Steps to buying a business, with a realistic timeline
Short answer
The steps to buying a business are: set your criteria and budget, line up a lender and advisers, search, screen listings, sign NDAs and review financials, verify earnings, make an offer and sign a letter of intent, do due diligence while the lender underwrites and orders a valuation, negotiate the purchase agreement, clear closing conditions, close, and transition.
From signed LOI to closing commonly takes two to four months on an SBA-financed deal, longer if the seller's records are messy or licences take time.
Here's the process as a checklist with typical durations. They're common ranges, not promises: deals move at the speed of the slowest party.
- Set criteria and budget (1 to 2 weeks). What you can run, what you can afford (at least 10% equity for an SBA initial acquisition, plus costs and reserves), what you need to earn.
- Line up lender and advisers (1 to 3 weeks). Talk to two or three SBA lenders; pick a deal attorney and CPA.
- Search (weeks to many months). Brokers, listing sites, direct outreach, your network. See how to find a business to buy.
- Screen listings (an hour each). Price vs cash flow, owner dependence, concentration, trend, lease.
- NDA and first financials (1 to 2 weeks per deal). Tax returns, P&Ls, the broker's CIM.
- Verify earnings (1 to 2 weeks). Returns vs P&L vs bank deposits; rate add-backs. See proof of cash.
- Offer and LOI (1 to 3 weeks of negotiation). See letter of intent.
- Due diligence and financing (commonly 6 to 12 weeks, in parallel). Your diligence; lender underwriting, valuation, QoE at $3M+.
- Purchase agreement (2 to 4 weeks, overlapping diligence).
- Closing conditions and close (1 to 3 weeks). Lease assignment, licences, insurance, funds.
- Transition (weeks to months). Seller training; first 90 days.
What speeds a deal up
- A pre-qualified lender who's seen the deal before the LOI.
- A seller with organized records (ask for them early).
- Starting landlord and licence conversations early in diligence.
- Your own earnings check done before the LOI, so diligence confirms rather than discovers.
The full version of each step is in how to buy a business.
How to buy a business from someone you know
Buying a business from someone you know (your boss, a customer, a supplier, a family member) usually starts with a direct conversation, not a listing. Keep it professional from the first meeting: sign a simple NDA, get three years of tax returns and bank statements, verify the earnings independently, use your own attorney and CPA, and put everything in writing.
Familiarity makes the deal easier to start and easier to get wrong; the friendlier the seller, the more important the paperwork.
Some of the best deals never reach a broker. An owner you know is thinking about retiring, and you happen to be the person they trust. These deals have real advantages: you know the business, the seller knows you, and nobody is paying a broker's commission. They also have a specific failure mode: everybody is too polite to check the numbers.
How to raise it
- Pick a private moment and ask about their plans: "Have you thought about what happens to the business when you step back?"
- Say you'd be interested, and that you'd want to do it properly.
- Don't name a price in the first conversation.
- Give them time; many owners haven't thought it through.
Keep it professional
| Step | Why it matters with someone you know |
|---|---|
| Simple NDA | Shows you'll respect confidential information, including from colleagues |
| Your own attorney and CPA | Avoids "we used his accountant" problems later |
| Full financial review | Insiders see revenue, not every cost |
| Independent price basis | Verified earnings and, in SBA deals, the lender's valuation |
| Written transition plan | Avoids open-ended "I'll help whenever" promises |
| Proper purchase agreement | Protects the relationship as much as the money |
Financing note
SBA rules classify changes of ownership by who is buying. An Initial Acquisition is defined as a new majority or largest owner who wasn't previously employed by, or an owner of, the business. If you're an employee or partial owner, your lender will determine the category, which affects equity and coverage requirements. Ask early. See SBA 7(a) for acquisitions.
For the steps that follow, use the due diligence checklist and plan the handover with seller transition.
