How a Business Gets Bought

by

From Dreamer to Owner: The Real Process Behind a Small Business Acquisition

If you’re new to buying a business, the process probably feels murky—like trying to guess what’s behind a locked door while someone else holds the key.

Most first-time buyers think it starts with seeing a listing and ends with wiring money. That’s the fantasy version. The real process is longer, messier, and full of points where people waste time, lose leverage, or walk away broke and bitter.

Think you need money to play this game? Sitting on the sidelines while you save up a million bucks? You’ll be there a while. Read: Broke Is No Excuse

This is your high-level map of the actual journey—from kicking the tires to walking out with keys in hand.

1. Search: The Treasure Hunt Phase (Where Most People Get Played)

This is where it starts. You’re scrolling listings, calling brokers, or getting deals through backchannels.

Here’s the uncomfortable truth:
Teasers lie. Brokers polish turds.

Your job isn’t just to spot a “good” business. It’s to filter out the garbage before you waste a month falling in love with a fake number.

Here’s what that filter looks like:

  • Get the real P&L—not the “Adjusted SDE” fairytale version
  • Look at customer concentration—who controls the revenue?
  • Understand churn, contract terms, and pricing power
  • Figure out what actually drives margin and growth
  • Know if the seller is staying, leaving, or ghosting at close

Ask questions. Push back. If they dodge or spin—walk.
You didn’t lose a deal. You just saved six months of pain.

From the Trenches: How I filter Deals Before They Waste My Time

The search phase is where most people get sloppy—and waste a year.

There are so many bad deals out there. Hundreds. Thousands. Most are just jobs with liabilities: small owner-operator shops that barely function and would collapse if the owner rolled an ankle.

But the seller still wants $1 million. If there’s a partner? $2 million.

Why?

“That’s what we need to retire.”

That’s not a valuation. That’s a personal problem.

I see these kinds of deals all day—plastered on listing sites, dressed up by brokers, pitched like they’re the next NVIDIA.

But under the hood?
Burnout. Weak systems. Duct-tape ops. No team.

You don’t need an IOI or a financial model to sniff it out. Just a quick NDA and a phone call. That’s it.

2. Initial Contact + NDA: Get In the Room

Once a deal passes the initial sniff test, you’ll sign an NDA to get the full CIM (Confidential Information Memorandum). That’s supposed to tell the business’s story.

But remember—this is still marketing. Nothing in the CIM is verified. Read it like a brochure, not a Bible. You’re getting the seller’s version of reality, polished by someone who wants a commission.

Go through the CIM. Visit their website. Check the reviews. If it still looks decent, schedule a phone call—or better yet, a face-to-face—with the seller.

From the Trenches: That First Call Tells You Everything

Here’s what I do—and it’s saved me years of wasted time:

That first call or meeting? It’ll tell you everything you need to know:

  • Is the seller retiring, or fleeing the scene?
  • Do they know their numbers, or stall and deflect?
  • Are they open, or already defensive and twitchy?

I sign 3–4 NDAs a week. I walk from just as many after a single call. That’s not tire-kicking. That’s filtering. And filtering is half the job.

I’ve had brokers get salty. Try to ice me out. Say I’m wasting their time. That’s fine. I’ve got cash. I’m the customer.

Find a few brokers who get that. Who know you’re serious and will quietly feed you real deals from their network. The rest? Let ’em, they don’t matter.

You’re not here to make friends. You’re here to buy something worth owning.

A great exit starts right here—when you protect your time, trust your gut, and say no to the wrong deal.

3. IOI – Indication of Interest: Raise Your Hand, Not Your Checkbook

An IOI is your way of saying:

“I’m interested—if the math checks out.”

It’s non-binding, usually vague, and mostly directional. It’s a placeholder to keep the conversation moving while you dig deeper.

A typical IOI includes:

  • Price range (e.g., $1.8M–$2.2M)
  • Deal structure (cash, SBA loan, seller note, earnout)
  • Rough timeline and terms

In small to mid-sized business acquisitions—especially under $5M—you often won’t see a formal IOI at all. Many listed deals skip this entirely and jump straight to the LOI phase. But if a broker is ambitious or trying to manage a competitive process, you might get handed an IOI form like it’s a gate you have to pass through.

Treat it like what it is: a procedural step. Keep it broad. Keep it non-binding. Don’t offer more than you have to.

From the Trenches: IOIs, Brokers, and Holding the Line

There are good brokers—and there are closers who don’t care what you buy as long as it closes.

