BusinessBeginnerPreview
Buying an Existing Business
A practical playbook for acquiring an existing, cash-flowing business. You will learn how to value a company, structure the deal, run real due diligence, fund it with an SBA 7(a) loan, and take over without breaking what you bought.
Aspiring owners, operators, and investors who want to acquire a profitable small business rather than build one from zero.
Course content
Workbook & downloads
Put the course into practice — a printable workbook plus editable templates you can fill in and reuse.
Preview the workbook
This workbook turns the course into a working acquisition toolkit. Move through it in order: define what you are hunting for, value a real listing on SDE, structure an offer, run disciplined due diligence, size an SBA loan that keeps you cash-flow positive, and plan a transition that keeps customers and staff. Use the templates to track deals, recast earnings, model your debt service, and run your diligence checklist.
Why Buy, and How to Find the Right Business
Decide what you are looking for and build a pipeline that surfaces it.
Worksheet: Write Your Buy-Box
Fill in concrete criteria for every dimension. The point is to be able to reject most listings in seconds. Be specific with numbers, not adjectives.
- Target SDE / owner-earnings range (dollars)
- Target revenue range (dollars)
- Industries I will consider (and ones I will not)
- Geography / max commute or relocation
- Maximum acceptable customer concentration (% of revenue from top customer)
- Owner-dependence tolerance (can the business run without the owner? Y/N + notes)
- My core operating strength (sales / operations / finance / trade skill)
- Total cash I can put toward a down payment (dollars)
Exercise: Buy vs. Build Gut Check
Pressure-test your reasons for acquiring rather than starting from scratch, so your decision is deliberate.
- What specific certainty are you buying (existing cash flow, customers, team, supplier terms)? Which matters most to you?
- What are you giving up by buying instead of building, and are you comfortable inheriting someone else's prior decisions?
- Can you lead the core engine of the business you want (selling, operating, or the key trade)? Be honest.
- How much capital and time would building an equivalent business from zero realistically cost you?
Checklist: Build Your Deal Pipeline
- Set saved-search alerts on BizBuySell and BizQuest matching my buy-box
- Identified and introduced myself to 3-4 brokers in my target industry/region
- Drafted a polite, specific direct-outreach message for off-market owners
- Told my network (accountant, attorney, banker) exactly what I am looking for
- Started a deal tracker (company, source, asking price, SDE, multiple, status)
- Committed to reviewing enough deals (50-100) to make one good offer
Valuing the Business and Structuring the Deal
Recast earnings into real SDE, value the business, and design protective terms.
Exercise: Recast Earnings Into SDE
Using a target listing's tax return or P&L, work the add-backs step by step. Demand proof for every add-back; reject anything the new owner would still have to pay.
- Start with net income from the tax return. What is it?
- Add back the owner's salary, depreciation/amortization, and interest you will not inherit. What is the running total?
- Add back only documented, one-time or personal expenses (with proof). What is your defensible SDE?
- Which add-backs could you NOT verify, and how much do they inflate the seller's claimed SDE?
Worksheet: Triangulate the Valuation
Value the business three ways and compare. When they roughly agree you have a defensible number; when they diverge, dig before offering.
- Defensible SDE (from the recast exercise)
- Chosen multiple (2.0-4.0x) and the reasons (recurring revenue, concentration, owner-dependence)
- Multiple-method value = SDE x multiple
- Fair market value of tangible assets being sold (equipment, inventory)
- Implied goodwill = price minus tangible assets (is it reasonable?)
- Buyer cash-flow test: SDE minus my fair salary minus annual loan payment = ?
- Does the deal leave positive cash flow after debt service? (Y/N)
Exercise: Design the Deal Structure
Decide how to split price and risk between cash, seller note, and earn-out, and which protective clauses you require.
- Is this an asset purchase (buyer-friendly, standard for SBA) or is a stock purchase required to preserve a license or contract?
- What split fits the risk: roughly what % cash at close, % seller note, % earn-out/holdback?
- Where is the risk (customer concentration, owner-dependence, shaky recent numbers) that an earn-out or holdback should cover?
- What non-compete length (3-5 years) and seller transition/training period (30-90+ days) will you require?
Checklist: Valuation & Structure Readiness
- Anchored SDE to tax returns, not the CIM
- Every add-back is documented and truly would not recur for the new owner
- Chose a multiple justified by the specific business's quality
- Cross-checked with the asset method and the buyer cash-flow test
- Decided asset vs. stock with my attorney/CPA
- Planned a working-capital adjustment so the business is not stripped at close
- Required a non-compete and a seller transition period in writing
Due Diligence and Financing the Purchase
Verify the business is what the seller claims, and fund it without crushing cash flow.
