The Small Business Buyer's Checklist

The questions that decide whether a deal works — from The Business Lesson.

Work top to bottom. Most deals die from something in the first three sections, and almost nobody gets to them before they are emotionally committed.

Before you look at anything

Six months of personal living expenses in cash, separate from the deal money Every deal has a bad first quarter. If you need a paycheck in week two you will make decisions that cost you years.
Written down: the smallest profit that makes this worth doing Decide it before you fall in love with a business.
Know what you would pay somebody to do your job in it, at market rate Subtract that before you call anything profit. What's left is the actual return.
You are not quitting your job the same month you close

What happens to this business if the owner disappears for thirty days? "It runs fine" = you're buying an asset. "It dies" = you're buying a job with debt attached.
Why are they selling — asked once, then silence for ten seconds The first answer is the press release. The real one arrives in the pause.
Biggest customer as a % of revenue Over ~20% and you are buying a relationship, and it is with the seller.
Will they carry paper? If flatly no, why not? A seller who finances believes it will still generate cash in year three.
Monthly revenue, 24 months back, in a spreadsheet Calendar years smooth over the exact cliff you need to see. If they can't produce it, that's the answer.

Every add-back defended line by line Ask of each: would the business still run next year without this expense? The truck the crew drives is not an add-back.
Trailing twelve months, not last fiscal year
Working capital: how much cash and how many receivables stay in at close — as a number, in the agreement The seller collecting receivables on the way out is what kills first-time buyers in week two.
Inventory aged: last sale date per item Anything that hasn't moved in a year is a storage cost, not an asset.
Equipment: age, last service, replacement cost of the two most likely to fail Book value is what an accountant depreciated it to. Replacement cost is your problem.
Cash reserve set aside for a surprise capital expense in year one

Identified: the one person who is not the owner that the place cannot lose
Met them before signing, if the seller allows it
Retention offer drafted, ready the day the sale is announced Close Friday, announce Monday, and they start making calls Tuesday because nobody told them they still have a job.
Anyone on payroll who cannot be described doing actual work — and whether they hold keys, relationships or pricing knowledge
If there's a manager running it: what do they want, and do they have equity?

Non-compete in writing: how long, how far, surviving the whole sale Cheapest insurance in the deal. Most-skipped, because asking feels rude.
Lease: term remaining, renewal option and rate, landlord will assign without a rent bump The landlord gets a vote on your purchase, and he knows it.
Transition period in the agreement with a number attached — aim for double what sounds sufficient
If SBA financed: you have read the personal guarantee out loud If the business fails they do not take the business back and call it even.
Earnout avoided if a simpler structure exists Lower price plus a seller note beats a fight scheduled for eighteen months out.

Change nothing structural for ninety days You don't yet know which broken thing is load-bearing.
Learn how money moves through the business week by week
Ask every employee what they'd fix if it were theirs — write it down
Keep every promise the seller made, including the ones you wouldn't have
If raising prices: newest customers first, then highest-complaint-per-dollar, anchors last