How to Buy a Business
Learn how to buy a business by understanding your budget, funding options, and the essential steps of due diligence. Get practical advice on finding opportunities and making informed decisions to achieve your entrepreneurial goals.
Transitioning from a W-2 to entrepreneurship is a life-changing opportunity that can create generational wealth. Before beginning this process, it is first important to know how to buy a business.
At Tupelo, we helped over 1,000 buyers acquire businesses in 2024. Here, we will analyze the market and guide you through the step-by-step process of how to buy a business.
Before moving forward, click here to create an account with Tupelo and access thousands of business opportunities.
Understanding What Size Business You Can Afford
The first step in buying a business is understanding how much you can afford. Business acquisitions are typically financed through a combination of methods, and many deals use a hybrid approach. Below, we break down the four most common ways to fund a business purchase, along with their benefits and downsides.
1. Cash Purchase
Buying a business with all cash is exactly what it sounds like—you use your available funds to pay the seller outright.
Benefits:
- Cash buyers often secure a lower purchase price, as sellers value the simplicity and certainty of an all-cash deal.
- The acquisition process is faster, avoiding financing-related delays.
- No debt means no monthly loan payments, reducing financial risk.
Downsides:
- Ties up personal capital, limiting funds for future investments or growth.
- Could reduce diversification, as a large portion of your assets may be concentrated in one business.
- Opportunity cost—cash spent on a business could be used elsewhere for potentially higher returns.
2. Financing
Many business acquisitions involve financing. Common loan options include SBA 7(a) loans, cash flow-based loans, and real estate-backed loans. For businesses valued under $5 million, SBA loans are particularly popular. For SBA loans, buyers generally need to make a downpayment 10% of the sale price.
Benefits:
- Enables buyers to acquire a larger business than they could afford with cash alone.
- Frees up cash for working capital, operational improvements, or future expansion.
- Some loans, like SBA loans, offer favorable terms with longer repayment periods and lower interest rates.
Downsides:
- Typically requires a personal guarantee, putting personal assets at risk if the business struggles.
- The loan approval process can be lengthy and complex.
- Carrying debt increases financial obligations, which can strain cash flow.
3. Raising Capital (Investors)
Some buyers raise capital from outside investors, either through private equity firms, angel investors, or a network of individual investors. Investors usually need to approve the acquisition before the deal closes.
Benefits:
- Allows for the acquisition of a larger business without taking on personal debt.
- No need to meet strict banking requirements or debt covenants.
- No personal guarantee required, reducing personal financial risk.
Downsides:
- Investors typically expect a return, reducing the buyer’s future profits.
- Equity dilution—ownership is shared with investors, limiting control and upside potential.
- Many sellers and advisors prefer deals without investor approvals, as they add complexity and uncertainty.
4. Seller Financing
While rare for a seller to finance 100% of a transaction, it is common for sellers to finance a portion of the deal—especially when an SBA loan is involved. In these cases, the seller carries a promissory note for part of the purchase price, which the buyer repays over time.
Benefits:
- Aligns the seller’s interests with the success of the business, as they have a financial stake in its performance.
- Can make financing more accessible, especially when combined with an SBA loan or other funding sources.
- Often allows buyers to negotiate more favorable terms, such as a lower interest rate or deferred payments.
Downsides:
- Sellers typically don’t want lingering liabilities after exiting the business.
- More seller financing often results in a higher purchase price to compensate for the risk.
- Some sellers may impose restrictive terms, such as performance requirements or oversight provisions.
A common acquisition structure combines cash injection, bank financing, and seller financing, often following SBA guidelines: 10% buyer down payment, 10% seller financing, and 80% lender financing. Understanding your budget is the foundation of how to buy a business.
What businesses are available for sale?
Understanding what types of businesses are available is crucial when looking to buy. The majority of businesses for sale fall within the Main Street and Lower Middle Market categories, while larger businesses in the Middle Market are less frequently listed publicly. Below is a breakdown of what types of businesses you’ll typically find in each category.
Main Street Businesses (Value: $0 - $3M)
These are the most common businesses available for sale. They are often owner-operated and cater to local markets. Many of these businesses are sold due to owner retirement, burnout, or changing life circumstances.
- Service-Based Businesses – HVAC, plumbing, electrical, landscaping, cleaning services, pest control, auto repair shops, car washes.
- Retail & Consumer Businesses – Convenience stores, liquor stores, gas stations, specialty shops, fitness centers, hair salons, nail salons, spas.
- Hospitality & Food Service – Independent restaurants, small coffee shops, delis, food trucks, ice cream parlors, small hotels/motels.
- Professional Services – Small accounting firms, tax preparation services, insurance agencies, real estate brokerages.
- Healthcare & Wellness – Chiropractic clinics, optometry practices, small dental offices, physical therapy clinics.
