Micro SaaS products look attractive because they are small, focused, and often cheap relative to their revenue. That same smallness hides risks: a handful of customers, one founder's knowledge, and code that has never been reviewed by anyone else. Knowing the red flags before you buy saves you from acquiring a product that unravels within months.

The first red flag is churn hidden inside averages. A product can report low overall churn while losing its highest-paying customers and replacing them with free or discounted users. Ask for cohort data and revenue churn, not just logo churn, and check whether the largest accounts are on month-to-month plans with no contract.

The second red flag is customer concentration. If one or two customers account for a large share of monthly recurring revenue, losing one of them can cut your income in half overnight. Ask for the revenue share of the top five customers and whether any of them are personally connected to the seller, since those relationships may not survive a change of ownership.

The third red flag is technical debt and single-person knowledge. Ask who wrote the code, whether it is documented, and whether any third-party services or licences are tied to the seller personally. A product built on an outdated framework, with no tests and no documentation, can cost more to maintain than it earns. Budget for a code review before closing, not after.

Other warning signs include declining signups masked by a price increase, support tickets answered only by the founder, and revenue that depends on a platform integration that could change its terms. If several of these flags appear together, either negotiate a much lower price or walk away. A cheap acquisition is only cheap if it keeps running.

One practical protection is to negotiate a transition period with the seller, typically 30 to 60 days, during which the seller remains available to answer questions and fix urgent issues. Pair this with a holdback — a portion of the price released only after the transition completes successfully. These two terms cost little to ask for and reveal a great deal: a seller confident in the product will usually agree, while a seller eager to disappear entirely is telling you something.