Buying a small business is a multi-phase process. Here's the typical timeline:
Phase 1: Search & Qualification (3–6 months) - Define acquisition criteria (industry, geography, size, price range) - Set up deal sourcing (platforms, brokers, direct outreach) - Screen 50–100+ opportunities - Deep-dive on 5–10 prospects - Submit 2–3 IOIs (Indications of Interest)
Phase 2: LOI & Negotiation (2–4 weeks) - Negotiate Letter of Intent terms - Agree on purchase price, structure, and key terms - Sign LOI (typically grants 60–90 day exclusivity)
Phase 3: Due Diligence (60–90 days) - Financial due diligence (review 3 years of tax returns, P&Ls, balance sheets) - Quality of Earnings (QoE) report from independent CPA - Legal review (contracts, leases, licenses, litigation) - Operational review (employees, customers, vendors, systems) - Environmental/regulatory review if applicable
Phase 4: Financing (30–75 days, often overlaps with DD) - SBA 7(a) loan application and underwriting: 45–75 days - Conventional bank financing: 30–45 days - Seller financing: negotiated during LOI phase - Investor/equity raise: highly variable
Phase 5: Closing (2–4 weeks) - Purchase agreement drafting and negotiation - Final lender conditions and funding - License and permit transfers - Lease assignment or new lease - Closing day: wire funds, sign documents, get keys
What can slow things down: - Seller's books aren't clean (adds 2–4 weeks to DD) - SBA lender is slow (add 2–4 weeks) - Lease transfer issues with landlord - Key employee concerns - Environmental issues discovered - Seller gets cold feet
What speeds things up: - Pre-approved SBA financing - Clean, organized seller financials - Experienced M&A attorney on both sides - Clear acquisition criteria from day one - Using a deal management platform (SearchStreet) to organize the process