A trend has emerged in recent years: younger professionals searching for and buying an existing business. Some of the trend is credited to cultural shifts with millennials seeking to escape corporate life. But it’s likely driven more by demographic shifts.
Roughly 25% of all US small businesses owners are 65 or older. The “silver tsunami” of Boomer retirees isn’t just people leaving their jobs and starting 401k withdrawals. In many cases, it means a business owner is looking to sell. Perhaps because there is no family succession plan or the business itself is their retirement nest egg.
From HVAC businesses to record stores, small businesses in often unglamorous industries, are being bought by millennial and Gen Z young professionals seeking to hop off the corporate ladder. For aspiring entrepreneurs, buying a small business instead of starting one can be alluring, with many of the benefits of running a business without the startup headaches. But it also has its own challenges and potential pitfalls. If you’re thinking about buying an existing business, here are some things to consider.
Weigh the pros and cons
The biggest perk of buying an existing business is that much of what gives an entrepreneur heartburn about starting a business from scratch is already in place:
Proven business model.
The products and services have been tested and a level of demand is there. The concept works and time and money isn’t needed for research to establish proof of concept. You don’t need to worry that with a lease signed or equipment purchased, your business isn’t meeting a need.
Established customer base.
That proven business model comes with existing customers. While the goal will be to grow customers, a foundation already exists, meaning customer acquisition won’t need to keep you up at night.
Trained employees.
The employees to deliver your products or services to those customers already know how to do it and operations staff know how to keep the business running. With persistent workforce challenges across industries, hiring and training (and the cost that comes with them) are much less of a concern.
US Bureau of Labor Statistics reveals that 20% of all startups don’t make it past the first year, and nearly 50% close their doors before the five-year mark. This makes buying an existing business, one that has cleared the startup hurdles, an attractive option. However, on a personal level, this can be a con. You may not feel the connection to the business. You may also miss the satisfaction of building it into a success. And there are additional cons, which largely come into play when conducting due diligence (discussed later). But generally, would be business buyers opt not to go this route because of:
Up front cost.
Because an existing, profitable business comes with loyal customers, trained employees, existing cash flow, and potentially real estate, inventory, and other assets, significant capital is needed to make the purchase. Depending on the business, this can range from less than $100,000 for a lawn care business to $10M+ for a successful manufacturing or electrical contracting outfit.
Owner dependency.
For many small businesses, the owner is the business. They started and grew the business, and as a result, have the personal relationships, reputation, and specialized skills that make it hum. If the owner departs, it’s possible employees, customers, and revenue may go with them.
Declining performance.
The silver tsunami is indeed resulting in more businesses coming up for sale, but retiring owners isn’t the only reason. A changing industry, increased regulatory environment, stiffer competition, and a host of other reasons could result in declining performance which sparks a desire to sell. When buying an existing business, if you can’t conduct proper vetting and be confident in your due diligence, it may be smart to pump the brakes before you end up with a lemon.
What kind of business to buy
While not essential, it certainly helps if the type of business you are interested in buying has a product or service which you are familiar with. The ability to converse with employees, customers, and vendors knowledgably will make for better due diligence and help you hit the ground running should a purchase go through.
Even if an auto body repair shop has great financials, reputation, and sale price, if you don’t know the difference between fenders and bumpers, your management of the business could quickly turn into a car wreck itself.
That being said, a desire to learn and passion for the business can go a long way. There are many success stories of entrepreneurs who brought their business acumen and grit to an industry they didn’t have prior knowledge of or experience in, and succeeded. After all, Elon Musk runs SpaceX but is neither an astronaut nor rocket engineer.
Aside from whether the kind of business is one you know, the varying features of professional service, retail, food service, etc. need to also be weighed.
How to go about buying an existing business
If purchasing a small business seems like the right fit, there a number of different ways to go about it. Which route to take is likely based on your experience, timeframe, and financial situation.
Business brokers.
Much like real estate agents, business brokers facilitate the buying of privately held businesses and manage a host of items from valuation to marketing to negotiations and closing. A buy-side broker (there are also sell-side brokers) will want to see proof of funds and how much you have available for an investment (again, like real estate agent knowing how much you’ve been pre-approved for). From there you’ll define your criteria, sign NDAs, involve them in due diligence, and communicate regularly.
Search funds.
