Red Flags & Green Flags: Andrew Wilkinson & Tiny on What Kills (or Accelerates) Deals

Red Flags & Green Flags: Andrew Wilkinson & Tiny on What Kills (or Accelerates) Deals is my plain-English checklist for moving from first call to funds-flow fast.
You’ll see the specific signals I underwrite, the traps I price or walk from, and how to turn “maybe” into an LOI and close in ~30 days.
I’ll keep it first person, direct, and practical.
Every sentence starts on a new line.

Green Flag 1 — Cash-Backed Earnings (EBITDA → Free Cash Flow)

I pay for earnings that convert to cash without gymnastics.
I bridge EBITDA to unlevered free cash flow after maintenance capex and working capital.
If the bridge is short and stable, I stretch on cash at close.
For a no-fluff QoE rhythm, see our blog post: Quality of Earnings for SMBs.

Red Flag 1 — “Trust-Me” Add-Backs

I cut add-backs that would recur after close.
Owner perks with no real replacement, endless “one-time” contractors, and vague “strategic” spend are fiction.
Label each add-back in one sentence and attach receipts.

Green Flag 2 — Pricing Power Without Churn

Show me two price increases and the churn/NRR impact.
If NRR stayed ≥100% and complaints didn’t spike, your moat is real.
I’ll pay for that durability.

Red Flag 2 — Promo-Propped Demand

If growth vanishes when coupons pause, the engine isn’t working.
I remove discounts and test contribution margin by cohort.
Life-support marketing kills multiples.

Green Flag 3 — Clean Revenue Recognition

I want a five-line policy and invoices traced to the bank.
Deferred revenue is treated as a real liability.
Clarity beats cleverness every time.

Red Flag 3 — Murky Deferred or Pre-Bill Games

Front-loaded cash with lagging delivery inflates optics and invites disputes.
Put recognition, fulfillment cost, and capacity in one table or expect a price cut.

Green Flag 4 — Calm Retention and Cohorts

Show 12–36 month cohorts with GRR and NRR.
Annotate dips with fixes and dates.
Predictable retention compresses diligence and accelerates close.

Red Flag 4 — Customer Concentration With No Plan

25% in a single customer is fine only with contracts, renewal history, and a dilution plan.
If the plan is “vibes,” I slow down or structure around it.

Green Flag 5 — Working Capital Peg Math, Done Early

I set the peg from 12 monthly snapshots with inclusions, exclusions, and a dollar-for-dollar true-up.
One paragraph can move six figures.
For the cadence, see: Working Capital Peg Explained.

Red Flag 5 — End-of-Deal AR/AP Games

AR that “magically improves” and AP that spikes in the last 30 days trigger normalization.
If DSO/DPO diverge from the 12-month pattern, I reset the peg.

Green Flag 6 — Boring Legal, Clean IP

Current cap table, signed IP assignments, and change-of-control lists are ready on day one.
Boring legal is fast legal.
We close faster when the footnotes are tidy.

Red Flag 6 — Orphaned IP and Surprise SAFEs

Unassigned contractor code and forgotten notes blow up timelines.
Fix the paper before the LOI or expect heavier escrow and reps.

Green Flag 7 — Replaceable Founder and Documented SOPs

An org chart with owners per KPI tells me the machine runs without heroics.
I’ll still pay for a short, paid transition, but I won’t price in chaos.

Red Flag 7 — Single-Point-of-Failure People or Vendors

If one engineer, ad platform, or supplier can crater EBITDA by 20%, I haircut or structure for protection.
Show backups, cross-training, and second sources.

Green Flag 8 — Contribution Margin Truth

I want COGS plus payment fees, pick-pack-ship, returns, chargebacks, and support in the math.
If CM holds when ads throttle, I lean in.

Red Flag 8 — Topline Theater, Bottomline Silence

Slides about GMV or ARR without CM, CAC, and payback are noise.
I price cash engines, not headlines.

Green Flag 9 — Tight Security Hygiene and Backups

SSO, least-privilege access, backups, RTO/RPO, and an incident log de-risk handover.
This is an easy multiple expander.

Red Flag 9 — “We’ll Document Later”

If access can’t be rotated on Day-1, we’re buying a fire drill.
I pause or re-sequence until keys and SOPs exist.

Green Flag 10 — Simple, Founder-Friendly Terms

Short diligence, modest escrow, capped indemnities, clean peg, and more cash at close close faster.
I prefer rollover to big, murky earnouts.
For tone and narrative, see: Never Tell, Always Storytell.

Red Flag 10 — Earnouts With Moving Goalposts

Multiple metrics, integration allocations, and undefined EBITDA destroy trust.
If there’s no ironclad governance, I swap the earnout for escrow or price.

