An Introduction to SMB Acquisitions
1. Introduction
Here’s the thing: SMB acquisitions aren’t just for private equity firms or finance bros. Driven people—often with zero prior business ownership experience—buy and run small businesses every day. Plumbers, HVAC companies, laundromats, agencies, manufacturing shops—you name it.
If you’ve ever thought, “I want to own something that makes money without me having to invent the next SpaceX,” this might be for you. That isn't to say it's easy (spoiler alert, it's , or without risk, so learn all you can before pulling the trigger because buyer's remorse is not what you want to experience when tied to a 6 or 7 figure loan 😅
What this guide covers:
- Why buying an SMB is a solid move.
- The people involved in a deal.
- The different ways to buy a business.
- What the overall process looks like.
By the end of this, you’ll have a solid grasp of how this world works and what steps to take next. Let’s dive in, but first, I need to shout out the tombstones ⬇️ of SMB knowledge, which I recommend you dig into these books & podcasts ASAP before reading on (ok... you can read on now, but for real you need to get on these soon):
Buy Then Build
This is the one book everyone will tell you that you need to start with. It covers all the basics and then some.
HBR Guide to Buying a Business
Sometimes considered the "one book", but either way, it's a must-have from your boys Rick & Royce at the Harvard Business School
There are 300+ episodes; Will Smith has cracked the code here on talking to SMB acquirers. He's got every flavor in the archives and 2x new ones every week. Dig in deep, you'll learn more than you could imagine.
2. Ok, so, why Buy an SMB?
There are a few big reasons why SMB acquisitions are gaining steam:
1. Cash Flow from Day One
Startups can take years to turn a profit (if they ever do). But with an existing business, you get an operation that already makes money. If you structure your deal right, you can even pay yourself a salary immediately.
2. Skip the Hardest Part
Building a business from scratch is brutal. Finding customers, hiring employees, figuring out processes—it takes years. When you acquire an SMB, you inherit a working machine.
3. The “Silver Tsunami”
Millions of business owners are aging out. Boomers built solid, cash-flowing businesses but don’t have kids who want to take over. This means massive opportunity for buyers.
4. It’s Less Risky Than Starting from Scratch
Most startups fail. But if you buy an SMB that’s been around for 10+ years, the business model is proven. You’re buying a track record, not just an idea.
5. Work-Life Balance & Autonomy
Corporate life has its perks (steady paycheck, benefits), but you’re building someone else’s dream. Buying an SMB gives you more control over your time and income.
6. The Roll-Up Potential
Once you own one business, adding others gets easier. Many successful operators acquire multiple businesses in the same industry, making everything more efficient.
3. Who’s Involved in an SMB Deal?
1. You (The Buyer)
Your role? Find the right deal, secure financing, and operate the business post-acquisition. Your success depends on your ability to manage people, solve problems, and not panic when things go sideways (because they will).
2. The Seller
Most sellers are not trying to trick you—they just want to retire, cash out, or move on. Many actually care about who takes over their business and want to see it continue.
3. Brokers
They can be helpful for finding deals, but they work for the seller. Some will act like used car salesmen. Others are solid. Learn to do your own due diligence and don’t trust everything they say.
4. Lenders
Unless you’re writing a seven-figure check from your own bank account, you’ll likely need financing. Options include:
- SBA 7(a) Loans – Government-backed loans with 10-year terms.
- Seller Financing – The seller loans you part of the purchase price.
- Traditional Banks & Private Lenders – Less common, but an option.
5. Lawyers & Accountants
You need a good M&A attorney and a due diligence accountant. Bad legal or financial advice can tank a deal. Don’t cheap out here.
6. The Business’s Employees
They are your greatest asset post-acquisition. Handle the transition well, and they’ll make your life easy. Handle it poorly, and they might quit on day one.
7. Customers & Suppliers
The lifeblood of the business. A good acquisition means retaining customers and keeping supplier relationships strong.
4. Ways to Buy an SMB
A. The Self Funded Search
You spend 12-24 months looking for a business, financing the search yourself (usually 10-15% down from your savings + 80% SBA 7A loan + 5-10% seller note), and closing a deal. This is a grind, but it offers maximum control and likely the biggest ownership stake while ensuring you don't answer to anyone else (except your bank!).
B. Search Funds
You raise money from investors to finance your search and acquisition. You get a salary while searching, but you’ll own less of the business in the end and you'll answer to your investors throughout the process. Be thoughtful about who you bring on and what the expectations are. If done right, this can be hugely beneficial if you have experienced investors who can also act as advisers.
C. Seller-Financed Deals
This is the one gurus like to act like you can find easy peasy but these are few and far between. The seller acts as the bank, financing part of the purchase price. This reduces your upfront cash need and shows the seller has skin in the game. Most often, and ideally, your seller will finance 5-25% of the purchase price in conjunction with other capital sources (i.e. bank loan, investor equity, etc.). On the rarest of rare occasions you may find someone willing to let you earn-in over time and they'll hold a big note.
5. The SMB Acquisition Lifecycle
Here’s what the full process looks like:
1. Learning the Game
- Read everything you can on SMB acquisitions.
- Talk to people who’ve done it.
- Decide if this path is right for you.
2. Searching for a Business
- Look on broker sites, reach out directly, or network.
- Narrow your criteria (industry, revenue, location).
- Start reviewing deals and talking to sellers.
3. Transacting (Due Diligence & Closing)
- Send an LOI, sign it, and lock in exclusivity under general terms
- Conduct thorough due diligence
- Draft up the purchase agreement
- Secure financing and finalize the deal.
4. Operating & Growing the Business
- Take over day-to-day operations.
- Learn from existing employees.
- Improve profitability and efficiency.
- Put the right team in place to work "on" the business, not "in" it
5. Exiting (Selling or Expanding)
- Scale the business or buy another.
- Sell for a higher multiple.
- Enjoy the financial freedom.
6. Next Steps: How to Get Started
If you’re serious about SMB acquisitions, here’s what you should do next:
✅ Assess Your Financial Situation – How much can you invest? What’s your risk tolerance?
✅ Start Looking at Deals – Get familiar with what’s out there. BizBuySell, private networks, direct outreach.
✅ Network with Other Acquirers – The best deals come from connections, not broker sites.
✅ Decide on Your Criteria – Industry, size, location, and deal structure preferences.
✅ Get Ready to Make an Offer – Don’t get stuck in analysis paralysis. At some point, you have to pull the trigger.
Buying an SMB is one of the fastest ways to wealth and autonomy—but you have to commit. The good news? You’re not alone. SMB Orbit is here to guide you through every step of the process.
Now, let’s move on to how to find the right business to buy…
