How to Buy a Business: A Step-⁠by-⁠Step Guide for Buyers

To buy a business, define your criteria and budget, source and screen candidates, value the business, sign a letter of intent (LOI), complete due diligence, agree the structure and financing, sign the purchase agreement and close, then run a planned transition with the seller. From LOI to closing often takes 60 to 120 days. Foreign investors also plan entity setup, the transfer of funds and, where relevant, the E-2 visa.

Buying a business is less about finding a listing and more about controlling risk at each stage. This guide walks through how to buy an existing business in the order the work actually happens, who does what, and where buyers most often lose money. Each step links to a deeper guide.

What are the steps to buy a business?

The rest of this guide explains each step. If you want the same process delivered on your behalf, see how our acquisition process works.

How do you define what business to buy?

Start with constraints, not industries. Write down the total capital you can commit, the share you can afford to lose, the cities or states you would live in, how many hours you will work in the business, and whether the purchase must support an E-2 visa. A clear brief saves months of looking at businesses that never fit.

Then choose a few industries that match your skills and budget. Owner-operated service businesses such as cleaning, construction and renovation, or home services are common starting points for buying a small business, while franchises offer a tested system and e-commerce suits buyers who want location flexibility. Our industry guides and state guides cover what to check in each.

If you are deciding whether to buy at all, compare the options in buying an existing business vs starting one. If you want a business that runs without you, read about absentee owner businesses first, because the term is often used loosely and E-2 rules require the investor to develop and direct the enterprise.

Who should be on your acquisition team?

A small deal still needs several roles. The buyer decides; an advisor manages search, valuation, due diligence and negotiation; a deal attorney drafts and reviews the legal documents; a CPA advises on tax and accounting; an escrow agent holds funds. Landlords, franchisors and licensing agencies also need to approve parts of the deal.

Keep in mind who works for whom. Business brokers usually represent the seller and are paid by the seller, often around 10% for small businesses. That is a legitimate role, but it is not yours. Our guide on business brokers vs buy-⁠side advisors explains the difference, and when you need a business acquisition attorney covers the legal side. TealBridge acts as a buy-⁠side advisor only: we do not represent sellers or take seller commissions.

Where do buyers find businesses to buy?

Most candidates come from three channels: brokers and marketplaces, direct outreach to owners who have not advertised a sale, and franchise resales offered through the franchisor or existing franchisees. Each has trade-offs. Brokered deals move faster but attract competing buyers; off-market deals need more work and often have weaker records.

A structured business search applies your brief to every candidate before you spend time on calls. If a franchise interests you, read how to buy a franchise for the Franchise Disclosure Document, Item 19 and resale approval.

How do you screen a business before making an offer?

Sign a non-disclosure agreement, request a summary of the business and the last three years of financial statements, and ask the first round of questions: why the owner is selling, how revenue is generated, who the key customers and employees are, what the lease says. Our list of questions to ask when buying a business groups them by seller, broker, landlord and staff.

Screening is also where you look for early warning signs: cash revenue that does not reach the bank, a single customer providing much of the revenue, a lease that ends soon, an owner who cannot step away. See red flags when buying a business for the full list. Dropping a weak candidate early costs far less than discovering the same problem during due diligence.

How do you decide what to pay?

Small owner-operated businesses are usually priced as a multiple of seller’s discretionary earnings (SDE), and larger companies as a multiple of EBITDA. Typical small-business multiples are roughly 2x to 4x SDE, higher for larger, stable companies with diversified customers and a team that does not depend on the owner. The multiple applies to earnings you can verify, not to the asking price.

Our guide on how to value a business explains the market, asset and income approaches, and our business valuation service produces an independent opinion of value. For larger deals, a quality of earnings report from a CPA firm tests adjusted earnings and working capital.

How do you make an offer and sign a letter of intent?

An offer states the price, how it is paid (cash at closing, seller note, earnout or holdback), the structure, the working capital target, the due diligence period and the conditions for closing. Most buyers make the offer through a letter of intent, which is usually non-binding except for exclusivity and confidentiality. Exclusivity often runs 60 to 90 days.

