Question 1

Does the buyer need their own advisor?

Accepted Answer

In most acquisitions the seller has a paid advisor and the buyer has no one, negotiating alone against a professional while funding the seller's process out of the purchase price. That asymmetry is why buyers overpay and why deals collapse in diligence, and closing it is the reason to have your own function rather than borrowing the other side's.

Question 2

Is it better to grow by acquisition or organically?

Accepted Answer

Organic growth is linear, and it is capped by the two things an owner has least of: time and technicians. Acquisition compounds three things at once, revenue, cost, and the multiple your business sells for, which is why buying can produce several times the value of building over the same five years. It works when your core business is stable enough to absorb the integration.

Question 3

Should I sell my business or buy more and get bigger first?

Accepted Answer

If you can stomach another five years, buying first almost always produces the larger exit, because size raises the multiple on top of the added earnings. An owner who could net five million today can often reach something closer to fifty by acquiring one or two companies a year for five years. The calculator shows the gap on your own numbers.

Question 4

What are the acquisition moves available to a trades owner?

Accepted Answer

There are eight, and each one buys a different asset: density, customers, revenue quality, people, supply, or a new map. The tuck-in, the book buy, the key account buy, the mix shift, the talent buy, the adjacent trade, the vertical move, and the step-out. Most owners can name their move in ten minutes, because the constraint names it; the work is turning the move into a thesis, a target profile, a fundable structure, and a kill criterion.

Question 5

How do owner-operators buy home services companies?

Accepted Answer

Private equity pays 17 to 20 times earnings for home services platforms and buys companies your size at 4 to 8 times, and that gap is why HVAC, plumbing, electrical, and landscaping are all consolidating. An owner-operator can run the same arbitrage with far less capital, and against those platforms you hold one advantage they cannot manufacture: you are the local operator the seller already trusts.

Question 6

Should I buy another HVAC company?

Accepted Answer

If you already run a profitable HVAC business with the systems and people to absorb more volume, buying is usually faster than adding customers one call at a time. The install base you acquire feeds service revenue for the next decade, and you are buying technicians you could not otherwise hire. The 2026 refrigerant transition is the diligence item most buyers are missing this year.

Question 7

How do you find businesses that aren't for sale?

Accepted Answer

The best acquisitions are off-market or pre-market, never listed, and they come with less competition and more room to structure the deal. You reach them through broker relationships holding owners not ready to list, through a buyer profile strong enough to bring a seller to the table, and through directed outbound against a tight target profile, not by cold-calling on your own.

Question 8

Are listed businesses for sale worth buying?

Accepted Answer

Often, yes. A business that has sat on the market is usually not a bad business but a deal that was priced or structured wrong, and both are fixable. Dismissing listed deals as picked over is how buyers miss the good ones.

Question 9

Why do small-business acquisitions fall apart in diligence?

Accepted Answer

In a predictable order: the earnings break first (the seller's adjusted EBITDA fails verification and the debt stops servicing), then concentration, working-capital surprises, liens, and seller fatigue. Most diligence effort is wasted confirming things that were never going to kill the deal. Rank the killers first and a dead deal dies in week two, cheaply, instead of week eight.

Question 10

Why do deals blow the exclusivity window?

Accepted Answer

Because the long clocks started late. Underwriting is the longest and coldest clock, so the lender is engaged on day one, before the QoE. The valuation takes three to five weeks, the QoE two to four, and a Phase I environmental can trigger a Phase II that adds 30 to 90 days. Ordering everything in week one is worth about a month against an exclusivity window of 60 to 120 days.

Question 11

Why do SBA deals stall in underwriting?

Accepted Answer

Over file requirements knowable on day one: injection funds seasoned 30-plus days with a paper trail, IRS transcripts reconciled to filed returns, a lender-procured valuation, seller interims within 120 days of close, and a Phase I environmental within a year on property deals. The buyers who fund on schedule treat the lender file as a day-one diligence workstream, not a closing formality.

Question 12

What is a quality of earnings analysis?

Accepted Answer

Diligence on the earnings number itself: whether the profit the seller claims is real, recurring, and transferable. It tests the add-backs, converts cash-basis books to accrual, and separates one-time events from the run rate. The price is a multiple of this number, so every soft dollar in it is paid for several times over. The test for every add-back: will this cost genuinely not exist for the new owner?

Question 13

What lowers the value of a business I'm buying?

Accepted Answer

Risk that the earnings do not continue under new ownership. Four do most of the killing: owner dependence, customer concentration, low recurring revenue, and weak financial reporting. Each pulls the multiple toward the floor of its range, and each maps to a structure, a holdback, an escrow, a retention agreement, that shifts the risk onto the party who controls it.

Question 14

What is an earnout and when should I use one?

