How to acquire an established business

Start with clear acquisition criteria

Buyers who define what they are looking for before they start reviewing businesses move faster and make fewer expensive mistakes. Criteria give you a consistent way to say no, which matters as much as recognizing the right opportunity.

Write your criteria down and share them with anyone helping you search. Revisit them only deliberately, not every time an interesting listing appears.

• Industry and business model you understand or can learn quickly
• Size range, usually expressed as annual earnings rather than revenue
• Geography, and whether the business can be run remotely or needs you on site
• Your role after closing: owner-operator, part-time owner, or passive investor
• Total capital you can commit, including reserves after closing

Source opportunities through more than one channel

Publicly listed businesses are only part of the market. Many owners prefer a confidential process, and some transactions happen without a public listing at all. Registering with brokers, working with an advisor, and approaching owners directly all widen the pool.

Expect to sign a non-disclosure agreement before seeing identifying details or financials. A serious, well-prepared buyer profile makes sellers and their representatives more willing to share information.

Evaluate earnings, not just revenue

Most small and mid-sized businesses are priced on a measure of owner earnings, often called seller’s discretionary earnings or adjusted EBITDA. Understand every adjustment the seller has made to reported profit, and ask for the records that support each one.

Look at the quality of earnings as well as the amount: how concentrated customers are, whether revenue repeats, how dependent the business is on the current owner, and what capital spending is needed to keep it running.

Structure the offer

Price is only one term. How it is paid — cash at closing, seller financing, an earn-out tied to performance, or bank financing — changes the risk each side carries. A letter of intent sets out price, structure, the diligence period, exclusivity, and the main conditions to closing.

Most letters of intent are non-binding on price but binding on confidentiality and exclusivity. Have counsel review it before you sign.

Diligence and closing

Diligence confirms that the business is what it appeared to be. It typically covers financial records and tax returns, contracts and leases, employees, licenses and permits, legal and regulatory matters, and the condition of key assets. Accountants and attorneys experienced in small business transactions are worth engaging early.

Closing follows a definitive purchase agreement, financing approval where applicable, and any third-party consents, such as landlord or contract assignments. Plan the transition with the seller before closing so customers, staff, and suppliers experience continuity.