When I was younger, I believed good decisions came from having more information.

I was wrong.

After two decades and more mistakes than I care to list, I've learned something less flattering: most bad decisions come from misunderstanding what information actually does.

Search is a peculiar business. You spend months, sometimes years, looking for a company to buy, knowing full well that when you finally decide, you will still be operating under incomplete information. Anyone who tells you otherwise is either inexperienced or selling something.

You are not investing in certainty. You are investing in downside protection and option value. The rest is storytelling.

Let me explain what I mean.

You Are Making Two Kinds of Decisions (Whether You Admit It or Not)

Over time, I've found it helpful to separate decisions into two buckets: reversible decisions and irreversible decisions.

Reversible decisions are forgiving. You can unwind them. Change course. Learn cheaply.

Irreversible decisions are not. Once made, they compound. Sometimes beautifully. Sometimes painfully.

Buying a business is, in most cases, an irreversible decision.

You cannot unbuy it if you're wrong, only attempt to sell. You cannot return it if it breaks. You cannot get a refund on the time you spent fixing it.

That simple fact should change how you behave during diligence. Unfortunately, it often does the opposite. Faced with finality, we reach for comfort instead of clarity.

Comforting Information Is Usually the Most Dangerous Kind

I spent the first decade of my career making beautiful spreadsheets that taught me nothing. The models worked perfectly. The deals didn't.

Searchers do the same thing.

We build detailed projections. We refine EBITDA adjustments to the second decimal. We debate growth rates that will matter far less than one operational surprise.

I once reviewed a deal where the searcher had spent three weeks modeling revenue growth scenarios - 5%, 7%, 11% CAGR with corresponding sensitivity tables. Beautiful work. Color-coded. The formatting alone probably took hours.

The business derived 60% of its revenue from a single contract up for renewal in eight months.

He never called the customer.

He never asked what the renewal process looked like. He never learned that the buyer's procurement team had changed, or that they were consolidating vendors, or that price had become the primary decision factor.

The model was beautiful. The renewal fell apart. He closed the deal anyway, convinced he could "figure it out." Eighteen months later, he sold at a loss.

Information that reduces anxiety is not the same as information that reduces uncertainty.

In fact, they are usually inversely correlated. The spreadsheet that makes you feel best is often the one lying to you most convincingly.

Uncertainty shrinks when you learn how cash actually moves through the business - not according to the CIM, but in practice. Does the general manager pay himself from whichever account has money? Do customer deposits sit in an unaudited account? I have seen both. The accounting was clean. The cash management was chaos.

Uncertainty shrinks when you learn what breaks first under stress. Not theoretically. Specifically. When revenue dips 15%, does the owner cut marketing, delay vendor payments, or pull from the line of credit? All three tell you different things about how the business survives.

Uncertainty does not shrink because your model reconciles. Uncertainty shrinks when you learn who really has leverage - customers, employees, lenders, or you.

When to Walk Away vs. When to Structure Around Uncertainty

One of the hardest skills to learn as a searcher is knowing whether uncertainty is fatal or merely priceable.

Some risks cannot be fixed with structure.

A business dependent on one individual who plans to leave.

I have seen this exact scenario three times in the past five years. I almost bought one myself, despite all my QoE talk. Every buyer is convinced s/he could replace the person. Every buyer was wrong. Two are still underwater four years later. The third sold at a loss.

The pattern is always the same. The founder is tired. The founder wants out. The founder agrees to stay for twelve months, sometimes even less! The searcher believes twelve months is enough time to learn the relationships, systematize the knowledge, and transfer the trust. It isn't.

Customers don't call the business. They call the founder. Suppliers don't negotiate with the company. They negotiate with the founder. Employees (if any) don't respect the org chart. They respect the person who hired them.

No amount of seller financing fixes founder dependency. You can structure earnouts, rollover equity, consulting agreements - it doesn't matter. If the business is the founder, and the founder is leaving, you are not buying a business. You are buying an expensive education. Not saying these businesses are unsellable, but as a buyer, really know what you are getting into, that’s the opposite of uncertainty.

Customers who can walk without consequence.

If your top three customers represent 70% of revenue, and all three are on month-to-month agreements, and all three have viable alternatives, you do not have customers. You have employers. And they can make you unemployed very quickly.

A culture that resists new ownership.

This is the hardest one to see in diligence because everyone lies. Not maliciously. Defensively. The employees don't trust you yet. The founder is protecting her legacy. The manager is protecting his job.

You ask, "How do people feel about new ownership?" They say, "Everyone's excited for fresh energy!"

What they mean is: "We're terrified you're going to screw this up, and we've already updated our resumes."

I watched a searcher close on a small manufacturing business. The financials were solid. The operations were stable. The team had been there for years. Within ninety days, the production manager quit. Then the lead salesperson. Then the quality control supervisor.

Not because the new owner was incompetent. Because the team had been there for fifteen years under the same founder, and they could not imagine working for anyone else. The founder thought loyalty was an asset and boasted about loyalty in the CIM. In reality that loyalty was a liability for the buyer.

Nine times out of ten, no earnout, note, or covenant will save you from these situations. Walking away is not failure. It is decision-making discipline.

Your odds of success are already low. Why shrink them further with fatal uncertainty?

Other Risks Can Be Structured

Not all uncertainty is fatal. Some risks are real, priceable, and survivable.

Timing mismatches in working capital.

A searcher I worked with last year was looking at an electrical contractor. Strong margins. Repeat customers. Solid reputation in the local market.