Also known as Entrepreneurship Through Acquisition (ETA), a search fund is a model where an entrepreneur raises capital from investors to search for, acquire, and operate a single small-to-medium-sized business. The entrepreneur typically spends 1–2 years looking for a suitable company, then uses additional investor capital to purchase it.
Online business marketplaces.
Platforms like BizBuySell, BizQuest, BusinessBroker, and others list businesses by price, industry, and geography. These are great for those looking for a business close to home or to relocate to a specific market. They have large volumes and easily allow for comparisons. However, like home searching on Zillow, there’s heavy competition and listings are often overpriced.
Direct owner outreach.
Not for the faint of heart or those not good with rejection. Instead of responding to listings, you contact owners directly — even if the business isn’t formally for sale. One of the biggest upsides to this approach is less competition, meaning a potentially better valuation and a more flexible deal structure. The downside is it’s time intensive and getting a “no” is actually a win, most (repeated) outreach doesn’t even get a response.
Do your due diligence
No matter which route you go, they all require due diligence. All those pros from above need to be vetted and verified. Is the customer base really that large and loyal? How committed are the employees? The goal here is to verify what you’re buying, uncover risks, and accurately account for those risks in the purchase price (or walk away). This phase of the journey is often supported by a CPA, attorney, and industry experts.
Financial due diligence.
Going back 3-5 years, financial statements, tax returns, balance sheets, and bank records need to be thoroughly reviewed. There are a host of confirmations be looked for, but primarily you’re validating things like revenue, margins, and cash flow to confirm working capital requirements and any outstanding debt.
Legal and structural review.
Existing contracts pertaining to customers, vendors, leases, and loans need to be reviewed. Also, the business ownership structure (does who you’re dealing with have the authorization to sell the business?), licenses, permits, and recent litigation history need to be identified.
Operational due diligence.
What is role and involvement of the current owner? What stops working if they leave? Additionally, an examination of the business operations will review how the business runs day to day and the systems, processes, and dependencies.
Market analysis.
Although its current existence provides a positive sign, it surely doesn’t tell the whole story. The business’s market position, competition, and growth trends need to be confirmed. Customer acquisition cost, concentration, and churn need to be determined.
People and culture.
Review the org chat, determine who does what, compensation, key staff, and employee agreements. Asses the likely acceptance or resistance to new ownership and overall morale regardless.
Assets and physical inspection.
Is it really turnkey? A lot of business for sale claim to be. No different than with houses and apartments, listing often embellish a bit. Inspect equipment, inventory, and real estate to verify their condition, maintenance needs, and replacement costs.
The goal with due diligence is twofold: ensure you’re making a good investment and that the price is right. You want to confirm the benefits are there with potential for growth while factoring in all potential downsides. Adequate time allocated for this portion of the process, as it can’t be rushed.
Fund to close the deal
If you haven’t gone the search fund route, financing the purchase of your targeted business will most likely be needed. In many cases, a combination of financing tools will be used, often including:
Small business loan.
The most common funding source, especially with first-time buyers, these can either be Small Business Administration (SBA) backed or traditional bank loans. Washington Trust is an SBA Preferred Lender with flexible terms and a variety of loan programs, all backed by the SBA.
Personal cash and savings.
Most deals still require some cash from the buyer, even when other financing is involved. This skin in the game signals to financers that your committed and shows the seller you’re serious about the purchase.
Seller financing.
In this scenario, the purchase may be financed by the seller where the buyer is allowed to pay part or all of the purchase price over time. Like SBA loans, this is very common with many deals including some amount of seller financing.
Other options include raising funds from friends and family, angel investors, or taking on a business partner. More complex routes may also include earnouts, asset-based financing, or retirement funds.
Buy smart, not fast
Buying an existing business can be a powerful entrepreneurship route, but it’s not a shortcut around risk. The best deals balance the upside of proven cash flow, customers, and trained staff with a clear-eyed view of what could break when ownership changes — especially if the business is highly owner-dependent.
Start by focusing on industries you can learn quickly (or already understand), then choose a search path — broker, search fund, marketplace, or direct outreach — that fits your timeline and comfort with competition. Most importantly, treat due diligence as the moment where optimism meets evidence: validate the financials, contracts, operations, market dynamics, and team before you commit.
Finally, map out your capital stack early — SBA or bank financing, personal cash, and seller financing often work best in combination — so you can move decisively when the right opportunity appears. Do it thoughtfully, and you’re not just buying a business — you’re buying a foundation you can improve, grow, and steward for years to come.
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