How to Buy a Business: A Complete Guide for First-Time & Experienced Buyers
- Garrett Leonard
- Dec 1
- 4 min read
Presented by Creative Investment Advisors — Your Trusted Partner in Business Brokerage, CRE, and Capital Advisory.
Buying an existing business remains one of the most effective ways to accelerate your path into entrepreneurship. Instead of starting from scratch, you acquire a company with customers, revenue, trained staff, market presence, systems, and proven cash flow.
However, the purchase of an existing business comes with complexities—valuation, due diligence, financing, negotiation, legal structure, and verifying what you’re actually buying.
This guide walks you through the 8 essential steps to purchasing a business while protecting your investment and maximizing your success.
Why Buy an Existing Business?
An established company offers:
Immediate cash flow
Existing customer relationships
Brand recognition and reputation
Operational staff already in place
Historical financial performance
Vendor and supplier relationships
A proven business model
But hidden risks—outdated equipment, declining revenue, customer concentration, unresolved debts, litigation, or a poor location—must be uncovered before closing.
Creative Investment Advisors helps buyers evaluate deals, perform independent valuations, connect with financing options, and negotiate favorable terms.
8 Essential Steps to Buying a Business
Step 1 — Identify the Right Business for Your Skills, Goals & Budget
Choose a type of business that aligns with:
✔ Your skills and experience
Lenders—especially SBA lenders—will look closely at industry experience, managerial skill, and track record.
✔ Your lifestyle and time availability
Some businesses require daily hands-on involvement; others can be managed semi-absentee.
✔ Your financial capability
You must assess how much capital you can invest upfront and what you can borrow.
Where to Start:
Consider businesses where you understand the customer base.
Think about skills gained from past jobs or entrepreneurial experience.
Evaluate whether a franchise (more support) or independent business (more control) fits your ownership style.
Creative Investment Advisors can help match your background to high-performing industries and identify off-market opportunities.
Step 2 — Determine Your Readiness: Time, Money & Family Commitment
Owning a business impacts your schedule, finances, and lifestyle. Be clear on:
Time Commitment
How many hours did the current owner work?
Is the business owner-dependent?
Will you need to hire managers to replace the outgoing owner?
Financial Commitment
Establish:
Personal investment amount
Financing needs
Working capital required after purchase
Reserves for unexpected costs
Many buyers underestimate that they must fund:
Operations after closing
Payroll
Marketing and rebranding
Inventory purchases
Equipment maintenance
CIA advisors help you create acquisition budgets, compare opportunities, and run financial scenarios.
Step 3 — Build Your Acquisition Team
A successful buyer has a professional team supporting valuation, negotiation, and risk management:
Your Core Team Should Include:
Business Broker (Creative Investment Advisors)
Transaction Attorney
Accountant/CPA
Commercial Banker / SBA Lender
Financial Advisor (optional)
Industry Consultant (optional)
This team will help you:
Analyze financials
Verify seller claims
Conduct due diligence
Identify red flags
Structure offers
Draft agreements
Your CIA broker coordinates this entire process.
Step 4 — Locate Businesses & Begin the Due Diligence Checklist
You can find businesses:
Listed publicly through brokers
On platforms like BizBuySell or BizQuest
Through off-market outreach
Directly via CIA’s Private Client Buyer Program
Before Making an Offer, Gather Key Information
Financial:
3+ years of P&Ls and balance sheets
3+ years of tax returns
Year-to-date financials
List of debts, liens, and obligations
Inventory details
A/R and A/P aging
Breakdown of add-backs (for SDE or EBITDA)
Operational:
Business history and ownership structure
Licenses and permits
Supplier/vendor contracts
Customer lists (sometimes summary only pre-LOI)
Lease terms and renewal options
Equipment lists and condition
Litigation history
Market & Industry:
Competitor analysis
Demand and trend outlook
Regulatory considerations
Threats and opportunities
Personnel:
Organizational chart
Employee tenure, salaries, benefits
Key employees and likelihood of staying post-sale
Employment agreements
Your goal: Understand exactly what you're buying, what you’re inheriting, and where the risks are.
CIA provides a complete due diligence checklist and manages the process end-to-end.
Step 5 — Determine the Value of the Business
Valuation is both art and science.
Three Common Approaches:
1. Asset-Based Approach
Values the tangible and intangible assets minus liabilities. Useful for asset-heavy businesses or distressed companies.
2. Market-Based Approach
Uses multiples from similar businesses (SDE multiple or EBITDA multiple).
Typical SDE multiples for small businesses range from 2.0× to 3.5×, depending on:
Industry
Revenue size
Profit margins
Owner involvement
Market demand
3. Income-Based Approach
Values the business based on future cash flow—often using:
Seller’s Discretionary Earnings (SDE)
EBITDA
Discounted Cash Flow (DCF)
Creative Investment Advisors runs valuation models so buyers know:
Is the price fair?
What’s negotiable?
What’s the real return on investment?
Step 6 — Secure Financing for the Purchase
Common acquisition financing options include:
✔ SBA 7(a) Business Acquisition Loans
Low down payments (10–20%)
10-year terms
Funding for goodwill, working capital, and equipment
Requires strong financials and good credit
✔ Seller Financing
Often 10–30% of the purchase priceDemonstrates seller confidence in the businessReduces buyer risk
✔ Conventional Bank Loans
✔ Investors or Partnerships
✔ Cash Purchase (when available)
CIA advisors connect buyers to vetted lenders—including SBA-preferred lenders—and help structure financing packages.
Step 7 — Structure the Deal & Finalize the Purchase Agreement
There are several ways to transfer ownership:
1. Asset Sale (most common)
Buyer purchases specific assets, not liabilities. Often preferred for small business acquisitions.
2. Stock/Equity Sale
Buyer purchases ownership shares. Common when:
Contracts must stay intact
Licenses or permits can’t be transferred
The entity has significant value as-is
3. Seller Carry-Back or Earn-Out
Part of payment is tied to future performance.
4. Lease-to-Own or Management Buyout
Used in certain specialized deals.
Your Attorney Should Review:
Purchase agreement
Asset schedules
Non-compete agreement
Transition plan
Training period
Lease assignment or new lease
Representations and warranties
CIA helps negotiate terms that protect the buyer and support a smooth transition.
Step 8 — Close the Deal & Begin Transition
At closing:
Final documents are signed
Funds are transferred
Assets or stock ownership changes hands
Training begins
Vendor relationships transfer
Employees are notified (timing varies by deal)
A smooth transition is one of the biggest predictors of post-acquisition success. CIA supports you through your first 90 days to ensure continuity.
Final Thoughts
Buying a business is one of the most powerful wealth-building strategies available. But it requires expert guidance, a clear process, and protection from potential risks.
Creative Investment Advisors helps you navigate every step—from identifying opportunities to negotiating terms and closing the deal—so you can purchase with confidence and build a profitable future.
Want Help Finding or Buying a Business?
Schedule a Discovery Call with Creative Investment Advisors We help buyers find great businesses, analyze deals, secure financing, and negotiate strong terms.
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