- E-commerce & Digital – Small online stores, dropshipping businesses, affiliate marketing sites, blogs with ad revenue.
Lower Middle Market Businesses (Value: $3M - $10M)
These businesses typically have more infrastructure in place, including management teams and more predictable revenue streams. Many operate regionally or nationally.
- Industrial & Manufacturing – Niche manufacturers, specialty fabrication shops, industrial suppliers.
- B2B Services – Marketing agencies, commercial janitorial services, staffing companies, IT service providers.
- Franchise Multi-Units – Multi-location fast food chains, gyms, automotive service centers, gas station chains.
- Healthcare Practices – Group dental practices, outpatient surgery centers, urgent care clinics, home healthcare businesses.
- Construction & Trades – Mid-sized HVAC and plumbing businesses, specialty contractors (roofing, electrical, concrete).
- Logistics & Transportation – Trucking companies, last-mile delivery services, third-party logistics (3PL) firms.
- SaaS & Technology – Established software businesses with recurring revenue models, niche technology service firms.
Middle Market Businesses (Value: $10M - $50M)
These businesses are less frequently listed on public marketplaces and are often sold through private networks, investment banks, or M&A advisors.
- Manufacturing & Industrial – Large-scale manufacturers, industrial equipment suppliers, aerospace & defense contractors.
- Healthcare & Medical – Regional hospital groups, specialty healthcare providers, larger home healthcare organizations.
- Technology & Software – Established SaaS companies, cloud service providers, data analytics firms.
- Professional Services & Consulting – Large accounting firms, consulting firms with national clients.
- Retail & Consumer – Large e-commerce brands, regional grocery store chains, multi-location retail chains.
The Distribution of Available Businesses
Most businesses for sale are Main Street businesses. As you move up in value, the number of publicly listed opportunities decreases. Knowing where to look is key when learning how to buy a business.
Buying a Business: Defining Your Criteria
When looking for a business to buy it is import to know what type of business you want to buy. At any given time there are thousands of businesses that are for sale, and you don’t want to spend time considering opportunities that (1) you cannot afford (2) do not meet your acquisition criteria.
Early in your acquisition journey, the first step is to identify your budget and solidify your funding strategy: (1) cash, (2) financing, (3) investors, or (4) seller financing, most likely a hybrid of these.
Next it is important to determine if you have any location restrictions. Are you confined to a single city, state, or region? If you’re location-agnostic, then what characteristics are important in the location where you acquire a business, such as population, population growth, or proximity to a city? Without understanding where you want to acquire a business, it is easy to get lost in all the listings that are for sale, prolonging your acquisition process, or worst case scenario causing you to miss out on opportunities.
With location(s) targeted, it is now important to know what industry or industries you want to acquire a business in. Most business buyers have industry preferences, so it is important to identify the specific industry or industries you’re targeting. Determining which industry to acquire a business in is a two-fold exercise:
1. What industries are you interested in? You’re most likely going to be working long hours for the foreseeable future as a business owner, you want to be in a space you enjoy and believe in.
2. If you acquire a business in that industry, how can you provide value? Outside of can you afford to buy this business, the question everyone will ask you is “why are you right to buy this business?” Having your story early on helps not only you but your network know what you're looking for.
Lastly, what are the must have characteristics of your desired acquisition target. Generally these are:
Size - how much money is this business making in terms of revenue and EBITDA (or adjusted EBITDA).
Revenue construction - where revenue is coming from and the nature of that revenue (recurring, reoccurring, one off, etc.).
Revenue Concentration – How dependent is the business on a small number of customers? If a significant portion of revenue comes from just one or two clients, the business could be at risk if those clients leave.
Profit Margins – What are the gross and net profit margins? Some businesses generate high revenue but low margins, which can impact cash flow and long-term viability.
Growth Trends & Stability – Is revenue growing, flat, or declining? A business with consistent or increasing revenue is generally more desirable than one with a declining trend.
Age - How long the business has been in business for?
Owner Involvement & Key Employees – How involved is the current owner in daily operations? If the owner plays a critical role, their departure could create risk. Similarly, consider whether key employees are essential to the business and whether they will stay post-acquisition.
Customer & Supplier Relationships – Are relationships with customers and suppliers contractual or informal? A business that has long-term contracts with customers and favorable supplier agreements can offer more stability.
Competitive Positioning & Market Demand – How does the business compare to its competitors? Consider barriers to entry, brand reputation, and industry trends that could impact future demand.
Operational Systems & Processes – Does the business have documented processes, standard operating procedures (SOPs), and efficient systems in place? A business with strong operations is easier to transition and scale.
Legal & Compliance Considerations – Are there any outstanding legal issues, liabilities, or regulatory risks? Some industries have heavy compliance burdens that can affect the feasibility of a purchase.
Technology & Infrastructure – What technology does the business use for operations, customer management, and accounting? Outdated systems may require significant investment post-acquisition.
