Buying a Business: 6 Things You Need to Know

Buying a business can be a smart shortcut to entrepreneurship—no building from scratch, no brand-new audience, and (hopefully) instant revenue. But if you’re thinking about purchasing an existing business, there’s a lot more to it than just writing a check and taking over the keys.

Before you make a purchase, here are 6 key things you need to know to make sure you’re buying the right business for the right reasons—and avoiding major financial headaches.

6 Things to Consider When Buying a Business

1. Understand Why the Business Is Being Sold

This should be your first big question: Why is the owner selling?

Some common (and legitimate) reasons include:

• Retirement or burnout
• A new opportunity elsewhere
• Health or family issues

But if the business is losing money, in a declining industry, or facing legal issues, you’ll want to dig deeper. Ask for financials, contracts, and any customer or vendor complaints to get a full picture.

Pro Tip: If they’re selling because profits are down, ask yourself: Do I have a clear plan to turn it around?

2. Get Clear on What You’re Actually Buying

Not all business sales are equal. Some sales include:

• Equipment and inventory
• Customer lists and contracts
• Intellectual property (like trademarks or websites)
• Real estate

Others might only include the brand and goodwill. Be crystal clear on what you’re actually getting, because that affects the value—and how much financing you’ll need.

3. Do Your Due Diligence (Seriously)

Due diligence is more than a buzzword—it’s how you avoid buying a money pit.

You’ll want to review:

• Financials: Tax returns, profit/loss statements, cash flow
• Legal: Licenses, contracts, lawsuits, debts
• Operations: Employee details, customer base, vendor agreements
• Marketing & Sales: Traffic, lead sources, revenue breakdown

If you’re not confident doing this alone, hire an accountant or business attorney to help. It’s worth every penny.

4. Understand the Business’s True Value

The asking price isn’t always the right price.

Common valuation methods include:

• Asset-based valuation: Based on tangible assets like equipment and inventory
• Earnings multiplier: Based on profits (usually EBITDA) multiplied by an industry-standard factor
• Comparable sales: What similar businesses have sold for recently

Make sure the price reflects the business’s real income—not just projections or owner “potential” talk.

If the numbers don’t support the price, walk away or negotiate.

5. Secure the Right Financing

If you’re not buying with cash, you’ve got a few financing options:

• SBA 7(a) loans (popular and low interest for business purchases)
• Seller financing (the owner acts as your lender)
• Bank or credit union loans
• Personal savings or investor partnerships

Each has pros and cons. SBA loans take longer but offer great terms. Seller financing is faster but might come with higher interest.

Tip: Make sure your personal credit and business plan are solid before applying.

6. Plan for the Transition

The sale isn’t the end—it’s the beginning.

Ask the seller to stay on during a transition period to help you:

• Learn operations
• Build rapport with employees and customers
• Transfer licenses or vendor relationships

Even just 30–60 days of their time post-sale can make a huge difference. Make sure this is written into your purchase agreement.

Wrapping Up

Buying a business can fast-track your path to financial freedom—but only if you go in with your eyes open. From due diligence to financing and transition planning, the process is complex but doable.

The key is to stay grounded, ask smart questions, and don’t rush it.

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