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1. Set your acquisition criteria first

Start with the kind of business you can realistically operate, not with whichever listing looks most exciting. Write down your available capital, preferred industries, location constraints, time commitment and the return you need. Decide whether you want an owner-operated business, a business with a management team, or an asset you can grow alongside another job.

This prevents a common mistake: spending weeks investigating an opportunity that never suited your skills, finances or lifestyle.

2. Rebuild the earnings picture

Revenue alone tells you very little. Ask for enough financial information to understand gross margin, operating expenses, working capital needs and the cash the owner actually receives. Compare management accounts, bank activity, tax records and major invoices where appropriate. Differences do not always mean something is wrong, but they should be explained.

Separate recurring earnings from unusual items. Remove one-off income, add back genuinely personal expenses only when they are documented, and include costs that a new owner will need to introduce. For example, if the current owner works full time without a market salary, the business may be less profitable under hired management.

3. Measure owner dependence

Many small businesses rely heavily on the founder’s relationships, technical knowledge or daily presence. List the work the owner performs, estimate the hours involved and identify what is documented. Look for operating procedures, staff who can make decisions, transferable supplier relationships and customer contacts held in the business rather than on a personal phone.

High owner dependence is not automatically a bad deal. It affects the handover plan, the price you can justify and the effort required after completion.

4. Check customer and supplier concentration

A stable sales total can hide fragile relationships. Review how much revenue comes from the largest customers, whether agreements are written, and whether those customers can leave or renegotiate after a change of ownership. Repeat the exercise for key suppliers, landlords, platforms and referral partners.

Ask what would happen if the largest customer or only supplier disappeared. The answer shows how much resilience is built into the business.

5. Inspect the operating foundations

Walk through how the business wins customers, delivers its product or service, collects money and resolves problems. Review staff roles, employment commitments, leases, licences, equipment condition, inventory quality, software access and important contracts. Confirm which items belong to the business and which belong personally to the seller.

For a physical location, pay close attention to lease duration, renewal terms, reinstatement obligations and whether a transfer or landlord approval is needed. For a digital business, examine traffic sources, account ownership, platform concentration and the history of the domain and advertising accounts.

6. Understand what the deal includes

Clarify whether you are considering the assets of the business or ownership of the legal entity. The structure changes what may transfer, the liabilities you may inherit and the approvals required. Prepare a written list covering equipment, stock, intellectual property, customer records, deposits, contracts, licences, cash, debt and working capital.

The price is only one part of the transaction. Payment timing, seller financing, performance conditions, the transition period and protection against undisclosed problems can materially change the risk.

7. Test the seller’s explanation

Ask why the owner is selling, what they would improve with more time or capital, and what could cause the next owner to fail. Then compare the answers with the financial and operating evidence. A credible seller can usually explain both the strengths and the weaknesses of the business without relying on vague promises.

Meet more than once and revisit important questions. Consistent answers build confidence; changing explanations deserve further investigation.

8. Slow down when you see red flags

• Pressure to pay a deposit before receiving basic information.
• Earnings claims that cannot be reconciled with records.
• Key contracts, licences or accounts that cannot transfer.
• A sudden improvement in results immediately before the sale.
• Unclear ownership of assets, branding, customer data or online accounts.
• Refusal to let your accountant or lawyer review the proposed deal.

One concern may have a reasonable explanation. Several concerns together often signal that the apparent discount is compensation for hidden risk.

Your next step

Use the early review to decide whether an opportunity deserves deeper due diligence. If it does, engage suitable accounting and legal professionals before signing or transferring money. BizAcquire helps buyers and sellers discover each other; it does not replace independent verification or professional advice.