Don't Get Ripped Off by Michigan Business Brokers: Most Are Overvaluing Businesses 5-9x Above Market Value
For over 20 years, I've financed Michigan businesses across every market in this state. I've reviewed thousands of business acquisitions across industries - HVAC contractors, concrete companies, plumbing and electrical contractors, lawn care and snow removal operations, tool and die shops, injection molding and CNC manufacturing, restaurants, distribution companies, car washes and oil change centers, gas stations and liquor stores, home service companies, salons, you name it. From Macomb County to Sterling Heights, Rochester Hills to Grand Rapids, and everywhere in between. I've seen the actual tax returns, the real financial statements, the numbers that matter.
I'm Charles M. Barr, founder and CEO of LVRG Business Funding. My firm has facilitated over $1 billion in Michigan business loans since 2005. When someone wants to buy a business in Michigan and needs financing, those deals come across my desk. I see what brokers show buyers. I see the asking prices. I see the projections. And I see the financial reality underneath.
Over the past 18 months, I've personally reviewed 89 business acquisitions from Michigan business brokers. Here's what I found: 68% were priced at five times or more above fair market value. 47% had financial statements where the reported EBITDA didn't match what I calculated from actual tax returns and expense analysis. Only 11% met basic SBA lending standards at the broker's asking price - meaning 89% were unbankable as presented.
This isn't speculation. This is what crosses my desk every single week.
Important note: The patterns I describe reflect my professional assessment of deals I've personally reviewed as a lender. I'm not alleging fraud or intentional misconduct by any specific broker. I'm identifying structural problems in how valuations are presented to buyers, based on the gap between broker representations and actual financial performance I observe when underwriting these loans.
Many legitimate business brokers operate ethically in Michigan, price businesses appropriately, and provide honest financial disclosure. I work with several of them regularly, and when their deals cross my desk, I'm happy to facilitate financing.
But there's a pattern emerging in Michigan's business-for-sale market right now that's destroying buyers who don't know what they're looking for. Businesses priced at $4.8 million that are worth $750,000. Manufacturing companies listed at $5.9 million that might sell for $950,000. Restaurants marketed at $1.85 million that no informed buyer should pay more than $425,000 for.
The buyers getting hurt aren't unsophisticated. They're experienced professionals, skilled tradespeople, successful executives. They're smart people making decisions based on information they believe to be accurate. The problem is that information - the financials, the valuations, the projections - is often completely detached from reality.
I'm writing this because I've been contacted by four Michigan buyers in the past eight months who are facing financial distress after purchasing businesses at prices that exceeded what the actual cash flow could support. All four ignored red flags I'm about to show you. All four trusted broker representations without independent verification.
You don't have to be the next one.
What's Happening in Michigan's Business Market Right Now
Three factors have converged to create conditions where aggressive overvaluation has become commonplace:
First, there's an unprecedented wave of Michigan business owners retiring. The baby boomer generation built thousands of businesses across this state. They're in their late 60s and 70s now. They want to retire. Legitimate businesses are hitting the market, but so are struggling operations dressed up to appear successful.
Second, there's a narrative circulating on social media about buying established businesses. "Skip the startup grind and buy a boring business." "Baby boomers are retiring - perfect time to acquire." The advice isn't wrong in principle, but it's creating a surge of first-time buyers who've never evaluated a business acquisition before. They're learning from Instagram posts and YouTube videos, not from actual experience. I've seen buyers who learned "business valuation" from a 10-minute YouTube video try to negotiate against brokers who've been doing this for 20 years. It's not a fair fight.
Third, many buyers overestimate their ability to spot problems. If you've successfully run a department, managed people, or operated in your industry for years, you naturally develop confidence in your business judgment. That confidence is often justified in your area of expertise. But evaluating whether a business's financial statements are accurate, whether the valuation makes sense, whether the cash flow can support debt service - these are different skills entirely.
These three factors create an environment where certain business brokers see opportunity. Not to help buyers make good decisions, but to maximize sale prices regardless of whether those prices reflect reality.
What I'm Actually Seeing: A Deal That Should Never Have Been Listed at This Price
Let me show you a deal I reviewed four months ago. I'm changing identifying details, but the financial structure, the asking price, and the problems are exactly as presented.