The good ones? They’re rare. But they’ll talk you through the deal, help you calibrate expectations, and tell the seller when they’re dreaming. Those are worth keeping close.

The others? They’re order-takers with a PDF form and a quota. They’ll shove you into process, pressure you to write an IOI, and act like hesitation is disloyalty.

Here’s the truth: most small business deals don’t need a formal IOI. But if a broker insists—fine. Just make sure:

  • It’s clearly marked non-binding
  • You’re not committing to terms before you see real numbers
  • It keeps you in the game without boxing you in

I don’t love the forms. I don’t love the theater. But I’ll sign one if it gets me to the seller and deeper into the deal.

I’ve got cash. I’ve got leverage. So do you. Act like it.

4. Preliminary Diligence – Where the Dream Meets the Dirt

If they accept your IOI, you get deeper access. Now you’re testing whether this thing is real—or held together with duct tape and wishful thinking.

Here’s what you actually need to do:

  • Dig into the real P&Ls—monthly, not just annual roll-ups. Look for seasonality, margin erosion, hidden owner perks, and timing games around expenses.
  • Interview key staff—quietly, if you can. Watch body language. Ask what they’d fix if they ran the place. You’ll get truth the seller won’t tell you.
  • Walk the jobs—see what it feels like to operate this thing. Go where the revenue lives: trucks, equipment yards, job sites, kitchens, whatever. Don’t let PowerPoints blind you to rust, mold, or dysfunction.
  • Study the pricing—are they undercharging just to stay alive? Compare rates to competitors and sanity-check against cost of labor and materials.
  • Confirm the team—who’s actually doing the work, who’s just riding shotgun, and who walks with the Seller? Their spouse? Child? Nephew?
  • Ask about churn, backlog, and customer type—if 30% of revenue resets every January or one big client holds the whole thing up, you’d better know now.
  • Check the story against the statements—“We’ve been growing 20% a year” should show up in top-line, bottom-line, and headcount. If not, someone’s confused—or lying.

Don’t get hypnotized by the story. The deal lives in the details. Dig like your own money is at risk—because it is.

From the Trenches: Hiding In Plain Sight

I bought a small, route-based service business—three techs, three trucks, steady accounts. The sellers were a husband-and-wife duo running a classic mom-and-pop shop. The books were thin, but I didn’t push. It was my first deal, and I was excited. I thought I’d found a hidden gem.

That was the mistake.

The techs were classified as 1099 contractors. But they weren’t—not by a mile. They wore company shirts, followed assigned routes, used company materials, and reported directly to the owner every day. They were clearly employees and should’ve been paid as such.

Worse, the trucks they were driving weren’t even company-owned. The husband and wife kept them titled and insured under their personal family policy. Meanwhile, the customer contracts required a $1M commercial auto policy and explicitly prohibited subcontracting. So not only were we misclassifying labor—we were uninsured and in breach of contract.

The techs were grinding seven days a week. When I backed into the math, most weren’t even hitting minimum wage. One DOL complaint could’ve wiped me out.

And I missed it. Or really—I ignored it. I let inexperience, excitement, and small-town trust override good diligence. I wanted the deal to work so badly, I didn’t ask the hard questions.

Cleaning it up meant converting everyone to W-2, raising pay and insuring vehicles properly. It blew up my original financial model. For such a small acquisition, it took a long time to recover.

Lesson: Rookie optimism doesn’t excuse bad diligence. If you’re buying your first business, assume it’s messier than it looks. And if the team looks like employees—they probably are. Treat them that way, before the IRS or a personal injury lawyer makes you wish you had.

5. LOI – Letter of Intent: The Real Dance Starts Here

If the IOI was a handshake, the LOI is a firm grip. This is where the deal gets specific—and where you stop window shopping and start spending real time, money, If the IOI was a polite wave, the LOI is when you actually step onto the dance floor. You’re not married yet—but now there’s a ring on the table and lawyers in the room.

The LOI spells out your serious intent to do the deal. It lays down:

  • Purchase price
  • Deal structure (cash, SBA, seller note, earnout, etc.)
  • Timeline to close
  • What’s included—and what’s not
  • And most importantly: exclusivity

That last one is binding. Once it’s signed, the seller agrees not to shop the deal for a set period—usually 45 to 90 days. That’s your window to do deep diligence, lock financing, and decide if you’re still in.

The rest? Mostly non-binding. You’re not legally forced to close—but you are expected to act in good faith. If you ghost the seller, stall without cause, or try to retrade for sport, don’t be surprised when brokers stop returning your calls. Reputations travel fast in this space.