Checklist: Financial Due Diligence
- Obtained 3 years of business tax returns (the anchor)
- Obtained 3 years of P&L statements and balance sheets
- Reconciled tax returns, financial statements, and bank deposits to one story
- Demanded proof (invoice/payroll record) for every add-back inflating SDE
- Reviewed accounts-receivable aging (are customers actually paying on time?)
- Confirmed sales-tax and payroll-tax filings are current
- Assessed revenue quality: recurring vs. one-time, and any non-repeatable spike
- Considered a CPA Quality-of-Earnings review for a meaningful deal
Worksheet: Operational & Legal Risk Log
Record what you find for each risk area. Flag anything that is a go/no-go issue or grounds to renegotiate price or terms.
- Top-customer concentration (% of revenue) and whether the relationship survives the sale
- Key employees: who runs things, and will they stay (stay bonus needed? Y/N)
- Lease: transfers? remaining term? rent?
- Licenses/permits: which are needed and do they transfer to me?
- Change-of-control clauses in supplier/franchise/loan contracts (any that let a party cancel?)
- Litigation, liens (UCC), and insurance/claims history
- Owner-dependence: written SOPs or tribal knowledge in the owner's head?
Exercise: Size Your SBA 7(a) Acquisition Loan
Work the financing math so you know the deal clears underwriting and still feeds you. Aim for a DSCR of at least 1.15-1.25 after a fair salary.
- Total project cost and your 10% minimum equity injection — how much is cash vs. a possible seller note on standby?
- Estimate the annual loan payment on a 10-year SBA term (use an online amortization calculator: amount, rate at Prime + spread, 120 months).
- After paying yourself a fair-market salary, what adjusted cash flow is left to service the loan?
- Divide that cash flow by the annual loan payment: is your DSCR at or above 1.15-1.25?
Closing and the Owner Transition
Get to the keys cleanly, then stabilize the business before changing anything.
Checklist: LOI-to-Close Checklist
- Signed an LOI with price, structure, exclusivity (no-shop), and a diligence window
- Assembled my deal team: transaction attorney + CPA + SBA Preferred Lender
- Completed financial, operational, and legal due diligence (renegotiated/walked if needed)
- Finalized SBA financing sized to the independent appraisal
- Negotiated the definitive Asset/Stock Purchase Agreement (reps, warranties, non-compete)
- Confirmed a working-capital peg so the business comes ready to operate
- Cleared closing conditions: lease assignment, license transfers, lien searches
- Closed, funded, and received keys, passwords, and accounts
Worksheet: First-100-Days Plan
Map out your stabilization actions and timing. The goal is to retain and learn, not overhaul.
- Day-1 employee message (what I will say to reassure the team)
- Top customers I will personally contact in the first weeks (names)
- Key employees to retain and how (new agreement / stay bonus / attention)
- Roles I will spend time in to learn how the work actually gets done
- How I will use the seller transition period (questions only the seller can answer)
- 2-3 low-risk quick wins to build credibility
- Major changes I am deliberately deferring until I understand the business
Exercise: Pre-Mortem: Avoid the Common Pitfalls
Before you commit, name the specific way this deal could go wrong and how you have guarded against it.
- Could you be overpaying on inflated SDE? What proof backs every add-back you accepted?
- Where is the concentration or owner-dependence risk, and what structure (earn-out, transition, stay bonus) covers it?
- Are you leaving enough working capital and reserve for first-year surprises, or spending every dollar on the down payment?
- What is your single biggest worry about this deal, and is it a renegotiate, a structure fix, or a walk-away?
Checklist: Transition Retention Watchlist
- Communicated to all staff in person on day one
- Reached out to every major customer to reassure them
- Locked in critical employees before they could panic and leave
- Resisted changing pricing, vendors, branding, or processes prematurely
- Documented tribal knowledge from the seller before they left for good
- Tracked customer and employee retention as my top early metrics
Your Action Plan
- Write your buy-box (size, industry, geography, owner-dependence, your skill) before opening a single listing.
- Build a pipeline across brokers, BizBuySell/BizQuest, and off-market outreach, and track every deal you review.
- Get pre-qualified with an SBA Preferred Lender so sellers treat you as a funded, credible buyer.
- For each promising target, recast earnings into a defensible SDE and verify every add-back with documentation.
- Value on SDE times a justified multiple, then cross-check with the asset method and the buyer cash-flow test.
- Make an offer and sign an LOI with price, structure (cash, seller note, earn-out), exclusivity, and a diligence window.
- Run full due diligence: reconcile tax returns, financials, and bank deposits, and assess concentration, lease, licenses, and litigation.
- Size the SBA 7(a) loan over a 10-year term so the DSCR clears 1.15-1.25 after a fair owner salary.
- Close with attorney-drafted documents, a non-compete, a working-capital peg, and a seller transition period.
- Execute a 100-day plan: communicate, retain top customers and key staff, learn before you change, and bank a few quick wins.
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