Buyer Guide

Steps to Buying a Business

A practical guide to what to look for, what the process actually looks like, and how to know if business ownership is really right for you.

Do you dream of owning your own business? Buying one can be a complicated process, from finding the right fit to working out all the details required for a smooth transfer of ownership. There’s no such thing as the ‘perfect’ business, but a business broker knows how to help you find one that fits your needs, talents, skills, and lifestyle, and can walk you through the entire process.

Below is what we tell every prospective buyer before they start their search.

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What Buyers Are Really Looking For

Going into business for yourself is a big step, one that can come with real apprehension. Almost 90% of people who purchase a small business have never owned one before, and most end up buying something different from what they originally set out to find. In most cases, the seller finances at least part of the sale.

Keep in mind as you search: owning a business isn’t just a job, it’s a lifestyle change, usually a significant one. You’ll likely work longer hours, make every decision yourself, and, as the saying goes, be the ‘chief cook and bottle washer.’ That means doing everything from running the business to sweeping the floor and changing the light bulbs.

Most buyers are looking for some combination of the following:

What to Look For When Buying a Business

Buying a business requires more than reviewing the asking price. Understanding its history, ownership, financial records, and the seller’s reasons for selling can help you evaluate the opportunity realistically. These factors provide valuable insight into the business’s stability, profitability, and potential for future success.

How long the business has been operating

A long track record means there are good reasons it’s still running. It’s likely well known in the area, with customers already used to patronizing it. Generally, the longer it’s been in operation, the better sign it is.

How long the current owner has owned it

The longer the present owner has run the business, the more likely it’s been genuinely successful. People don’t tend to stay in an unprofitable business for long

Why the current owner is selling

If an owner has only been in business six months and wants to retire at 37, be skeptical. The more valid the reason for selling, the more realistic that seller is likely to be when considering your offer, though keep in mind that after five or six years, burnout is real and people do look for new challenges. Either way, get a real answer to this question.

How to tell if the seller is reporting all their income

The honest answer: you can’t. Underreported income (particularly in cash-heavy businesses) is well documented as a real phenomenon, but sellers who tell you how much they’re ‘skimming’ have no way to prove it, and you shouldn’t factor unverifiable claims into your decision. Base your evaluation only on the figures the seller can actually document.

Why the books and records matter

Financial records indicate how the business has actually performed, but tax returns are designed to minimize taxes, not showcase profitability, so they tend to reflect a worst-case scenario. Look for non-cash items like depreciation, and personal expenses run through the business, such as vehicle use or a ‘business trip’ that was really a vacation. A professional business broker can help you spot these. Just remember: financial records are history, not a guarantee of the future. What you do with the business going forward is up to you.

Steps to Buying a Business: The Process

Too many prospective buyers ask about the asking price first and how much they can make second. That’s backwards. The better first question is how much cash the seller requires as a down payment, since no matter how good the numbers look, it’s not worth pursuing a business if the seller wants far more cash upfront than you’re willing to invest. It’s worth getting more information and even visiting a business before ruling it out based on numbers alone.

There’s no single “right” way to buy a business, but here are the steps that have proven most efficient and practical over the years:

Get the Basic Facts
Get preliminary information on price, terms, income, cash flow, and general location. There's little point continuing if the cash required is more than you're willing to invest, and at this stage, the full price matters less than the cash needed to get in the door. Outside financing (banks, etc.) is limited for business purchases; the large majority are seller-financed, which is exactly why your cash commitment is the key variable. Also make sure the business can meet your living expenses in addition to its own debt service. Nearly everything is negotiable. In fact, businesses typically sell for about 15% to 25% less than the original asking price.
Visit the Business
See the location and the business itself, inside and out, the way a customer would. It's not yet time to talk to the owner, this is a visual gut check. If the business doesn't lend itself to a casual visit, schedule an appointment through the seller or their representative. There's no reason to go further if you don't like the physical business itself.
Get Your Questions Answered
If you like what you've seen, it's time to talk: What's the rent? How long is the lease? What have sales looked like the past few years? Can the seller support the numbers you've been given? This isn't the moment for a full books-and-records review, that comes during due diligence, but it is the time to get a feel for whether this is a business you'd actually want to run.
Make an Offer
Once your basic questions are answered and you want to move forward, it's time to make an offer, subject to verification of everything you've been told.
Due Diligence
Once you've reached an understanding with the seller, it's time to remove the contingencies. This is due diligence.

Insider tip

Unless you're already familiar with this type of business, it's worth including in the agreement that the seller stays on to teach you the ropes at no charge. 30 days on-site is typical, often followed by 30 to 60 days of phone consultation. If you'd like the seller to stay longer than that, consider offering a consulting fee.

Is Buying a Business Right for You?

Owning your own business is still very much ‘the great American dream,’ but it isn’t for everyone. Ask yourself these questions before taking the next step:

How long have you actually been thinking about this?

Plenty of people talk about buying a business the way others talk about buying an expensive car, without ever committing. Generally, the longer you look without acting, the less likely you are to actually buy.

What's your realistic timeframe?

If you’re thinking two years out, start your education now, but don’t start actively searching yet, since anything you find today will likely be sold by the time you’re ready. Arm yourself with information first.

What's your real motivation?

You have to want this for the right reasons: tired of the corporate world, stuck in a dead-end job, facing an unwanted relocation. If you’re not genuinely motivated, it won’t happen.

Are you willing to invest a majority of your liquid assets?

Buying a business is a serious financial commitment. If you’re risk-averse, this may not be the right path.

Are you comfortable being fully in control?

Ownership means constant decision-making, and you will make some wrong calls. The real question is whether you can recover from a bad decision and keep moving. If poor choices keep you up at night, ownership may not be for you.

Is your family genuinely supportive?

Without real support, especially from a spouse, business ownership gets a lot harder. It’s time-consuming, though many businesses also offer flexibility that a traditional job doesn’t (like making it to an afternoon Little League game)

Are you open-minded, or fixed on one specific type of business?

Especially as a first-time buyer, staying open-minded matters. Look for a business that provides the income you need, that you can actually afford, where the numbers work, and, most importantly, one you can genuinely see yourself running.

Are your expectations realistic?

No one is selling a business with strong cash flow for next to nothing. Sellers who offer financing aren’t giving the business away. Many have spent years building what may be their largest financial asset.

Can you make the leap of faith?

Some buyers do all the homework, get right up to the purchase, and back out anyway. That’s okay, business ownership isn’t for everyone. But if you can’t ultimately part with the money and take the leap, it’s worth being honest with yourself about that now.

Do you need a guarantee?

If you need certainty, business ownership isn’t for you. You can and should review every financial record available, but remember: it’s all history. A new owner changes things, management styles differ, and circumstances shift. The financial record matters, but it doesn’t guarantee the future. You do.

The Bottom Line

Being in business for yourself is a daunting prospect, and there are no guarantees. After all your research is done, you’ll still need to make the leap of faith required to move forward. You’ll work hard, possibly tighten your belt for a while, and wear a lot of different hats to succeed. But if running your own show, making your own calls, and never worrying about someone else firing you matters to you, business ownership may be exactly right for you. Almost every owner who’s taken that leap will tell you they’d never go back to being an employee.

Have More Questions?

Visit our Buyer FAQ page for straight answers to what buyers ask us most, including why buying beats starting from scratch, how businesses are actually priced, what it takes to succeed as an owner, and whether you need your own attorney.

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