The Diagnosis
Last week I told you the chart closes but the board doesn't. The medical clinic was gone. Five conversations were open. This week I sat down and did something I haven't done in eighteen weeks of writing this newsletter: I evaluated three live deals against each other, side by side.
A flooring operation. A med spa. A painting and drywall company. All in the Las Vegas market. All with real numbers attached. I built the comparison the way I'd build a differential in the ER — same framework applied to each one, scored against the same criteria, measured against my operating model. Not my excitement. My model.
One of them didn't survive the read.
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The Prescription
In medicine, a contraindication is a specific reason you don't prescribe a treatment — even when the treatment works. The drug isn't bad. The diagnosis isn't wrong. But something about this patient makes this particular intervention the wrong call. A medication that's first-line for most people can be contraindicated for one because of their history, their other medications, their physiology. The treatment is sound. The match isn't.
That's what happened with the painting and drywall company. On paper, the business was profitable. The revenue was real. The team existed. But the deeper I looked, the more contraindications I found — and they were specific to me as a buyer.
The owner structure was the first flag. Two partners — one retiring, one open to staying. The question was whether I'd be buying a hundred percent or splitting it fifty-fifty with someone still in the building. Each scenario changed the deal fundamentally: the management plan, the SBA structure, the transition timeline. Add in compressed margins — gross profit had fallen from around thirty-two percent to seventeen, chasing volume over pricing discipline — and a seller timeline that wanted a close by midsummer, and the complexity stacked up fast. Any one of those might have been workable. Together, they made the deal contraindicated for my model.
I drafted a short, professional decline to the broker. Thanked him for his time. Named the specific reasons it wasn't a fit. Didn't hedge, didn't leave the door half-open. A clean pass is a courtesy — it frees the broker to work with buyers who are actually right for the deal.
The contraindication wasn't the business. It was the match between the business and my operating model. And that distinction matters, because it means the other two deals on the board — the ones that don't carry those same contraindications — are still worth the workup.
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Where We Are Right Now
Three deals evaluated. One passed. Two still alive.
The flooring operation has the best margins of the three, runs semi-absentee, and fits an out-of-state ownership model. It's the lead. The med spa sits in my clinical wheelhouse — I understand the operations, and my background gives me an edge most buyers don't have. But it's young, and that's the risk. I'm treating both with the same discipline: check them against the model, not against my hope that one of them works out.
And this week I did something I should have done months ago. I sat down and turned the vague goal of "replace my income" into an actual number. Not gross. Net. What it actually costs to live the life we're building — after taxes, after benefits, after the expenses that disappear when you stop getting a W-2. The number I need to replace is smaller than I thought. And SDE — the earnings I'd be buying — is the bucket everything comes out of: the loan payment, my draw, the reinvestment. Understanding that math doesn't make the decision easier. But it makes it real.
No community calls this week. The energy went into the spreadsheet and the pipeline.
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What Comes Next
Pursue the two remaining deals. The flooring operation gets the next call — I want to understand the ownership structure and how the bidding process works without the current owner in the room. The med spa needs a harder look at the verified numbers against the ask price, and whether the gap between what they want and what the business supports is bridgeable.
And keep the discipline that got me here. Eighteen weeks ago I didn't know what a deal box was. This week I passed on a profitable business because my operating model told me to — and I did it without second-guessing. The contraindication isn't a failure. It's proof the system works.
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— Joe & Lacy
A profitable business can still be the wrong prescription.