Accepted Answer

An earnout defers part of the price and pays it only if the business hits defined targets, converting an argument about the forecast into a wager both sides can sign. Use it as a targeted bridge for a specific risk, commonly 10 to 30 percent of consideration, measured on revenue or gross profit rather than EBITDA. On an SBA complete purchase earnouts are barred; the compliant mirror is a buyer rebate.

Question 15

How does seller financing work when buying a business?

Accepted Answer

The seller carries part of the price as a note behind the senior lender, at rates that have held around 7 percent. Sellers carry because financed deals clear 20 to 30 percent higher prices and the installment note spreads their tax. On SBA deals a note on full standby for the life of the loan can cover up to half the equity injection, and well-built deals often carry more than one note doing different jobs.

Question 16

What multiple should I pay for a small business?

Accepted Answer

Medians run around 4x EBITDA for businesses in the $2 million to $5 million range and step up to roughly 6.5x above $5 million. But the median is a starting point: the metric under the multiple (SDE vs EBITDA), the business's specific risks, and the debt its cash flow can service decide the price you should actually pay. The seller starts from the comp; the buyer starts from the cash flow.

Question 17

Why is a small acquisition hard to finance?

Accepted Answer

Underwriting a $1.5M deal costs a lender almost as much as a $15M one, and the fee does not cover the work, so capital passes or prices it punitively. The business is not the problem; the economics of delivering capital are. Deals in this band get done by building a stack sized to the deal instead of hunting for one instrument.

Question 18

Are there SBA fee breaks for buying a manufacturing business?

Accepted Answer

Yes, and they are unusually generous this year. For fiscal 2026 SBA waived the upfront guaranty fee entirely on 7(a) loans of $950,000 or less to qualifying small manufacturers (NAICS 31 through 33), and waived both the upfront and annual fees on 504 loans to manufacturers with no cap. Structure the stack so the 7(a) piece fits under the cap and the fee line goes to zero.

Question 19

Should I use an SBA loan or a conventional loan to buy a business?

Accepted Answer

Under $5 million, SBA is the default: 10 percent down against the 20 to 30 a bank wants, and a 10-year term that roughly halves the annual payment of a 5-year note. Conventional wins in nameable situations: ineligible ownership, a deal that needs an instrument SBA bars, a seller who won't live with SBA's rules, spent guaranty room, or a buyer big enough that banks compete without the guaranty.

Question 20

What are the new SBA rules for buying a business?

Accepted Answer

SOP 50 10 8 tightened the change-of-ownership rules. Every direct and indirect owner must now be a U.S. citizen or national and one non-qualifying owner disqualifies the deal, seller earnouts are prohibited, the seller must fully exit with at most a 12-month consulting transition, and a seller who keeps equity guarantees the whole loan for at least two years. All of it is knowable before the LOI, which makes it structure, not surprise.

Question 21

How much do I have to put down on an SBA acquisition loan?

Accepted Answer

10 percent of total project costs, which includes fees and financed working capital, not just the purchase price. At least half of that must be your own non-borrowed cash. A seller note can cover the other half only on full standby for the life of the loan, a HELOC counts only if outside income services it, and the lender verifies every dollar with 30 days of bank statements.

Question 22

Do the new SBA rules favor owners who already run a company?

Accepted Answer

Yes. SOP 50 10 8.1, effective for loans numbered on or after October 1, 2026, sorts buyers into categories and gives established companies the better terms. An owner with two full fiscal years of history buying in the same four-digit industry group gets a 1.15x coverage test instead of 1.25x, a down payment the lender can reduce to zero, and underwriting credit for combination savings. The old geography limit is gone, so a same-industry acquisition in another state can qualify.

Question 23

Can I use SBA again for my next acquisition?

Accepted Answer

Yes, if your existing loan is current and you have guaranty room left. The limit that governs a serial acquirer is not the $5 million per-loan maximum but the $3.75 million aggregate guaranty cap across you and your affiliates, which your existing SBA loans count against. Since July 2026 the 7(a) and 504 programs are decoupled, up to $5 million each, and buyers who plan the sequence before deal one keep buying.

Question 24

Why do roll-ups stall?

Accepted Answer

Roll-ups almost never run out of companies to buy. They run out of capital, because every acquisition pulls working capital and management attention out of the core before it puts anything back. The fix is to design the funding for the moves you intend to make, ahead of the deals, so you buy from strength instead of scrambling from weakness.

Question 25

What is an acquisition capital stack?

Accepted Answer

An acquisition capital stack is the set of layers that fund a purchase: senior debt, SBA loans, private credit, seller notes, working capital, and equity. Each layer has a different cost and a different lead time, and the cheapest money is usually the slowest to arrange. Knowing what each does, and lining them up in the right order, is what lets a deal close on terms the buyer can live with.

Answers

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