Working Capital Needs – How much working capital does the business require to operate smoothly? Some businesses have heavy capital requirements for inventory, payroll, or equipment maintenance.
Scalability & Exit Potential – Can this business grow under new ownership? Consider whether it has opportunities for expansion, new revenue streams, or an eventual resale strategy.
Filtering opportunities with clear criteria saves time and ensures you focus on the right businesses. Without this filter, learning how to buy a business becomes overwhelming.
9 Steps to Buy a Business Successfully
Buying a business takes time—typically 6 to 24 months. There are two ways to find deals:
Public Listings – You browse marketplaces like Tupelo and BizBuySell. Most listings are brokered, meaning an advisor represents the seller.
Off-Market Deals – You reach out directly to business owners to see if they’re open to selling.
Focusing in on public listings as this will most likely fill you funnel the fastest, the process follows a somewhat straight forward path:
1. Find a Listing – Search public marketplaces or source off-market opportunities.
2. Inquire & Sign an NDA – Fill out a buyer profile and sign a Non-Disclosure Agreement to access details.
3. Call the Broker – Introduce yourself and gauge expectations. *Key Tip - call the broker right after signing the NDA
4. Review Listing Files – The broker shares financials, business history, and key documents.
5. Follow-Up with the Broker – Clarify questions after reviewing the files.
6. Meet the Seller – A call or meeting with the business owner, broker, and you.
7. Submit a Letter of Intent (LOI) – Make a formal offer outlining price, terms, and exclusivity.
8. Due Diligence – Verify financials, contracts, and operations before closing.
9. Acquire the Business – Finalize financing, sign agreements, and take ownership.
Each step is critical when learning how to buy a business. Speed and diligence are essential for success.
How to Stand Out to Brokers:
- Call immediately after signing the NDA.
- Follow up within 48 hours if they don’t respond.
- Leave a voicemail + email when reaching out.
- Show you’re serious with a clear buyer profile.
Where to Find Businesses for Sale: Best Online Marketplaces & Brokers
Businesses that are for sale are generally posted to a public marketplace (aka listing site). The vast majority of businesses posted on these sites are represented by a business broker, meaning the owner of the business hired a sell side advisor to help them sell their company. Here are the top marketplaces:
BizBuySell
Businesses For Sale
BizBen
In addition to public market search, business buyers often reach out to business owners directly and search for off market deals. This is a bespoke process that requires a significant amount of time and energy to create and execute campaigns.
It’s a Seller’s Market – The Broker is Vetting You
This market favors sellers. Always has. Think of it like trying to buy a house during a boom—having money isn’t enough. The best businesses, the ones with $400K+ in adjusted EBITDA, recurring revenue, long-standing customers, and a strong industry position, get swarmed with buyers. When one of these hits the market, there are 50+ inquiries within hours.
Sourcing buyers isn’t a problem for business brokers. Their job is to run a confidential sale process and protect the seller’s interests. Before they share any financials, they need to know:
Are you financially capable of buying this business?
Are you a serious, high-quality buyer?
Brokers prioritize serious, financially capable buyers. Demonstrating these qualities is crucial when learning how to buy a business.
Pro tip: Once you submit everything, call the broker. Show them you’re real, serious, and ready. If they don’t pick up, leave a message and call again later. Brokers are busy, often in meetings with sellers. If you wait for them to get back to you, you’ll lose the deal to someone more persistent.
Due Diligence
If you’ve made it to due diligence, congrats—you’re serious now. This is where you dig into the numbers, operations, and risks before closing the deal. It’s your chance to verify everything the seller has told you and uncover anything they haven’t.
Start by reviewing financial statements, tax returns, contracts, customer data, and key operational processes. Put together a list of questions. Look for red flags—declining revenue, customer concentration, unexpected liabilities. If something doesn’t add up, now is the time to ask.
One of the best ways to understand a business is by talking to other business owners in the same industry. They can give you real insights into challenges, profit margins, industry trends, and common pitfalls that may not show up in the financials. Even competitors can be surprisingly open—especially if they don’t see you as a direct threat. A 30-minute conversation with someone who’s been in the industry for years can tell you things no spreadsheet ever will. Talking to industry peers can reveal insights beyond financial documents. Thorough due diligence minimizes risk when learning how to buy a business.
How to Buy a Business
Buying a business takes time—twists, turns, and uncertainty. The key? Stay organized and define your strike zone.
- Move quickly on the right deal.
- Say no to anything that doesn’t fit.
- Don’t let opportunity pass you by.
At Tupelo, we’ve helped over 1,000 small and medium-sized businesses change hands in 2024 alone. Whether you need help with valuations, financing, working with brokers, improving your response rate, or assessing a deal, our team is here to guide you.
Learning how to buy a business is a journey filled with opportunities and challenges. At Tupelo, we're here to help. Contact us to discuss your acquisition goals.