Here’s the mindset shift:

  • IOI: “I’m interested—if the numbers make sense.”
  • LOI: “I’m serious—unless you’ve been lying to me.”

Once the LOI is signed, the meter starts running. Legal fees, quality of earnings, lender underwriting, customer interviews—this is where real time and money get spent. The seller starts treating you like the future owner. You’d better be treating them like a future liability if they’re hiding skeletons.

From the Trenches: The LOI is the Test of Character, Theirs and Yours

In one deal, the seller was all smiles during the initial talks. Said all the right things—clean books, loyal staff, smooth handoff. Seemed like a dream.

Then the LOI got signed.

Everything shifted. The seller and their broker started pushing to close faster. Then came the red flag—they pressured me to use their lender to “close quicker,” saying he was already familiar with the books.

That raised a question they weren’t ready to answer:
Why had a lender already seen the books?
Was there another buyer before me?
Did someone already walk?

In another deal, I was the one who flinched. I agreed to a “good faith deposit”—$5,000 to show I was serious. But as diligence moved forward, red flags started stacking up. I called the broker and said I was backing out.

What I didn’t do? Send it in writing.

The LOI required written notice to terminate. I missed that clause. They kept the $5K and their broken business. My attorney said I had a case—the broker should’ve reminded me—but suing him would’ve cost just as much. So I ate it.

Later—after the deal was long dead—I did a little Facebook stalking. Turns out the broker and seller went to the same church. That explained a lot.

Lesson:

  • Don’t sign an LOI unless you’re ready to follow through.
  • Don’t skip the fine print—especially on deposits and exit clauses.
  • If a lender’s already seen the books before you have, ask why.
  • And when you’re doing diligence, don’t just vet the numbers—vet the people.

6. Confirmatory Diligence – No Surprises Allowed

This is the final checkpoint before you stroke the check and bring it home to meet the parents.

If it’s a bigger deal, you may have done some light vetting already. That’s preliminary diligence—high-level sniff tests: skimmed financials, looked at route maps, maybe walked a job or two. You’re still on the fence, just trying to confirm this thing might be worth chasing.

But with smaller deals? You usually skip all that. No IOI, no banker, no data room. You sign the LOI and boom—you’re in it. Due diligence starts now, and everything the seller didn’t mention? That’s what’s about to surface.

This is the stage where fantasy ends and liability begins.

You’re not trying to kill the deal. But if it’s going to die, better now than after your money’s in and your name’s on the door.

Here’s what needs to happen.

Financials – Tear It Apart

You need real, monthly financials going back at least two years—none of this “here’s my P&L from QuickBooks” nonsense. You’re looking to:

  • Match invoices to deposits
  • Normalize earnings (strip out one-time noise, adjust for seasonality)
  • Verify every owner add-back
  • Confirm no hidden liabilities—vendor debts, payroll taxes, credit cards tucked away in the glovebox
  • Check if reported SDE holds up when you rebuild it from scratch

Watch for COVID Artifacts

In recent years, a lot of PPP and COVID relief money hit the books—some clean, some not. I’ve seen “income” inflated by:

  • Forgiven PPP loans that weren’t broken out
  • Equipment sales booked as operating revenue
  • One-time subsidies mixed into top-line figures
  • Temporary cost cuts that won’t last post-close

If you don’t dig, you’ll end up paying a full multiple on fake earnings. That’s value you’ll never see again. A proper QofE audit will flag this—and protect you from buying a COVID-inflated mirage.

QofE vs. Your CPA

Let’s make this simple:

  • Your CPA keeps you out of jail. They know taxes, compliance, and general accounting.
  • A Quality of Earnings (QofE) firm is a forensic bloodhound. They rebuild the business’s true earnings by pulling raw data—bank statements, payroll, vendor invoices. They don’t just look at numbers. They validate how those numbers were created.

If this is a million-dollar-plus deal, and especially if debt is involved, get a third-party QofE. It’ll cost $10K–$25K, but it can save you six figures and years of regret.