Worked example: a 20-week deal, week by week
Illustrative timeline for one SBA-financed purchase, not a promise
Weeks 1 to 2: buyer finalizes criteria and talks to three SBA lenders. Weeks 3 to 10: search; 40 listings reviewed, 6 sets of financials, 2 visits. Week 11: earnings check on the preferred deal; tax returns tie to transcripts, deposits support revenue, two add-backs rated shaky. Week 12: LOI signed with a 75-day exclusivity period and valuation and financing contingencies. Weeks 13 to 18: lender orders the valuation and underwrites; buyer's attorney drafts the purchase agreement; lease assignment negotiated; key employees met. Week 19: loan approval and closing documents. Week 20: closing, funding and first day. Some deals are faster; many are slower, usually because of the lease, the valuation, or missing documents. A deal that needs a QoE (SBA purchases of $3 million or more), licence transfers or franchisor approval adds time.
Who you need, and when
| Stage | Bring in | For |
|---|---|---|
| Before searching | SBA lender (two or three) | Pre-qualification, what they'll finance |
| First financials | Your own earnings check; CPA if complex | Is the SDE real? |
| LOI | Business attorney | Structure, contingencies, exclusivity |
| Diligence | CPA, attorney, industry specialists | Tax, legal, licences, environmental |
| Closing | Attorney, lender, insurance broker | Purchase agreement, loan, coverage |
| After closing | CPA, payroll provider | Books, payroll, tax registrations |
Where deals stall, and how to keep them moving
- The lease. Contact the landlord as soon as the LOI is signed; assignments and new terms take weeks.
- The valuation. Lenders order it; ask on day one how long their appraiser is taking. Under SBA rules, smaller 7(a) Small and Express loans with a business purchase price of $350,000 or less may use an internal lender valuation, which can be faster.
- Missing documents. Send the seller a complete list with the LOI, not piece by piece.
- Tax transcript delays. Get the seller's signed authorization early so the lender can request transcripts.
- Licences and approvals. Liquor, healthcare, franchisor and landlord approvals all run on someone else's clock.
The documents that move at each step
| Step | You send or sign | You receive |
|---|---|---|
| First contact | NDA, buyer profile, proof of funds | Listing summary or CIM |
| Early review | Initial questions | Three years of tax returns, P&Ls, add-back schedule |
| Offer | Letter of intent | Signed LOI, exclusivity period |
| Financing | Loan application, personal financial statement, resume | Term sheet, then commitment letter |
| Diligence | Full request list | Bank statements, contracts, lease, payroll, customer data |
| Third-party work | Engagement letters | Valuation where required, QoE if used, lien and entity searches |
| Contracts | Purchase agreement comments | Final purchase agreement, disclosure schedules |
| Closing | Equity injection, signatures | Bill of sale or assignment, lease assignment, keys and passwords |
Keep one shared tracker of every request, who owes it and the date. Deals rarely stall on one big issue; they stall on twenty small documents nobody chased.
After closing: the steps nobody lists
Closing is a step, not the end. In the first weeks, move bank accounts, payroll, merchant accounts and insurance into your name; tell customers and suppliers, ideally with the seller; confirm every licence and permit has transferred; and file any notices your state requires. Then follow the transition plan you agreed with the seller, week by week, and keep a list of questions for them while they are still around to answer.
Frequently asked questions
How long does it take to buy a business?
Searching can take months. After a signed LOI, diligence, financing and documents commonly take two to four months, depending on the seller's records, the lender, the landlord and any licence transfers.
What's the first step to buying a business?
Decide what you can run and afford, then talk to a lender and advisers before you look at listings. It speeds up everything later.
When do I need an attorney?
Before you sign anything binding: the NDA (briefly), the LOI's binding clauses, and definitely the purchase agreement.
What slows a deal down most?
Messy seller records, lender timelines (including the valuation and any QoE), landlord consent to assign the lease, and licences that must be reissued.
How do I ask my boss about buying the business?
Privately and simply: ask whether they've thought about succession, and say you'd be interested if they ever want to sell. Then let them set the pace.
Can I skip due diligence if I've worked there for years?
No. Working in a business is different from knowing its books. Insiders often overestimate profit because they see revenue but not every cost.
Sources
- SBA: Buy an existing business or franchise
- SBA SOP 50 10 8.1, Appendix 15 (valuation, QoE, closing documentation)
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.