Learn How to Buy a Business in 8 Simple Steps
Learn how to buy a business step-by-step: financing, networking, due diligence, and closing. A practical guide to buying a business in 2025.
Introduction: Why Buy a Business?
Learning how to buy a business has never been more popular. Influencers are flooding social media with advice and courses on buying a business, and even MBA programs are offering classes dedicated to the topic.
Having been part of thousands of transactions, we’ve put together a practical guide to help you understand the process of buying a business.
The truth: buying a business isn’t easy. It can take months—or even years—to complete. You’ll face highs and lows, false starts, and plenty of uncertainty. But while the journey can be long, the steps to buy a business are relatively straightforward.
Buying a business is life-changing, and it all starts with preparation and research.
Steps to Buy a Business
Here’s a quick overview of the process:
1. Define your goals, strengths, and budget
2. Build an investment thesis
3. Understand the SMB M&A landscape
4. Network and source opportunities
5. Review listings and CIMs
6. Meet sellers and ask the right questions
7. Submit a Letter of Intent (LOI) and conduct due diligence
8. Sign the purchase agreement and transfer ownership
Let’s break it down step by step.
Laying the Foundation to Buy a Business
Before you dive in, you need clarity. Your search should start by answering three key questions:
1. Why do you want to be a business owner?
2. What is your budget?
3. What industries or businesses fit your investment thesis?
If you can’t clearly articulate these, your chances of successfully buying a business drop dramatically.
Why You?
Buying a business is risky. It requires confidence that you can not only match the current owner’s performance but also grow the company. Remember—the seller has spent years building the business and knows it inside out. Believing you can step in and do better requires conviction and a bit of ego.
Exercise: Write down why you want to buy a business and why you believe you’ll be a great owner.
Determining Your Budget
Two of the most common ways to finance a business purchase are:
- SBA Loan (7a): Typically 10% down from the buyer, 10% seller financing, and 80% from an SBA lender.
- All Cash: Straightforward—you pay the full price in cash.
Rule of thumb: you’ll need at least 10–20% of the purchase price in liquid assets to buy a business.
Exercise: Add up your liquid assets and decide how much you’re willing to use to buy a business. Divide by 10% to estimate your target purchase price.
Building an Investment Thesis
This is the fun part. Look at industries you’re passionate about and where you believe the future is bright. Consider whether you’re willing to relocate for the right opportunity.
Exercise: Choose three industries. For each, write a sentence or two on why you’re excited about its future and where you could add value as a potential owner.
Understanding the SMB M&A Landscape
For most buyers, small and medium-sized business acquisitions are unfamiliar territory. Here are three things to know:
Financial Statements: Expect to work with tax returns and QuickBooks files, not polished, audited statements. There will be gaps.
Valuations: Businesses are usually priced based on a multiple of Seller’s Discretionary Earnings (SDE)—owner income plus EBITDA plus discretionary expenses.
Supply vs. Demand: Quality listings receive hundreds of buyer inquiries within 24 hours. Buyers are a commodity.
Starting the Search to Buy a Business
Think of buying a business like running a sales process—you need to source leads, build relationships, and qualify opportunities.
Networking
Networking is one of the most underrated steps in buying a business. Talk to:
- Business brokers
- Business owners
- Suppliers and vendors
- CPAs and bookkeepers
- Attorneys and consultants
- Wealth managers and insurance brokers
- Trade organizations and customers
Always ask: “Is there anyone else I should be talking to?” Referrals are powerful.
On-Market vs. Off-Market Deals
There are two main ways to find businesses for sale:
On-Market: Listings on platforms like BizBuySell or Tupelo. These businesses are actively for sale, often with a broker involved.
Off-Market: Owners who aren’t actively selling but may consider an offer. These deals usually come through direct outreach or networking.
Reviewing Listings and CIMs
When you inquire about an on-market listing, you’ll complete a buyer profile and sign an NDA. After a call with the broker, you’ll receive a Confidential Information Memorandum (CIM)—a detailed packet with financials and qualitative details.
Most CIMs won’t meet your criteria, and that’s fine. Let brokers know when you’re passing—it builds goodwill.
If the CIM looks promising, let the broker know you’d like to move forward and speak with the seller.
Buyer-Seller Meetings
Meeting the owner is a pivotal step in buying a business. Keep the first meeting light and focused on building rapport.
Common questions to ask:
How did you start the business?
Why are you selling now?
What do you enjoy most about owning it?
What are the biggest challenges?
Where do you see the biggest opportunities for growth?
Submitting an LOI and Due Diligence
The Letter of Intent (LOI) is a non-binding agreement that gives you exclusivity to conduct due diligence.
Due diligence covers:
- Historical financials
- Contracts and leases
- Employees and payroll
- Systems and processes
Some buyers hire accountants or lawyers; others do it themselves. The key is balancing thoroughness with practicality—don’t overwhelm a seller with impossible requests.
Remember: there is no perfect business. Inefficiencies often represent opportunities for growth.
Purchase Agreement and Transfer of Ownership
If you’ve made it this far, congratulations. This is where you either commit or walk away.
The purchase agreement is the binding contract that finalizes your deal. It outlines the price, terms, assets, non-competes, and transition details.
Once signed, ownership transfers. This often includes licenses, leases, contracts, bank accounts, and payroll. Many sellers stay on for a transition period to help you take over smoothly.
At this point, you’ve officially bought the business. Now the real work begins—running and growing it.
Frequently Asked Questions About Buying a Business
How long does it take to buy a business?
Anywhere from a few months to over a year, depending on financing, due diligence, and negotiations.
How much money do you need to buy a business?
Most buyers need 10–20% of the purchase price in liquid assets. SBA loans can help finance the rest.
Is it better to buy a business or start one?
Buying a business gives you immediate cash flow, customers, and systems. Starting one means building everything from scratch.
What’s the safest way to buy a business?
Work with professionals—brokers, accountants, and attorneys—and be thorough in due diligence.