Contracts and Legal Obligations

  • Review all customer agreements, leases, vendor contracts, and loans
  • Look for change-of-control triggers—some clients or suppliers will bail the moment the business changes hands
  • Validate who actually owns the trucks, tools, and equipment—don’t assume what’s listed is included

HR and Employment Risk

  • Get actual payroll records—not just a spreadsheet
  • Validate W-2 vs 1099 classifications
  • Check pay rates, overtime, tenure, promises made
  • Look for handshake deals and undocumented perks (“We usually give Joe a Christmas bonus if he doesn’t quit…”)

Customer Interviews

  • Talk to the top customers—if the seller won’t allow it, that’s a red flag
  • Ask how long they’ve been with the company, how happy they are, what they think of the team
  • Validate price sensitivity and switching risk—if they’re only there because the old owner was cheap, you’ll lose them as soon as you raise rates

Site Visits and Asset Inspection

  • See the trucks, tools, inventory, equipment—in person
  • Start every engine, test every pump, inspect every roof
  • Count inventory and separate usable from expired, rusted, or fake
  • Talk to frontline workers—you’ll learn more in 10 minutes with a tired tech than in an hour with a broker

Regulatory and Legal Exposure

  • Run UCC searches—make sure assets aren’t pledged as collateral elsewhere
  • Check business licenses, insurance policies, OSHA records, permit history
  • Ask about lawsuits, fines, and vendor disputes—past and pending

This is when you bring in help.
Your lawyer, your CPA, maybe even a buddy who’s owned a similar business. You don’t need a deal team, but you do need people who’ve seen behind the curtain. Now’s not the time to be a hero.

From the Trenches: What They Don’t Show You Can Still Cost You

I bought a company where the seller proudly handed over a list of “fully equipped” assets. Trucks, tools, shop gear—it all looked great. Until I walked the warehouse and inspected the trucks.

Two didn’t start. One had a blown engine. Most of the tools were missing. The “backup generator” was a shell with no internals. Looked great on paper. Worthless in reality.

In another deal, I asked for 12 months of payroll. Seller gave me a spreadsheet. No backup. I pressed for the real payroll records—W-2s, tax filings, anything with a signature. That’s when I found out two of the “employees” hadn’t worked there in months. And the guy listed as foreman? Seller’s cousin. Showed up when he felt like it. Weekend warrior with a title.

Then there’s the COVID money. One seller showed a banner year—up 30% in top-line revenue. Looked like a rocket ship. But when I dug into the bank statements, a big chunk of that “revenue” was a forgiven PPP loan. Never broken out. Just quietly sitting in the income line like it belonged there. Same deal with some old equipment sales—dumped a few trucks and rolled the proceeds into revenue. Made the SDE look great on paper.

They weren’t hiding it maliciously—they just didn’t think it mattered. But it did. Had I paid a multiple on that fake revenue, I’d have been underwater on day one.

Lesson:
If you don’t tear the financials apart, you’ll end up paying full price for money that’s never coming back. The trucks, the payroll, the COVID bump—none of it is what it looks like at first glance.

Assume nothing. Verify everything. Because once the deal closes, every inflated line item becomes your problem.

7. PA – Purchase Agreement: Ink the Contract

This is the final legal contract—the one that actually transfers ownership. Not the teaser, not the LOI, not the napkin math from your first meeting. This is where it all gets locked in.

It covers:

  • Structure: Are you buying assets or equity? (This matters for taxes, liability, and what you’re actually getting.)
  • Final Price: How much, when, and in what form? Cash, seller note, earnout?
  • Reps and Warranties: What the seller swears is true—about the business, the books, the people, the permits.
  • Indemnification: What happens if one of those reps turns out to be BS? Who pays? For how long? With what cap?
  • Transition Plan: How long the seller sticks around, what support they’ll give, and what happens if they ghost you.

Everything you’ve negotiated lives here.
If it’s not in the PA, it doesn’t exist. That verbal promise they made over coffee? Worthless if it’s not in writing. That “don’t worry, we always do that” answer? Might as well be smoke in the wind.

This is where good deals get protected—and sloppy ones bleed out later.

Hire a lawyer who knows deals, not your cousin who did your divorce. Push for clarity, not just closure. And if something feels off, fix it now. After this, there’s no do-over.

From the Trenches: What You Don’t KNow Still Binds You

I haven’t had many major issues from a Purchase Agreement as a buyer—at least nothing that solid diligence wouldn’t have caught. But on the sell side? I’ve learned the hard way.

Here’s what I figured out too late:
It’s not enough to “have a lawyer.” You need the right lawyer.

One who knows small business M&A, not just contract law in general. Bonus points if they understand your industry and how deals in it actually fall apart. Because what you don’t know? That’s survivable. What your lawyer doesn’t know? That can cost you real money.

I’ve had reps and warranties written so vaguely they were worthless. I’ve had indemnities that left me exposed. I’ve had transition clauses with zero enforcement teeth. And all of it could’ve been avoided if I had the right legal firepower at the table.