Read how to make an offer on a business for negotiation tactics and letter of intent to buy a business for the clauses. Do not let the LOI stay vague on working capital, transition or contingencies: terms left open are usually settled later in the seller’s favor.

What happens during due diligence?

Due diligence is where you verify what the seller has told you. It typically takes 30 to 60 days after the LOI and covers financial statements, bank statements, tax returns, payroll, customers, suppliers, the lease, licenses, contracts, litigation and liabilities. We rebuild the P&L from three years of bank statements because they are the hardest data to adjust.

Use our due diligence checklist for buying a business to see each area and what to request, and our due diligence service for what we deliver: a verified P&L, balance sheet and cash flow, a valuation opinion and a business risk review, with legal review through qualified counsel.

How should the deal be structured and financed?

The two main structures are an asset purchase, where you buy selected assets and usually leave most liabilities with the seller, and a stock (equity) purchase, where you buy the company with its history. Asset deals are common for small businesses because of liability protection and the tax basis step-up, while stock deals can help when contracts or licenses are hard to transfer. See asset vs stock purchase.

Financing options include cash, seller financing and bank loans. Foreign buyers usually rely on cash or partial seller financing, because SBA loans generally require U.S. citizen or permanent resident owners. Our guide on financing a business purchase covers what is realistic, and deal structuring is where we model the options. For E-2 investors, loans secured by the business’s own assets do not count toward the investment, and seller financing secured by the business is generally not counted.

What happens at closing?

The deal attorneys draft the purchase agreement, disclosure schedules, bill of sale or stock transfer documents, lease assignment, non-compete and transition agreements. Funds move through escrow, licenses and permits are transferred or reissued, and the IRS generally requires both parties in an asset sale to report the allocation of the price among asset classes on Form 8594.

Closing coordination means keeping attorneys, CPAs, escrow, landlord and seller on one timeline. Our closing and transition service covers that, and how long it takes to buy a business shows where timelines usually slip.

How long does it take to buy a business?

Foreign buyers should add time for entity formation, the bank account and the transfer of funds, and E-2 investors for consular processing if the purchase is visa-contingent. Delays most often come from late seller documents, landlord consent and license reissue.

What should the first 90 days look like?

The transition plan should be agreed before closing: how long the seller trains you, how customers and suppliers are told, which employees are retained and on what terms, and how bank accounts, payment processing, software and insurance change hands. Most value loss after closing comes from customers or key staff leaving during an unmanaged handover.

Keep changes small at first. Learn how the business really runs, confirm the cash flow matches your diligence model, then make improvements.

What does it cost to buy a business?

Our cost page explains the structure in more detail.

What changes for foreign buyers and E-⁠2 investors?

A foreign buyer typically forms a U.S. entity, obtains an EIN, opens a U.S. bank account and plans how funds will move from abroad, all before closing. Our guide on how to buy a business in the U.S. as a foreigner covers these steps.

If the purchase must support an E-2 visa, the investment must be substantial, at risk and irrevocably committed; you must own at least 50% or have operational control; the business must be real, operating and not marginal; and the source of funds must be documented. Funds held in escrow and released only on visa issuance can count as committed, so many E-2 buyers use a visa-contingent escrow. See businesses that fit E-⁠2 requirements. TealBridge never files visas: independent licensed immigration attorneys do.

What mistakes do buyers make most often?

• Making an offer based on the asking price before seeing bank statements.
• Treating a broker as their own representative.
• Skipping the lease, license or franchise approval until the end.
• Underestimating working capital and post-closing cash needs.
• Buying a business that depends entirely on the departing owner.
• For E-2 buyers, choosing a business that is too small to be non-marginal.

Next step

TealBridge works only on the buyer side: we help you define criteria, find and screen businesses, value them, negotiate the offer and LOI, run due diligence, structure the deal and coordinate closing with your attorney, CPA and escrow agent. Contact us to discuss your budget, timeline and goals.