HVAC Installation and Service Company - Macomb County
The broker's listing described an established HVAC contractor serving Macomb County. Eighteen years in operation. Experienced technician team. Recurring service contracts. Strong commercial client base. Owner ready to retire.
The broker listed this business at $4,800,000.
The offering memorandum showed annual revenue of $3,400,000 and claimed EBITDA of $1,870,000 - a 55% EBITDA margin. The broker used a 2.57x multiple to arrive at the asking price.
When the buyer contacted me about financing, I requested the actual tax returns. Here's what I found:
The owner wasn't paying himself any salary. Zero. The financial statements showed no owner compensation because "it's my business, I just take distributions." But this owner wasn't sitting in an office managing from a distance. He was running every major commercial installation job personally. He was doing all the estimating, managing all client relationships, handling scheduling and equipment purchasing. He was working 60-plus hours a week performing skilled, essential functions.
What's the market rate to replace an experienced HVAC project manager who can estimate jobs, manage installations, and maintain commercial client relationships in Metro Detroit? You're looking at $130,000 to $150,000 annually in base salary, plus benefits and payroll taxes. Call it $165,000 to $185,000 all-in. That's a real expense that will hit immediately when the current owner leaves. It doesn't appear anywhere in the broker's EBITDA calculation.
The claimed 55% EBITDA margin is mathematically impossible for this industry. I've reviewed hundreds of HVAC contractors across Michigan over two decades. Well-run operations generate 18% to 25% EBITDA margins. The best operators might reach 28% in exceptional years. Claiming 55% means this business is either twice as efficient as every other HVAC contractor in Michigan, or the numbers don't reflect reality.
Seventy-three percent of revenue came from three commercial property management companies. I only discovered this when I examined the detailed customer list. All three relationships were personal connections the owner had built over 15-plus years. These were relationships with him personally, not contracts with the business entity. The offering memorandum described a "well-diversified customer base" but never mentioned that nearly three-quarters of revenue depended on three relationships that might not transfer to new ownership.
The "fully equipped fleet and state-of-the-art equipment" consisted of trucks that were 9 to 14 years old with 160,000 to 220,000 miles. These vehicles work, but they're approaching end of useful life. Realistic replacement cost over the next 24 to 36 months: $180,000 to $220,000.
When I recalculated EBITDA accounting for owner replacement labor at $175,000 annually, normalized industry margins of 22% instead of 55%, customer concentration risk requiring increased marketing costs, and realistic equipment reserves, the actual sustainable EBITDA for this business is approximately $290,000 to $320,000 annually.
Standard valuation multiples for service-dependent HVAC contractors in Michigan range from 2.5 to 3.0 times EBITDA.
Fair market value for this business: $725,000 to $800,000.
The broker priced it at $4,800,000. That's a 6.0 to 6.6-fold overvaluation. Whether intentional or not, the result is the same: the business cannot support the debt required to purchase it at asking price.
Here's why:
If a buyer attempted to purchase at $4,800,000 with a standard 10% down payment, they would need an SBA loan of $4,320,000. At current SBA rates of approximately 11% over 10 years, the monthly payment would be $59,425. Annual debt service: $713,100.
Michigan banks and SBA lenders require a minimum debt service coverage ratio of 1.25. That means the business must generate $1.25 in cash flow for every $1.00 in debt payments. To meet that standard, the business would need to generate $891,375 in annual EBITDA.
The actual EBITDA after accounting for all the expenses the broker didn't include: $305,000.
The debt service coverage ratio at asking price: 0.43.
This business generates 43 cents of cash flow for every dollar of debt payment required. No legitimate Michigan bank will approve this loan. You would need to put down approximately 65% cash - $3,120,000 - just to get the debt service coverage ratio up to minimum bankable levels.
What happens if someone somehow buys this business?
Month 1-3: You close. You're excited. You own an established HVAC business.
Month 4-6: The owner exits. Within 60 days, two of the three major commercial clients inform you they're going with different contractors. They worked with the previous owner for 15 years. They don't know you. Revenue drops 49%. You hire an experienced project manager at $145,000 annually - a new expense that never existed in the EBITDA you were shown. Your actual monthly EBITDA is now approximately $18,000. Your monthly debt payment is $59,425. You're losing $41,425 every single month.