Whether you’re buying or selling, here’s the truth:
If you sign a weak agreement because you didn’t want to pay for a real attorney, you’re not saving money—you’re pre-paying for pain.

Lesson:
If it’s not in the Purchase Agreement, it doesn’t exist.
If there’s no teeth—no clause, no consequence, no trigger—you have no leverage.
And if you’re not clear on what you’re buying and what the seller’s still responsible for, the deal isn’t done—it’s a ticking time bomb.

Make the PA bulletproof. That’s not the lawyer’s job—it’s yours.

8. Financing + Closing: Sign, Fund, Own

Financing is odd. It’s slow when you’re in a hurry and fast when you’re not ready. I always start early.

By the time I’m prepping an LOI, I’ve already reached out to my lenders. I want to know before I sign anything whether the deal is bankable in their eyes. Because if it’s not? That’s a signal. Either the business is overpriced, the financials are sloppy, or there’s something hidden I haven’t found yet. If a lender won’t back it, odds are I shouldn’t either.

Start financing conversations early and set your closing timeline around what’s actually possible—not what you’re hoping for. SBA deals especially move on their own schedule. Underwriting alone can take weeks. Don’t write an LOI with a 30-day close unless you’re cash or already pre-approved.

Always include a financing contingency in your LOI. It’s your clean exit if the bank bails or the seller drags their feet on document delivery. It also protects your deposit—and your pride—when things get sideways.

Once the Purchase Agreement is finalized:

  • Lender funding gets submitted for final approval
  • Escrow is set up to hold and release funds cleanly
  • Final documents are signed—buyer, seller, lender, attorneys
  • Funds are wired, ownership transfers, and it’s yours—ready or not

Sounds simple. It’s not. This is the stage where good deals quietly fall apart because someone missed a detail.

Don’t assume anything. Triple-check:

  • That your lender has everything in hand
  • That escrow instructions are written and clear
  • That the funds flow memo matches the final agreement
  • That seller obligations—like lease assignments, title transfers, and passwords—are already in motion

If anything’s missing, hold funds back. You lose 100% of your leverage the moment the wire hits.

From the Trenches: Buyer’s Remorse Is Real

I’ve had closings go smooth. I’ve also had closings where I thought I was buying a solid business—and ended up inheriting a mess I didn’t even know was mine.

One deal—a stock sale—looked clean. But my name was never fully removed from the vehicle titles. Both the business and my name were still listed. The seller said, “We’ll figure it out after closing.” That was four years ago.

Today, 22 trucks are still titled in my name alongside the business. I’ve gotten three calls about accidents involving vehicles I no longer control. And twice, repo guys have shown up at my home looking for trucks I don’t own.

Here’s what happened: two of those trucks were leased. But the buyer never made the payments—because they thought everything was “free and clear.” In their mind, they owned the trucks outright. They never looked at the titles, and the operating leases? Buried in the expense lines, off the balance sheet.

To be clear: it was disclosed. The lease agreements were in the data room. But they didn’t ask, didn’t read, and didn’t understand what they were taking on. They stopped paying, the lessors came hunting, and the paperwork still pointed back to me.

I had the bill of sale. I had the PA. Didn’t matter. I didn’t make sure the cleanup actually happened before the wire went out. That mistake didn’t cost me cash—but it’s cost me time, stress, and exposure I thought I’d sold off.

Lesson:
Make the Purchase Agreement airtight. Don’t close on promises. Close on proof.
Titles, leases, liabilities—get it all transferred, assigned, or extinguished before you fund.
If it’s not done at close, assume it won’t be.

And expect to feel sick on closing day. I did. That knot in your gut? It’s not a sign you messed up. It’s a sign you’re in the fight now.

Because this—this was the easy part.

The handoff.
The calls.
The chaos.
The “who do I call about this?”
The “wait, we’re out of money?”
The moment where you stop reading books and start writing scars.

Welcome to ownership.

You didn’t just buy a business.
You bought the game.
And if you can survive this part, you’re gonna love it.

Final Word: The Game is Won in the Search and Diligence

Anyone can write an IOI. Most can copy-paste an LOI. But deals aren’t won in documents. They’re won in the shadows—where the risk lives.

It’s not about the offer. It’s about what you catch before the wire hits.

Go slow. Dig deep. Ask the hard questions. Bring a great buy-side team to the table—lawyer, CPA, operator. It matters. Sellers won’t hand you the truth—but the business will if you know where to look.

Price matters less than clarity. You don’t need a perfect deal. You need a real one.

That’s how you win the game.