How to Successfully Buy a Small Business: Lessons from Industry Experts

Buying a small business can be one of the fastest and most realistic ways to become an entrepreneur. But it’s not without challenges. At a recent panel hosted in Salt Lake City by Chase Murdock of Durable, three seasoned professionals shared what really goes into a successful acquisition — from financing to legal agreements to understanding the business’s financial health.

Meet the Experts Behind the Insights:

• Chris Barrett – Founder of Midwest CPA, an expert in quality of earnings and financial due diligence.
• Eric Hsu – M&A attorney at Clear Focus Law, guiding buyers through every step from LOI to close.‍
• Matthias Smith – Founder of Pioneer Capital Advisory, specializing in SBA loans and acquisition financing.

‍Why More Entrepreneurs Are Buying Businesses Instead of Starting One.

Starting a business from scratch is tough — time-consuming, risky, and expensive. More entrepreneurs are realizing that buying an existing business is a smarter, faster path to ownership.

We’re currently in the midst of a generational shift. As millions of baby boomers retire, they’re selling profitable businesses — many of which are stable, cash-flow positive, and underpriced.

Entrepreneurship Through Acquisition (ETA) is gaining popularity through MBA programs, online communities, and investor networks. It’s now easier than ever to find, analyze, and finance a business — especially with the help of SBA loans.

Listen The Full "Build Durable: Salt Lake City ETA Panel" Below

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Financing a Business Purchase with SBA Loans

Financing is often the biggest hurdle — especially for first-time buyers. But SBA loans are making business ownership accessible. Matthias Smith explained how the SBA 7(a) loan program works:

• The SBA requires an equity injection (down payment) of 10%. This can either come entirely from the buyer group (guarantor and investors), or it can come from a combination of a seller’s note on full standby and buyer group cash.
• Up to 90% of the total uses of funds (loan budget) can be financed by an SBA 7(a) loan based on the current SBA requirements if the financials of the company being purchased support this amount of leverage.
• Loans are paid over 10 years with no balloon payments.
• Additional capital can cover working capital and closing costs.

However, not every lender follows the same rules. Each bank has its own credit standards. That’s why working with a financing advisor who knows the SBA landscape can make or break the deal.

Evaluating the Business: The Power of a Quality of Earnings Report

Don’t just rely on a seller’s financial statements. Chris Barrett emphasized the importance of a Quality of Earnings (QoE) report, which gives a clear picture of the business’s true earning potential.
A good QoE report adjusts for:

• One-time or unusual expenses
• Owner-related add-backs
• Inconsistent bookkeeping
• Non-operational income

Another critical factor? Working capital. Many deals fall apart because buyers and sellers have different expectations about how much working capital should remain in the business post-sale.

Legal Essentials: Structuring the Deal and Writing a Smart LOI

Buying a business involves more than just signing a check. Eric Hsu shared legal strategies to avoid complications down the road:

• Treat the Letter of Intent (LOI) as a clear roadmap — not a placeholder.
• Include specifics on price, working capital, transition terms, and seller financing.
• Understand the difference between asset sales vs. stock sales — each has different tax and liability implications.

Open, honest communication with the seller is key. Deals built on trust last. Deals built on vague expectations fall apart.

Common Deal Breakers to Watch Out For

The panelists shared real-world stories of what can derail a deal:

• Financing issues: Poor lender fit or lack of post-close liquidity.
• Overstated earnings: Unverified numbers that collapse under due diligence.
• Unclear LOI terms: Leading to disputes later.
• Last-minute surprises: Like tax issues or hidden liabilities.
• Cold feet: Sellers backing out due to delays or miscommunication.

👉 Pro tip: Move quickly, communicate often, and stay transparent. Deals fall apart when people go silent or lose momentum.

Build the Right Team Before You Buy

One key takeaway from all three experts? Don’t go solo. A strong acquisition team increases your chances of success and helps avoid expensive mistakes.

Your deal team should include:

• A CPA with experience in small business acquisition and QoE reports
• An M&A attorney who knows deals in the $1M–$10M range
• A capital advisor familiar with SBA lending
• (Optional) A mentor or peer group to provide guidance and accountability

Start building this team early — ideally before you find a business. The right advisors will help you spot good deals, avoid bad ones, and close with confidence.