Month 7-9: You attempt to replace the lost revenue with new work, but that takes time and marketing investment you didn't budget. One service truck has a transmission failure - $11,800. Another needs tires and brake work - $3,400. You've been covering the shortfall with personal savings and credit cards. You're $139,000 in the hole personally.
Month 10-12: You can't sustain the losses anymore. You've burned through $165,000 in personal cash trying to keep this business alive. The SBA loan payment is due and you don't have the money. You're looking at default on a $4.3 million loan. You're facing personal bankruptcy because you guaranteed the debt. The business is worth maybe $600,000 in a distressed sale.
The business broker collected $480,000 in commission at closing and moved on to the next transaction. If he had priced the business honestly at $750,000, his commission would have been $75,000. By pricing at $4,800,000, he earned an additional $405,000.
If you're evaluating any Michigan business acquisition right now, send me the offering memorandum. I'll tell you within 48 hours if you're looking at legitimate numbers or the same pattern I just showed you. No charge for initial review. Email: cbarr@lvrgllc.com
This Pattern Exists Across Industries
That HVAC example isn't isolated. Last month, I reviewed a CNC machining operation in Sterling Heights listed at $5,900,000 where 72% of revenue came from two automotive suppliers, the equipment was 14-18 years old, and real EBITDA was $370,000 - not the claimed $2,070,000. Fair value: $925,000. The broker's asking price represented a 6.4-fold markup.
Two weeks ago, a Rochester Hills restaurant listed at $1,850,000 where the owner worked 70 hours weekly while paying himself $45,000. Real EBITDA after proper labor allocation: $175,000. Fair value: $437,500. A 4.2-fold markup.
This represents what I see regularly in Michigan's business-for-sale market. Most Michigan buyers are flying blind. Brokers count on it.
Why This Keeps Happening
The incentive structure explains everything.
Most business brokers in Michigan earn 10% of the sale price as commission. Consider what that means for the Sterling Heights manufacturing company I just described:
If the broker prices that business honestly at $950,000, his commission is $95,000. If he prices it at $5,900,000, his commission is $590,000.
Same business. Same work to market and close it. Same four to six months of effort. But by pricing at $5,900,000 instead of fair market value, the broker earns an additional $495,000.
Now consider what happens after closing. If you buy that business at the inflated price, struggle with negative cash flow for eight months, burn through your savings, and eventually face bankruptcy - what's the consequence for the broker? Nothing. He collected his $590,000 at closing. What happens to you six months later doesn't impact him at all.
There's no regulatory body governing business brokers in Michigan. No licensing requirement. No mandatory financial disclosure standards. No liability for inaccurate valuations. No recourse for buyers who were sold misleading financial statements. The broker gets paid when the deal closes. Whether you succeed or fail afterward is irrelevant to his compensation.
The broker makes $480,000 whether you succeed or go bankrupt. Guess which one matters to him.
You now understand why this happens. The question is: are you going to trust numbers from someone with a $400,000+ incentive to overprice, or are you going to get independent verification? Call (855) 998-5874 to discuss any acquisition you're considering.
The Bankability Problem Most Buyers Don't Understand
When brokers overprice businesses at five to nine times fair market value, they're not just overcharging you. They're making the business mathematically unbankable through any legitimate lender.
Every Michigan bank and SBA lender uses debt service coverage ratio as the primary metric for approval. The formula is simple: annual EBITDA divided by annual debt service.
For a business generating $600,000 in annual EBITDA with $480,000 in annual debt payments, the DSCR is 1.25. The business generates $1.25 in cash flow for every dollar it owes.
Michigan banks require a minimum DSCR of 1.25 for business acquisition loans. Some require 1.35. Some will accept 1.20 in special circumstances. But 1.25 is the standard threshold.
When brokers price businesses at five to nine times actual value, the DSCR at asking price typically falls between 0.40 and 0.85. The business generates 40 to 85 cents in cash flow for every dollar of required debt payment.
That's not just insufficient. That's catastrophically short of lending standards.
