they can engineer a turnaround. That is a different skill set and a different risk profile than what I’m building. The businesses I pursue are fundamentally sound operations where the opportunity is steady improvement, not crisis management.
Single-customer dependency is a deal-killer regardless of the multiple. Financial engineering roll-ups, where the thesis depends on buying cheap and combining for a multiple arbitrage, create fragile portfolios. Hype-driven businesses with recent explosive growth and no operating history create the illusion of value without the durability to sustain it.
The acquisition criteria exist to filter for durability: $2M to $15M in revenue, $500K to $3M in EBITDA or SDE, repeat customers, understandable business model, and operational improvement upside that doesn’t require a genius to execute.
The Decision Framework
Every acquisition evaluation follows the same structure. What is known? What is uncertain? What is the upside case? What is the downside case? What is the decision trigger?
The decision trigger is the specific piece of information that moves the evaluation from “interesting” to “act” or “pass.” It might be the customer concentration ratio. It might be the owner’s actual involvement in daily operations. It might be the condition of a key piece of equipment or the terms of a key lease.
Every deal has one. The discipline is identifying it before you get emotionally invested in the opportunity. Once you’re emotionally invested, the trigger becomes harder to enforce.
The operator evaluation isn’t a replacement for financial analysis. It’s the context that makes financial analysis meaningful. A strong P&L without operational durability is a snapshot, not a forecast. The operator’s job is to determine which one you’re looking at.
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Own durable assets. Operate with discipline. Preserve capital. Compound intelligently.