How to Buy a Business: A Complete Step-by-Step Guide.
Buying an existing business beats starting from zero on almost every metric — revenue from day one, an existing customer base, working systems, trained staff. The path is well-trodden but unforgiving. This is the eight-step framework we walk first-time and experienced buyers through.
Step 1 — Define what you're buying
Before browsing listings, write a one-page acquisition thesis. Industry, revenue band, geography, owner involvement post-close, and your target financing structure. The thesis filters 95% of the noise before you spend a single hour on due diligence.
Step 2 — Source deals
Deal flow comes from three places:
- Brokers — BizBuySell, BizQuest, and regional broker networks. High volume, lower quality.
- Direct outreach — cold-emailing owners of businesses that match your thesis. Lower volume, dramatically better deals.
- Networks — your accountant, lawyer, and banker each see 1–3 deals per year that never hit broker listings.
Step 3 — Valuation and LOI
Most small-business valuations land at 2.5–5× SDE (Seller's Discretionary Earnings) for service businesses, 3–6× EBITDA for product or tech-enabled businesses. Submit a non-binding Letter of Intent once you're aligned on price within 10%.
Step 4 — Due diligence
Three weeks minimum. Your checklist:
- 3 years of tax returns + interim P&Ls
- Customer concentration (top-10 customers as % of revenue)
- Vendor and supplier contracts
- Employee roster, payroll, and key-person risk
- Lease assignment / real estate review
- Pending litigation, IP, and regulatory items
Step 5 — Financing
Most small-business acquisitions use SBA 7(a) — up to $5M, 10-year amortization, as little as 10% down. A typical structure for a $1M acquisition:
| Source | Amount | Terms |
|---|---|---|
| SBA 7(a) loan | $850K | 10-yr term, ~11% APR |
| Seller note | $100K | 5-yr standby, 5% APR |
| Buyer equity | $50K | 5% down |
Step 6 — Negotiation
Negotiation isn't just price — it's structure, working-capital adjustment, transition support, non-compete, and earnouts. Spending an hour on each of these is worth more than fighting for a 5% price concession.
Step 7 — Close
Closings typically run 30 to 60 days from signed LOI:
- Definitive purchase agreement
- SBA final commitment + working-capital underwriting
- Lease assignment / real-estate diligence
- Insurance binders, including key-person and business interruption
- Escrow funding and wire instructions
Step 8 — The first 90 days
Don't change anything material in the first 90 days. Meet every employee, every key customer, every vendor. Document the existing systems before deciding what to improve. The biggest acquisition destroyer-of-value is a new owner making changes before understanding why things work the way they do.