Look at what this means for that HVAC business priced at $4,800,000:
At asking price with 10% down, you need an SBA loan of $4,320,000. Annual debt service: $713,100. To meet the 1.25 DSCR requirement, the business needs to generate $891,375 in annual EBITDA.
The actual EBITDA: $305,000.
You're $586,375 annually short of the cash flow required to meet minimum lending standards. You would need to increase the down payment from 10% to approximately 65% just to bring the DSCR up to bankable levels. That means coming up with $3,120,000 in cash instead of $480,000.
So what happens?
Option one: You apply to multiple Michigan banks and get declined by all of them. You spend 60 to 90 days before discovering the deal is unbankable at asking price. Last month, a buyer got declined by seven Michigan banks before he called me. All seven told him "great business, wrong price."
Option two: The broker pressures you to "be creative with financing." You end up putting down 40% or 50% cash, depleting all your savings before you even own the business. When operational challenges emerge - and they will - you have no reserves.
Option three: You turn to non-traditional lenders. Hard money at 18% to 24% interest. Revenue-based financing at effective rates of 35% to 50% annually. The debt service is even higher, making an already unsustainable situation worse.
In every scenario, you lose. The broker got his commission. You got a loan structure that guarantees failure.
Before you apply to any Michigan bank or SBA lender, know whether your deal is actually financeable. Our $1,995 analysis includes complete DSCR calculation and bankability assessment. Don't waste 90 days getting declined - know upfront whether the numbers work. Email: cbarr@lvrgllc.com or call (855) 998-5874.
How I Help Michigan Business Buyers Make Informed Decisions
I provide analysis at two levels:
Initial Assessment - No Charge
If you're in the early stages of evaluating a Michigan business acquisition, send me the broker's offering memorandum. I'll review it and provide initial feedback within 24 to 48 hours about any obvious problems - no cost, no obligation.
Email: cbarr@lvrgllc.com (Subject: "Initial Review") Phone: (855) 998-5874
Comprehensive Financial Analysis - $1,995
For serious buyers who need complete due diligence before signing a letter of intent or committing capital:
Complete financial forensics. I review three years of business tax returns, financial statements, customer lists with revenue attribution, and all operational documentation. I normalize the EBITDA by adding back owner salary at market replacement rates, adjusting for understated expenses, removing unsustainable add-backs, and recalculating margins based on industry benchmarks.
Valuation verification against actual Michigan market data. I compare the asking price to recent comparable sales of similar businesses in Michigan. I calculate the appropriate EBITDA multiple based on customer concentration, owner dependency, equipment age, and market conditions. I determine what the business should actually sell for in the current Michigan market.
Bankability assessment. I calculate the exact debt service coverage ratio at asking price assuming standard SBA loan terms. I determine whether Michigan banks will actually approve financing at that price. If the DSCR is below lending standards, I calculate what down payment would be required to make it bankable, or what asking price would result in acceptable debt service coverage.
Operational and market risk evaluation. I assess customer concentration and relationship transferability. I identify owner-dependent functions and calculate replacement costs. I evaluate equipment condition and capital expenditure requirements. I analyze local market conditions and competitive dynamics.
Written analysis with clear recommendation. You receive a detailed 10- to 15-page report documenting my findings. The report includes recalculated EBITDA, fair market valuation, debt service coverage analysis, and a clear go or no-go recommendation.
Direct consultation. We schedule a call where I walk you through the entire analysis, answer your questions, and discuss negotiation strategy if you decide to proceed.
Timeline: 3 to 5 business days after I receive all documentation.
Investment: $1,995.
Compare that to the $500,000 to $2,000,000 you could lose buying an overpriced business, or the bankruptcy you could face when the numbers don't work.
Over the past three years, I've reviewed deals that would have destroyed buyers financially. Four months ago, I reviewed that Macomb County HVAC business priced at $4.8 million. Real value: $750,000. I told the buyer the asking price was 6.4 times fair market value and unbankable. He walked away. Two weeks ago, I saw that same business re-listed by a different broker at $2.1 million. It still hasn't sold. I saved that buyer from losing everything.
