Buying a business — buyer's playbook
How to Buy a Business: A Buyer's Playbook for 2026
Buying an existing business swaps the risk of finding customers for the risk of overpaying and breaking what works, and a disciplined buyer manages that second risk far better than most founders manage the first.
Starting from zero means proving that anyone will pay. Buying a small business that already has customers, staff and cash flow skips that step, which is why more operators are looking at acquisition as their route into ownership. But the risk doesn't disappear. It moves. Now the questions are whether the earnings are real, whether they depend on the person selling, and whether the price and the debt leave you room to survive a bad year.
This playbook covers where good deals actually come from, how to read seller earnings without being fooled, the due diligence red flags that should slow you down or stop you, and how small business acquisitions are typically financed, including the US SBA rules that change in 2026.
Decide what you're buying before you look at listings
Write a buy box before you browse: industry, size range, geography, and the skills you bring. A buyer with a sales background may do well with a business whose operations run smoothly but whose owner never marketed. A buyer with an operations background may want the opposite. The buy box keeps you from falling for a charming business you can't actually improve.
Be honest about what you'll do on day one. If the business requires a licence you don't hold, or the owner is also the lead technician, you are buying a job that needs replacing before you're buying a company.
Where small business deals come from
Broker listings and marketplace sites are the obvious source. They save time, but those deals are shown to many buyers and priced accordingly, and the listing numbers are the seller's best presentation. Treat them as a starting point, not a verdict.
The less crowded route is direct outreach. Owners approaching retirement without a successor often aren't listed anywhere. Accountants, business lawyers, industry associations and suppliers know who is thinking about stepping back. A short, respectful letter or call saying you want to buy and keep the business running, with staff and customers looked after, gets more replies than most people expect. Your own industry network is often the best source of all, because you already understand what good looks like.
Reading seller earnings honestly
Small businesses are often priced on seller's discretionary earnings, or SDE: net profit with the owner's salary and perks, interest, depreciation and genuine one-off costs added back. Add-backs are where optimism hides. A documented owner's car lease is a fair add-back. A legal bill described as one-time that appears every year is not.
Then rebuild the earnings as they will look under you. If you won't work in the business full time, subtract a market salary for the manager who replaces the owner. Tie reported revenue to tax returns and bank deposits for at least three years. Look at the trend, not just the latest year, and at customer concentration: if one client is a large share of revenue, you are partly buying that relationship, and it may not transfer.
If the seller says some revenue is not on the books, walk away. You can't finance it, you can't verify it, and you would be paying for it.
Due diligence red flags when buying an existing business
The common warning signs: books that don't reconcile with tax returns, a recent spike that flatters the trailing numbers, key staff or customers with no contract, supplier terms that end on a change of ownership, and a premises lease with little time left or no right to assign it to a new owner. Also watch for deferred spending, such as worn equipment or an old website, that becomes your bill after closing.
The biggest one is owner dependence. If customers call the owner's mobile, if the owner holds every supplier relationship, or if the brand is the owner's personal reputation, value walks out with them. Price that in, and negotiate a real transition period. Use an accountant for financial diligence and a lawyer for contracts, leases and the purchase agreement; their fees are small next to a bad deal.
How to finance buying a small business
Most small acquisitions combine several sources: the buyer's own money, a bank loan, a seller note where the seller is paid part of the price over time, and sometimes an earnout tied to future performance. Seller financing matters beyond the money itself, because a seller who is owed money has a reason to make the handover work.
In the US, SBA 7(a) loans can be used for a complete or partial change of ownership, and the SBA states the maximum 7(a) loan is $5 million. Under the SBA's operating rules effective June 2025 (SOP 50 10 8), a complete change of ownership required a buyer equity injection of at least 10% of total project costs, with a seller note counting toward part of that only if it stays on full standby. A revised version, SOP 50 10 8.1, takes effect on 1 October 2026, so confirm the current requirements with an SBA lender before you structure an offer. In the UK, Canada and Australia, bank lending and seller finance are the usual building blocks; ask lenders directly what they need.
Whatever the source, check that the business's cash flow covers loan payments with a comfortable cushion in a weaker year, and still pays you.
The first hundred days after you buy
Change less than you want to. Meet every employee and your top customers early, explain what stays the same, and learn why things are done the way they are before fixing them. Keep the seller close during the agreed transition.
Once you understand the engine, improvement usually comes from the offer and the sales process rather than from reinventing operations. The related WOW Mentor teardowns of an already-profitable business pushed toward its next stage, and of a small moving company rebuilding how it sells, show what that looks like in practice; they are English audio with a full transcript.
Checklist for today
- 1.Write a buy box: industry, size, location and the skills you will add.
- 2.Tell accountants, lawyers and suppliers in your target industry that you are looking to buy.
- 3.Rebuild seller earnings with a market-rate manager salary and verify revenue against tax returns and bank deposits.
- 4.List owner dependencies, key contracts and lease terms before making a firm offer.
- 5.Confirm current lender and SBA requirements, including the equity you must inject, before agreeing a structure.
Related briefings
English audio with a full transcript.
Frequently asked questions
How much money do I need to buy a small business?
It depends on price and structure, but expect to put in some of your own money. Lenders want buyers to have real equity at stake, and under the SBA's 2025 rules a complete change of ownership needed at least 10% of project costs as equity injection. Rules were revised again for October 2026, so check with a lender.
Can I buy a business with no money down?
Occasionally, with heavy seller financing, but it is rare for a healthy business and it leaves no cushion. If a seller is desperate to accept nothing up front, ask why. A deal financed entirely with debt has to survive every bad month on thin margins.
How are small businesses valued?
Many small businesses are priced as a multiple of seller's discretionary earnings, with the multiple reflecting risk: owner dependence, customer concentration, trend and industry. The multiple matters less than whether the earnings are real and whether cash flow comfortably covers the debt you take on.
Should I use a business broker?
A broker can bring deal flow and help with the process, but remember brokers usually represent the seller. Use them as one source among several, and do your own diligence with your own accountant and lawyer.