Businesses for sale by owner: how to buy without a broker in the middle
Short answer
A business for sale by owner (FSBO) is one the owner is selling without a broker. The upside: no broker commission built into the price, direct access to the person who knows the business, and often less competition. The downside: information is usually disorganized, the seller may have unrealistic price expectations, and nobody is managing the process, so you have to.
Bring structure: an NDA, a written document request, your own advisers, and a clear timeline.
FSBO deals can be the best value in the market or the most frustrating months of your life. The difference is usually whether someone takes charge of the process. In an FSBO deal, that someone is you.
Pros and cons
Upside
No broker commission baked into price. Direct conversations with the owner. Often fewer competing buyers. More flexibility on terms like seller financing.
Downside
No CIM or organized data. Price may be untested. Seller may be unfamiliar with the process and slow to produce documents. No intermediary to absorb emotional moments.
Bring structure
- Simple NDA before financials.
- A written document list: three years of tax returns, monthly P&Ls, bank statements, the lease, equipment list, payroll summary.
- Your own earnings check before any price talk. See proof of cash.
- A short LOI drafted by your attorney, with a timeline.
- Encourage the seller to get an attorney. It speeds things up and avoids later disputes.
- Weekly check-ins on outstanding items.
An FSBO document request you can send
Thank you for sharing the summary. To make an informed offer, I'd like to review the following under our NDA:
1. Business tax returns for [three most recent years].
2. Monthly profit and loss statements for the same years and year to date.
3. Bank statements for all business accounts for the last [12 to 24] months.
4. A list of any add-backs or owner expenses, with receipts or statements.
5. The lease and any amendments; equipment list; any loans or liens.
6. A staff list with roles, pay and start dates.
I'll keep everything confidential and get back to you within [two weeks] of receiving it.
Pricing an FSBO business
Owners often arrive at prices from rules of thumb, conversations with friends or what they need for retirement. Respond with evidence: verified earnings, what financing supports, and in SBA deals the lender's valuation. A respectful, documented explanation lands better than haggling. See how to make an offer.
A timeline you can propose to an FSBO seller
Owners selling on their own often have no idea how long a sale takes or what happens in what order. Giving them a simple written plan does two things: it sets expectations, and it shows you're a serious buyer who'll get to closing. A version like this works for many small deals; your attorney and lender will adjust it.
- Week 1: sign a mutual NDA; seller sends three years of tax returns, P&Ls and twelve months of bank statements.
- Weeks 2 to 3: you rebuild earnings, ask questions in writing, visit the business, and talk to a lender.
- Week 4: you send a short LOI with price, structure, a valuation and financing contingency, an exclusivity period and a target closing date.
- Weeks 5 to 10: full diligence (documents, lease, contracts, staff), lender underwriting and valuation, purchase agreement drafting.
- Weeks 10 to 14: lease assignment, licence transfers, final walk-through, closing.
Every deal moves at its own pace, and SBA-financed deals add the lender's own steps. The point is to agree the sequence early so nobody is surprised.
Worked example: answering a rule-of-thumb price
Illustrative example, not a real business or a valuation
An owner wants $900,000 because "businesses like mine sell for three times profit" and believes profit is $300,000. You rebuild earnings from the tax returns: reported net income is $140,000, plus his salary of $90,000, depreciation of $25,000 and interest of $10,000, gives SDE of $265,000. His $300,000 included $35,000 of personal travel and family phone bills he called business costs, but there are no receipts tying them to the business. On $265,000 of supportable SDE, his own rule of thumb would give $795,000, not $900,000. Showing him the arithmetic, line by line, and asking which items he can document, is more productive than a counteroffer with no explanation. You're not telling him what the business is worth; you're showing what the documents support.
Financing an FSBO deal
SBA lenders finance FSBO purchases on the same rules as brokered ones: verified tax returns, a valuation prepared for the lender, at least 10% equity on an initial acquisition and 1.25 coverage. What's different is that nobody has packaged the seller's information, so the lender's document requests go through you. Talk to a lender before you make an offer, ask exactly what they'll need from the seller, and send the seller one complete list. Seller financing is often easier to negotiate in FSBO deals, because there's no broker pushing for all cash at closing; in an SBA deal, a seller note that counts toward equity has to be on full standby.
What the seller is usually missing, and how to fill the gap
A broker normally does four jobs that an owner selling alone often skips. Knowing them tells you what you will have to do yourself, and how long it will take.
| Broker job | What happens without it | What you do instead |
|---|---|---|
| Recasting the books | You get tax returns and a number the owner believes in | Rebuild SDE yourself from tax returns and bank statements, and have a CPA review it |
| Packaging documents | Records arrive in pieces, weeks apart | Send one written request list with a date, and track what arrives |
| Managing expectations | Price talk turns personal quickly | Tie every point you raise to a document, not an opinion |
| Running the closing | Nobody owns the checklist | Agree early who orders lien searches, the lease assignment and the escrow |
Plan for the deal to take longer than a brokered one, and put the extra time into the schedule you propose rather than discovering it later.
Red flags specific to FSBO deals
- No tax returns, only "internal numbers". Ask for returns and sign IRS Form 8821 or 4506-C authorizations so you or your lender can get transcripts. See tax returns vs P&L.
- An owner who won't let you talk to the landlord until after closing. The lease is a deal condition, not a formality.
- Pressure to close fast without an attorney "to save money".
- A sale motivated by something undisclosed: a new competitor, a lost customer, a lease ending. Ask why they're selling, and check the answer.
- Cash income the owner wants you to pay for but didn't report. See buying a cash business.
Documents and advisers you'll need anyway
Without a broker, you're responsible for the paperwork a broker would chase. Hire a business attorney to draft the LOI and purchase agreement, and a CPA to review the tax side, including how the price is allocated among assets on IRS Form 8594, which both buyer and seller file. Ask your lender early what they need from the seller. A buyer who brings structure usually ends up with a better deal than one who waits for the seller to provide it.
Frequently asked questions
Are businesses for sale by owner cheaper?
Sometimes, since there's no broker commission. But owners without brokers sometimes overprice because they haven't tested the market. Price on verified earnings either way.
Who prepares the documents in an FSBO deal?
Usually the buyer's attorney drafts the LOI and purchase agreement. The seller should have their own attorney review them.
Can I use an SBA loan for an FSBO business?
Yes. SBA lenders don't require a broker. They'll still require tax returns, a lender-ordered valuation and all the usual documentation.
What's the biggest FSBO risk?
Incomplete records and an emotional seller. Be patient, polite and firm about getting the documents you need.
How do I find businesses for sale by owner?
Some owners list on general business-for-sale sites or local classifieds; many never list at all. Direct outreach to owners in an industry you know, introductions from CPAs, attorneys and bankers who serve owners, and trade associations are the usual routes. See how to buy a business that isn't for sale for an outreach approach.
Should I offer the seller less because there's no broker?
The absence of a broker commission doesn't change what the earnings support. Base your offer on verified earnings and what financing supports, not on the seller's savings. You can point out that the seller keeps more of the price without a commission, which can help them accept a number grounded in evidence.
Sources
- SBA: Buy an existing business or franchise
- IRS: Get transcript (verify the seller's returns)
- IRS: About Form 8821 (tax information authorization)
- IRS: About Form 8594 (asset acquisition statement)
Related guides
General information, not legal, tax, financial or investment advice. Rules and lender practices change; check the linked sources and talk to your attorney, CPA and lender about your deal. Examples with named numbers are illustrations, not real businesses. OKtoBuy's Deal Check does not value businesses or give price opinions.