What you are actually buying
You are buying the cash a business is likely to keep producing after you own it, minus the debt you take on to buy it. Everything else — the brand, the equipment, the website — matters only to the extent it protects or produces that cash. This is why the first serious question is never 'what is it worth?' but 'what does it earn, how reliably, and does that survive the owner leaving?'
- Owner-dependence is the most common value killer: if the owner is the salesperson, the relationships may leave with them.
- Customer concentration turns a good business into a fragile one; one lost account can erase the profit you bought.
- Recurring or contracted revenue is worth more than the same revenue won afresh every month.
Sourcing and screening
Most buyers look at far more businesses than they buy. Listings, brokers, industry contacts and direct outreach all produce deals, and each produces a different quality of information. Screening is about spending your limited attention on the small number of businesses that fit your capital, your skills and the kind of work you are willing to do every day.
- Write your buy box first: industry, geography, revenue range, earnings range, price range and capital available.
- Screen on fit before price — a cheap business in the wrong industry is still the wrong business.
- Expect incomplete information early; the seller's summary is a marketing document.
From offer to close
A typical path runs from an initial conversation to a letter of intent, then diligence, then financing approval, then closing documents. Diligence is where the seller's story meets bank statements, tax returns, payroll records, contracts and supplier terms. Deals commonly change price or structure at this stage, and some should die here.
- Verify earnings against tax returns and bank deposits, not only the seller's spreadsheet.
- Read the contracts: leases, customer agreements, supplier terms and anything that changes on a sale.
- Structure — seller financing, earn-outs, escrow, working capital — often matters as much as headline price.
The first ninety days
New owners lose more value in the first quarter than they gain in any negotiation. The work is unglamorous: keep the staff, keep the customers, learn the cash cycle before changing it, and resist redesigning a business you do not yet understand. Changes that must happen early are usually about control — banking, payroll, insurance, passwords, supplier accounts — not strategy.
- Meet every significant customer and supplier early, in person where possible.
- Get control of cash: accounts, signatories, collections and payment terms.
- Delay strategic change until you have seen a full cash cycle.