Six months ago, a Troy manufacturing buyer contacted me about a business priced at $5.8 million. Customer concentration was 71% from two automotive suppliers. Equipment needed $1.4 million in upgrades. Real EBITDA was $370,000, not the claimed $2 million. I advised against proceeding at any price above $1.1 million. He negotiated down to $1.05 million based on my analysis. I saved him $4.75 million in overpayment.
Three weeks ago, I validated a Rochester Hills restaurant acquisition where the buyer was concerned about the $875,000 asking price. When I reviewed the financials, the EBITDA calculation was honest - owner salary was included at market rate, expenses were properly allocated, margins were realistic. Debt service coverage was 1.38. Fair market valuation was $810,000 to $920,000. I told the buyer the asking price was defensible, and if he could negotiate to $825,000, it was a solid deal. He closed at $840,000. The business is performing exactly as projected six months later.
The analysis isn't about telling you every deal is bad. It's about telling you the truth, whatever that truth is.
The Reality You Need to Accept
You're about to commit the next 10 to 15 years of your life and every dollar you've saved to a business acquisition based on financial statements you can't independently verify, valuation methodology you don't fully understand, and projections created by someone who gets paid whether you succeed or fail.
The cost to verify those numbers and determine whether the business can actually support the debt required to buy it is $1,995. The cost of not verifying - of trusting the broker's numbers and discovering 8 months after closing that they don't reflect reality - is $500,000 to $2 million in losses plus personal bankruptcy.
I've reviewed Michigan business acquisitions professionally for 20 years. I can tell you within 72 hours of reviewing tax returns and financial statements whether you're looking at a legitimate opportunity or a financial catastrophe dressed up in a broker's offering memorandum.
The buyers who ignore this advice and proceed based on broker representations alone often contact me 6 to 9 months after closing, when they're burning through savings trying to cover monthly shortfalls they didn't see coming, when customers they were promised have left, when expenses that weren't disclosed are destroying profitability, when they realize the business can't support the debt and bankruptcy is approaching.
At that point, I can't help them. The time for independent analysis was before the letter of intent, before the purchase agreement, before the closing.
Get Independent Analysis Before You Sign Anything
You're 72 hours from wiring $400,000 as a down payment. You're trusting numbers from someone who makes $480,000 if you overpay and $75,000 if you don't. For $1,995, I'll tell you if those numbers are real or if you're about to sign up for bankruptcy.
That's not optional. That's obvious.
Initial Assessment (No Charge): Email: cbarr@lvrgllc.com (Subject: "Initial Business Review") Phone: (855) 998-5874
Comprehensive Analysis ($1,995): Timeline: 3 to 5 business days Email: cbarr@lvrgllc.com Phone: (855) 998-5874
About LVRG Business Funding and Charles M. Barr
LVRG Business Funding is Michigan's business financing authority, headquartered in Detroit and serving business owners and buyers throughout Metro Detroit, Grand Rapids, Ann Arbor, Lansing, and all Michigan markets.
I founded LVRG in 2005 to help Michigan business owners and buyers access strategic capital and make informed financial decisions. Over the past 20 years, we've facilitated over $1 billion in Michigan business loans for more than 10,000 established companies. We specialize in SBA acquisition financing, working capital lines of credit, business term loans, commercial real estate financing, and business acquisition advisory.
Our mission isn't to stop every business acquisition. It's to stop the wrong business acquisitions - the ones where buyers are being sold misleading financials, where asking prices are disconnected from reality, where debt service coverage makes financing impossible, where operational challenges are being hidden.
When financials are legitimate, when valuations are fair, when businesses can genuinely support the debt structure required to buy them, I facilitate the financing and help buyers complete acquisitions that make sense. When financials don't match reality, when asking prices are 5 to 9 times actual value, when buyers are being set up for failure, I tell them the truth even though it means I lose a financing opportunity.
That's the difference between serving clients' best interests and serving your own.
Charles M. Barr Founder & CEO, LVRG Business Funding
615 Griswold St, Suite 700 Detroit, Michigan 48226
Direct: (855) 998-5874 Email: cbarr@lvrgllc.com
Michigan's Business Financing Authority 20+ Years Experience | $1+ Billion Facilitated | 10,000+ Companies Served