The problem: the business was growing. Revenue was up 30% year-over-year. The CIM celebrated this. The QoE flagged it.

Growth is expensive, especially in this industry. Customer deposits came in, but they didn't cover the cost of materials up front. Classic percentage of completion accounting. Receivables stretched from 45 days to 60 days because larger customers paid slower. The line of credit was already at 60% utilization, and the seller had been personally guaranteeing vendor terms for years.

This wasn't a fatal flaw. It was a liquidity problem masquerading as a growth story.

The searcher could have walked away. Instead, he structured around it.

He negotiated a larger revolver with the bank - not for growth, but for working capital cushion. He priced the deal assuming flat revenue for eighteen months to let cash flow catch up to the balance sheet. He built in a $200K working capital peg at closing.

Three years later, the business is performing well. Not because the projections came true, but because he understood what had to remain true - and protected himself when it didn't.

Customer concentration that is stable but lumpy.

Concentration sounds scary. Sometimes it is. But not all concentration is equal.

If you have three customers, and all three are venture-backed startups burning cash, that's bad concentration.

If you have three customers, and all three are municipalities with twenty-year contracts and statutory budget obligations, that's different. Still concentrated. But priceable.

The mistake searchers make is treating all concentration the same. It isn't.

The question isn't "How many customers do you have?" The question is "What would cause them to leave, and could they all leave at once?"

If the answer is "economic stress," you have a problem. If the answer is "operational failure on your part," you have a manageable risk. Price it. Monitor it. But don't kill the deal over it.

Growth that is real but uneven.

I reviewed a deal last year where the business had grown 40% in the prior year. The seller attributed it to "market demand" and "operational improvements."

Both were partly true. But the real reason was a single large project that wouldn't repeat.

The searcher could have walked. Instead, she repriced the deal assuming the outlier year was noise, not signal. She underwrote the business at the three-year average EBITDA, not the trailing twelve months, and negotiated an earnout tied to sustaining the elevated performance.

The seller complained. The searcher held firm. The deal closed at a lower multiple, with downside protection built in.

That's not brilliance. That's decision-making discipline.

What a QoE Is, And What It Is Not

A Quality of Earnings report does not tell you whether to buy a business.

If it did, it would be a very dangerous document.

A good QoE does something far more useful: it clarifies what decision you are actually making.

Most QoE reports answer one question: "Are the numbers right?" That's table stakes. If the numbers aren't right, there's no deal.

The better question - the one most reports ignore - is: "Where do the numbers come from, and will that source still exist after you own it?" That's a harder question. It requires judgment, not just accounting.

This is why at Prairie Crossing Advisory, our work focuses on three things, the ACS Framework:

Accuracy: Are the numbers correct? This is the minimum standard. If we can't trust the starting point, nothing else matters.

Credibility: Are the numbers repeatable? Revenue might be accurate and still not be credible. If earnings came from a one-time project, a pricing anomaly, or deferred maintenance, the numbers are real but not repeatable. That's the difference between accounting and economics.

Sustainability: What has to remain true? This is the question most firms never ask. A business might have accurate, repeatable earnings - and still collapse if one assumption changes. Our job is to identify which assumptions matter, which ones are fragile, and which ones you can afford to be wrong about.

Accuracy you can buy from any firm. Credibility and sustainability require judgment. That's the gap we're filling.

But here's what a QoE should not do: make you feel safe.

If a QoE leaves you more confident but not more thoughtful, it has failed you - even if the numbers are correct.

The most valuable part of our QoE process isn't the report itself. It's the clarification calls after delivery, where we walk through the thought-provoking questions the analysis surfaced. If a buyer finishes those calls thinking more clearly about what could go wrong - and what they'd do if it did - we've done our job.

The Real Job of a Searcher

The job is not to eliminate uncertainty. That is impossible.

The job is to decide which risks you understand, which risks you can survive, and which risks you are being paid to take.

Every deal looks good in the middle. The edge comes from understanding the downside.

I made a mistake early in my career that taught me this lesson the hard way.

I was advising on an acquisition in the services sector. The business had steady revenue, reasonable margins, and a diversified customer base. The projections were conservative. The leverage was modest. The deal felt safe.

What I missed - what we all missed - was that the business had no contracts. Everything was purchase-order based. Customers could stop calling tomorrow, and there would be no breach, no notice period, no recourse.

For ten years, they hadn't stopped calling. Why would they start now?

They didn't stop. But one customer changed procurement policies and shifted to a national vendor. Then another customer was acquired and consolidated suppliers. Then a third customer hit budget constraints and delayed projects.

None of these were catastrophic individually. Together, they were devastating.

Revenue dropped 25% in eighteen months. Not because the business got worse. Because the assumptions that made it stable quietly stopped being true.

The buyer survived. Barely. But only because he had been conservative with leverage and had kept $300K in dry powder he didn't think he'd need.

He got lucky. I got educated.

Good decision-making under uncertainty is not about being clever. It's about being honest - with yourself most of all.

What You Should Take Away From This

Every searcher I know is looking for certainty.

They won't find it.

The seller doesn't have it. The QoE can't provide it. The bank won't wait for it.

What you can find is clarity: which risks you understand, which you can survive, and which you're being paid to take.

The deals that work are not the ones with the best projections. They're the ones where you knew exactly what could break - and you decided you could handle it anyway.

That's not certainty.

That's decision-making discipline. And it's enough.

In the next series: We'll explore concentration risk in depth - customer concentration, supplier concentration, and product concentration. Because knowing what could break is only useful if you know which breaks matter most.