Green Flag 11 — Short, Numbered Emails and One Thread

Decisions on top, one ask per line, owners and dates on every item.
This halves the timeline.
For the habit, see: I Don’t Respond to Long Emails.

Red Flag 11 — Spray-and-Pray Communication

Five channels, shifting versions, and reply-all chaos burn days.
One thread, one checklist, one weekly summary wins.

Green Flag 12 — Evidence-Backed Add-Backs

One-time legal, true migrations, dead SKUs with receipts.
Two lines of context and move on.

Red Flag 12 — Normalizing Real Costs Out of Existence

Calling ongoing contractors “temporary” or zeroing a market-rate replacement salary won’t fly.
Reality returns in diligence.

Green Flag 13 — Liquidity Pockets (Marketplaces Only)

Time-to-match, fill rate, and repeat by geo/category show density.
I’ll fund copy-paste expansion post-close.

Red Flag 13 — Subsidy Life Support

If liquidity dies when coupons stop, take rate isn’t real.
I’ll compress headline or pass.

Green Flag 14 — Inventory Truth (Brands Only)

Lower of cost or NRV, obsolescence reserve, turns by SKU, and landed cost discipline.
I stop arguing and start wiring.

Red Flag 14 — Seasonality Used as a Weapon

Punishing a Q4 build or excusing a Q1 dip without data wastes time.
Use same-month YoY and a seasonally adjusted peg.

Green Flag 15 — Vendor and Platform Risk Mapped

Tier-1 vendors, terms, backups, and exit plans are listed.
Platform dependence has a 90-day mitigation plan.

Red Flag 15 — Hidden Liabilities and Side Letters

Undisclosed refunds, reseller promises, or side deals kill trust late.
Disclose early and price it.

Green Flag 16 — Customer References That Ring True

Three to five calls with stickiness, switching cost, and price headroom.
Short, human, and credible.

Red Flag 16 — Scripted Praise and Gatekeeping

Blocking direct customer access or over-coaching signals fragility.
I widen diligence or slow the clock.

Green Flag 17 — Payback Discipline

CAC payback <12 months on core channels tells me unit economics travel.
I’ll stretch multiples when payback is real.

Red Flag 17 — Channel Roulette

NRR flat but CAC rising and channels rotating every quarter is instability, not growth.
We price volatility.

Green Flag 18 — Data Room “Vital 20%” on Day One

TTM P&L tied to bank, 3-year history, cash→accrual bridge, cohorts, top-20 customers by month, AR/AP, inventory or deferred schedules, key contracts, org chart, SOPs, access hygiene, and backups.
This unlocks a ~30-day close.

Red Flag 18 — PDF Parade, No Tables

If I can’t audit with CSVs, we waste time recreating facts.
Ship both executed PDFs and source tables.

Green Flag 19 — Simple SPA With Samples

Tight definitions, reasonable survival, modest escrow, and a sample closing statement.
Prose matches math, so closing is math, not drama.

Red Flag 19 — Bikeshedding and Scope Creep

Endless debates on immaterial reps signal culture clash and slow approvals.
Freeze issues by priority and move.

Green Flag 20 — Day-1 and 90-Day Plan

Access, comms, “what’s not changing,” weekly KPI cadence, and transition scope.
Calm Day-1 accelerates value capture.
For operating rhythm, see: 02: Journaling With AI.

FAQs

What single green flag accelerates my deal the most.
The Vital 20% data room on day one with a clean cash→accrual bridge.

What red flag kills deals fastest.
Hidden liabilities or vague revenue recognition that unravels trust.

Can I overcome high customer concentration.
Yes with contracts, renewal history, and a credible dilution plan.

How do I keep my multiple when we’re seasonal.
Set a seasonally adjusted working-capital peg with 12 monthly snapshots and same-month YoY logic.

Do I need audited financials to get an LOI.
No.
I need reconciled statements tied to bank and evidence-backed add-backs.

What’s better—earnout or escrow.
Usually escrow.
If you must use an earnout, keep it ≤25%, ≤18 months, one metric, governance locked.

How fast can we go from LOI to close.
~30 days with owners assigned, one thread, and a ready room.

What’s a healthy escrow.
Often 5–15% for ~12 months with capped indemnities and a small basket.

How do I present my moat in one page.
State the thing a smart competitor can’t copy in 12 months, then prove it with cohorts and price tests.

Where do founders quietly lose money at closing.
Vague peg definitions, sloppy earnout metrics, and unlimited indemnities.

Conclusion

Red Flags & Green Flags: Andrew Wilkinson & Tiny on What Kills (or Accelerates) Deals boils down to cash-backed earnings, clean pegs, pricing power, and ruthless simplicity in process.
Eliminate fiction, publish the Vital 20%, lock definitions, and keep one crisp thread, and you’ll convert complexity into cash at close in ~30 days.
Get Your Copy of Never Enough at https://www.neverenough.com/

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