How To Buy A Business by NAABB

By Scott Radin, Owner & Founder of the North American of Business Brokers and A.S. Radin & Associates.

How to buy a business starts with being Qualified – unless you have 100% cash to buy a Business, you will need either seller financing or lender financing. If financing is needed at all then the general rule of thumb to follow is that you will need relevant experience in that type of Business (or self-ownership), have at least 20% cash of the overall asking price to place down and you have good to great credit (credit score of 650 or up).

To determine the price of a Business you can afford – take the amount of cash you have now to place as a deposit then multiply by 5 times that. This will be the maximum you can spend on a Business.

To determine relevant experience – draw up a professional resume on yourself for the last 3- 10 years or more. A lender will want to see this – but now consider any field where you have at least 3 years experience in the last 10 years may apply (3 of the last 5 years is optimum). Relevant means just that – retail is retail whether it is a liquor store or convenience store. If you have extensive and successful self-ownership experience then this may apply as relevant experience in most types of Businesses.

To determine your credit score, use one of the credit reporting services like to determine your credit score. NEVER leave a credit report with a broker or seller unless you authorize a release to them – in writing.

Be prepared to work hard on buying a Business while experiencing various pitfalls that may seriously stress you. There is no perfect Business to buy so the work involved in buying a Business is intensive and full of legal issues and agreements.

Business buyers who try to buy without representation and documentation eventually find that they get in too deep into areas where they have no knowledge or experience. At this point the buyer may be in a position to lose deposits as the deal falls apart.

So make sure you have an attorney and accountant on call to assist you.

Next you should be prepared to place reasonable offers. The reality is that full offers would be nice but owners understand that offers may come in for less. The owner will almost always consider all offers – if they are within reason.

Next be prepared to frequently meet with sellers. Most buyers are first time buyers and while they have to be qualified they do experience fears of the unknown. Buyers are encouraged to meet with sellers – frequently more than once – prior to placing an offer.

Last is that you have to be prepared to manage in upwards of 20+ contingencies before and after the offer process. Failure to understand these contingencies will almost surely result in a damaged or failed transaction.


By Scott Radin, Owner & Founder of the North American of Business Brokers and A.S. Radin & Associates.