Some of today’s ambitious young entrepreneurs are walking away from the grind of the startup lottery. Instead, they’re stepping into established businesses with real customers, systems, and cash flow.
This is what’s known as entrepreneurship through acquisition, a growing phenomenon that’s a win-win for sellers ready to move on and buyers eager to lead. Over the next decade, an estimated 12 million privately held companies worth roughly $10 trillion are expected to change hands as Baby Boomers retire. Nearly 60% of them have no formal succession plan, and as many as 70% may never find a buyer.
So, what does it actually take? This guide gives you a glimpse of how buying a company works. We cover where deals come from, how to tell a healthy business from a fragile one, how people finance these purchases, and how the process unfolds—so that you’re not watching from the sidelines while the biggest transfers of business ownership in U.S. history play out.
Where to find potential businesses to buy
Deal flow isn’t mysterious. You don’t need to hunt for inner circles or private WhatsApp groups to find opportunities.
A lot of deals are happening in plain sight via online marketplaces—think of them as Zillow for small businesses. BizBuySell is one of the largest platforms for brick-and-mortar and service companies, such as clinics, restaurants, HVAC firms, laundromats, and auto shops. Acquire.com leans more toward online companies, from e-commerce to SaaS, apps, and even niche sites.
Then there are business brokers. Because owners hire them when they’re serious about selling, you can expect a package with three to five years of financials, tax returns, revenue, owner’s earnings, major expenses, and leases. There are no vague listings with a couple of photos and surface-level numbers you can’t really use to judge a company.
The other avenue is right in your backyard: your local professional network. Accountants, small business lawyers, and commercial bankers are often the first to hear, “I’m thinking about retiring, but I’m not sure what to do with the business.” Once they know you’re actively searching and what you’re looking for, they’ll call you when a client is ready to talk succession.
How to evaluate whether a business is worth buying
You don’t need a finance background to size up a company. A few simple checks can surface the winners and rule out the rest.
Start with how money comes in. Is there recurring or repeat revenue—service contracts, memberships, retainers, long-term clients—or is it mostly one-off projects and seasonal spikes? Predictable revenue makes it easier to cover costs, debt payments, and your own salary.
Then, look at what’s left. Over the last three to five years, have margins and cash flow been steady or growing? Or is the business bringing in similar revenue while profits shrink year after year? When earnings slide, it usually points to deeper issues with costs, pricing, or customer retention.
Next, check who the money depends on. If a single customer accounts for 20 to 30% of sales, losing them would hit hard. And if the owner is the only one who knows how everything works, you’re not just buying a company. You’re taking over their to-do list.
What you want instead are businesses with real operational maturity. That means the company runs on systems and people—not just the owner. Look for a core team with clear roles and simple, repeatable processes that keep the operation moving.
Finally, look at the records. You should see three to five years of tax returns, financial statements, and bank data that tell the same story. Clean, consistent books signal discipline, whereas missing or constantly revised numbers hint at trouble.
Understanding the finances and deal structure
Most first-time buyers aren’t sitting on a pile of cash. They usually combine a few funding options. That could look like putting in some money themselves and using the company’s existing profits to pay back the rest over time.
A common starting point in the U.S. is a Small Business Administration (SBA) 7(a) loan. In practice, it works like this: You make a down payment (often around 10% of the price), and a bank lends most of what’s left. The SBA agrees to cover part of the bank’s loss if the loan goes bad. That safety net makes banks more willing to fund small business acquisitions. You can then repay the loan out of the company’s cash flow.
Many deals also involve seller financing. Instead of getting all their money at closing, the owner agrees to receive part of the price over a few years. You sign a loan agreement with them and pay it back from future profits. From there, some buyers bring in investors: family, friends, partners, or small funds who put in cash in exchange for a share of ongoing profits (or a cut if you eventually sell the company).
Earn-outs are another way to bridge any gaps. They’re a performance-based structure where part of the price is only paid if the company hits certain revenue or profit targets after you become the new owner.
Across all of these approaches, Main Street businesses—small, locally owned shops and services—are typically sold for two to three times their annual cash flow. That’s more reliable than using revenue as a metric, because two businesses with the same sales can leave their owners in very different positions—one might pocket $200,000 a year, while the other barely breaks even after expenses.
Red flags and dealbreakers
Even if the purchase price and financing look good, not every business is worth inheriting. Some issues should make you slow down or walk away.
Start with the numbers. If the financials are incomplete or the revenue and profit shown on tax returns, profit-and-loss statements, and bank statements don’t line up, that’s a problem. The same goes if the seller keeps changing their numbers or story every time you ask for more details. In both cases, you’re being pushed to decide before you can actually see what you’re signing up for.
Then, look at performance. Revenue drifting downward, margins getting thinner, or a steady stream of lost customers usually mean you’ll be fixing underlying problems before you do anything else.
Pay attention to concentration and relationships. If a few customers account for most of the sales—and those relationships live entirely with the seller—you risk a major hit to revenue if they don’t stick around after the transition. The same goes for vendors, landlords, or key partners who seem more loyal to the owner than the company itself.
Debt and commitments matter, too. Loans on bad terms, long leases at above-market rates, or equipment financing that eats up cash will limit what you can fix once you’re in charge.
Inside the operation, lack of process documentation and high turnover are other warning signs. If everything lives in employees’ heads and people keep leaving, you’re taking over a broken system that will exhaust you long before it rewards you.
Finally, ask about legal and compliance issues directly. Lawsuits, unpaid taxes, licensing problems, or safety violations don’t disappear when ownership changes. They become yours.
What the purchase process actually looks like
Buying a business usually starts with a simple inquiry. You respond to a listing, get introduced by a broker, or reach out to an owner directly. Those first calls are about facts: how long the company has been around, its rough revenue and profit, what the owner actually does day to day, why they’re thinking about selling, and whether your budget and timing make sense for them. Both sides are testing basic fit.
If it’s a fit, you sign a non-disclosure agreement and get preliminary financials, such as a few years of profit-and-loss summaries, a basic revenue breakdown, key expenses, and an outline of the team and operations. This is your first real yes or no question: Does this business match the size, margins, and level of complexity you’re willing to take on?
Next comes deeper conversations and a site visit. You meet the owner, see how work actually gets done, and ask pointed questions about customers, staff, and systems. This is where you also need to do a gut check: Can you picture yourself walking in here as the one responsible for everything?
If you’re still in, you put it in writing with a letter of intent, which includes price, structure, and a timeline for diligence. Then you dig in—reviewing detailed financials, tax returns, contracts, leases, payroll, and any legal or compliance issues—to see if the story holds up.
If it does, the lawyers finalize the purchase agreement, funds move, and you take over. You’re no longer doomscrolling other people's success stories. You’re finally living your own version of it with paying customers, working systems, and cash flow from day one. And you have a luxury most startups never get: time and space to raise the ceiling by modernizing how the business runs and grows.
Relay is a financial technology company and is not an FDIC-insured bank. Banking services provided by Thread Bank, Member FDIC. FDIC deposit insurance covers the failure of an insured bank. Certain conditions must be satisfied for pass-through deposit insurance coverage to apply.
