Buying a business is a big decision. Whether you're looking to be your own boss or expand your current operations, this guide will walk you through the process step by step.
Why Buy an Existing Business?
Starting from scratch means building everything: customers, reputation, systems, and cash flow. When you buy an existing business, you're buying a proven track record. You get customers from day one, established relationships with suppliers, and a team that knows how things work.
According to the Small Business Administration, about 20% of new businesses fail in their first year, and only about half make it to five years1. Buying an established business significantly reduces these risks.
What to Look For
Not every business is right for every buyer. Here's what matters most:
Financial Health
Ask for at least three years of financial records. Look at profit and loss statements, tax returns, and bank statements. You want to see consistent revenue and real profits, not just sales numbers.
Watch out for red flags: declining revenue, owner taking too much money out, or inconsistent financial records. If the seller won't share financials, walk away.
Location and Market
Location matters, especially for retail and service businesses. Is the area growing or declining? Are there new competitors moving in? What's the lease situation?
For online businesses, location is less important, but market trends matter more. Is the industry growing? Are there new technologies that could disrupt the business?
Why Is the Owner Selling?
This is one of the most important questions. Common reasons include retirement, health issues, or wanting to pursue other opportunities. These are usually good signs.
Be cautious if the seller mentions declining sales, problems with customers, or disputes with landlords or suppliers. These could be warning signs of bigger issues.
Employees and Operations
Good employees are valuable. If key staff are leaving, find out why. You'll also want to understand how the business runs day-to-day. Can you step in and run it, or will you need training?
The Buying Process
Step 1: Find the Right Business
Start by browsing listings on our marketplace. Use the search filters to narrow down by industry, location, and price range. Save businesses that interest you and compare them.
Step 2: Initial Contact
When you find a business you like, contact the seller through our platform. Ask basic questions about the business, why they're selling, and if they can share financial information.
Step 3: Review Financials
If the initial conversation goes well, ask for financial documents. Review them carefully. Consider having an accountant look them over, especially if you're not comfortable reading financial statements.
Step 4: Visit the Business
Schedule a visit to see the business in operation. Watch how things run, talk to employees if possible, and observe customer interactions. This gives you a real sense of what you'd be buying.
Step 5: Make an Offer
Based on your research, make an offer. Most business sales involve some negotiation. Be prepared to justify your offer with facts from your research.
Step 6: Due Diligence
Once you have an agreement in principle, do thorough due diligence. This means verifying everything: financial records, contracts, leases, licenses, and any other important details.
Step 7: Close the Deal
Work with a lawyer to draft the purchase agreement. Make sure all terms are clear, including what's included in the sale, any training period, and how the transition will work.
Financing Your Purchase
Most buyers need financing. Options include:
- Seller financing: The current owner loans you part of the purchase price. This is common and often easier than bank loans.
- Bank loans: Traditional business loans, usually requiring good credit and a down payment of 20-30%.
- SBA loans: Government-backed loans with favorable terms for qualified buyers.
- Investors: Bringing in partners who provide capital in exchange for ownership.
Start exploring financing options early. It can take time to get approved, and having financing ready makes you a more attractive buyer.
Common Mistakes to Avoid
Here are mistakes that trip up many first-time buyers:
Falling in love with the idea instead of the numbers. A business might sound perfect, but if the numbers don't work, it's not a good deal.
Skipping due diligence. It's tempting to rush, but thorough research prevents costly surprises later.
Not understanding the industry. If you don't know the business, you're at a disadvantage. Do your homework or bring in someone who knows the industry.
Underestimating the time commitment. Running a business takes more time than you think, especially in the beginning.
Paying too much. Don't let emotions drive the price. Stick to what the numbers justify.
Getting Help
You don't have to do this alone. Consider working with:
- Business broker: Can help find businesses and navigate the process
- Accountant: Essential for reviewing financials and tax implications
- Lawyer: Important for contracts and legal issues
- Industry consultant: If you're entering a new industry, someone with experience can be invaluable
Next Steps
Ready to start looking? Browse our business listings to see what's available. Use our advanced search to find businesses that match your criteria.
Have questions? Check out our FAQ page or contact us directly.