Summary Transcript

Chase Murdock:
Welcome to the Durable Small Business Series. Appreciate everyone coming out—even on a powder day. This series is all about supporting the builders of Main Street businesses, not just your usual tech startup crowd.

Why ETA Is Growing Fast (00:12–00:18)

Chris Barrett:
A wave of baby boomer retirements is creating a massive handoff opportunity. Combine that with ETA clubs in MBA programs and online communities like Twitter and Searchfunder, and buying a small business has become a real, accessible path to ownership.

Matthias Smith:
You can often buy a business with the same down payment you'd need for a house. SBA loans help bridge the funding gap—especially when combined with seller financing or equity partners.

SBA Financing Basics (00:18–00:23)

Matthias Smith:
The SBA 7(a) loan program is designed to make business ownership attainable. Most deals can be financed up to 90%, with a 10–15% down payment—often split between you and the seller. Banks also expect the deal to include working capital and fees.

Chris Barrett:
SBA lending is why a lot of first-time buyers are able to close. But the structure is key—don’t overlook post-close cash needs.

Why Quality of Earnings (QoE) Matters (00:23–00:27)

Chris Barrett:
A QoE report helps validate a business’s earnings. Many sellers inflate EBITDA with questionable add-backs. We scrub that down, normalize earnings, and make sure you’re not overpaying.

Working capital is another landmine—if a seller assumes they’re pulling out $400K and you assume it's staying in, that misalignment alone can wreck a deal.

What Commonly Derails Deals (00:27–00:34)

Matthias Smith:
Disagreements over working capital are brutal. One side expects $500K left in the business, the other thinks it’s $100K. If you don’t align early, you’re asking for trouble.

Eric Hsu:
Deals fall apart when sellers sense hesitation or unnecessary delays. Most deals that died on my desk? The seller lost faith in the buyer.

Chris Barrett:
Time is your enemy. Stay organized and move fast—be the party others are waiting on, not the one slowing things down.

Building Trust with the Seller (00:27–00:34)

Eric Hsu:
Deals don’t survive on paperwork—they survive on relationships. Keep a steady cadence with the seller. Talk weekly. Build trust. Radio silence kills deals.

Chris Barrett:
The ETA process is long and often isolating. Stay plugged into a peer group or ETA community. Don’t go it alone.

LOI Tactics and Deal Framing (00:34–00:40)

Eric Hsu:
Your Letter of Intent should set expectations—not leave them open-ended. Spell out working capital, seller transition plans, and payment structure.

Chris Barrett:
Always build cushion into your offer. If QoE comes in light, you’ve already accounted for it. If it doesn’t, great—you get upside without renegotiating.

Audience Q&A (00:40–01:11)

Q: Where can I find solid deal flow?
Matthias Smith:
Start with BizBuySell, Axial, and local brokers. But also get creative—tap into your local network: CPAs, commercial lenders, attorneys.

Eric Hsu:
Cold outreach still works. Once you’ve picked a vertical, start calling and emailing owners directly.

Q: Should I do an asset sale or stock sale?
Eric Hsu:
Asset sales reduce risk and keep liabilities cleaner. But stock sales are sometimes required—for licenses, contracts, or continuity. An F-reorg can help if you go that route.

Chris Barrett:
Asset deals also give you a step-up in basis, which means you can write off more through depreciation after closing.

Q: Does SBA prefer certain business types?
Matthias Smith:
They avoid cannabis, gambling, and adult industries. Other than that, it’s fair game if the numbers make sense. Just make sure your lender understands your niche—especially if it’s SaaS or service-based.

Q: What if I need extra liquidity after the close?
Matthias Smith:
You probably won’t get a line of credit approved after the deal closes. If you think you might need one, secure it before you finalize the loan—even if you don’t use it right away.

Final Thoughts: Buying Smart, Not Just Fast

Buying a small business is more than just a financial transaction — it’s a strategic move toward long-term entrepreneurship and wealth-building.

With the right team, financing, and preparation, you can navigate the challenges and own a thriving business that’s already generating income.

If you’re thinking about buying a business, especially with SBA financing, make sure you get expert guidance from day one.

Need Help with SBA Financing?

At Pioneer Capital Advisory, we specialize in helping buyers like you secure the right SBA loan, structure deals properly, and get across the finish line smoothly.

Contact us today to start your acquisition journey with confidence.