Before you pick an industry, answer three questions about yourself: where the business needs to be, what you can actually afford, and where your skills and experience fit. Those answers narrow a huge market down to a short list, and they make the right business much easier to recognize when you see it.
It is the question I hear most from people who want to buy: what type of business should I buy? The answer surprises people, because it doesn't start with HVAC or car washes or whatever is popular this year. It starts with you.
Where does the business need to be?
Does the business need to be close to home, in your city, or at least in your state? Or would you move somewhere new to run it? Most small businesses need their owner nearby, at least for the first few years, so this answer matters more than people expect.
It also cuts your search down fast. A buyer who will only consider businesses within a short drive is looking at a very different list than one who will relocate anywhere in the country. Neither is wrong, but you need to know which one you are before you start calling brokers.
What can you actually afford?
Affordable doesn't mean every dollar you have. Once you own the business, you'll need a cushion for your own living expenses, plus working capital to run the business while you learn it.
An SBA loan can cover most of the price, but you'll still usually need to put in at least 10%, and under the SBA's rules that 10% is figured on the total project cost, which includes closing costs and working capital, not just the price. So never sink everything you own into the deal. Work backward from the cash you can commit while keeping a cushion, and let that set the size of business you look at.
A good first step: talk to an SBA lender before you shop. They can tell you what size deal your cash supports, which turns a vague search into a specific one.
Where do you fit?
Do you know this industry? Do you have a real interest in it? Or do you work in an industry next to the one you're targeting, where your contacts and knowledge carry over? And do your management skills fit the business you'd be running?
A buyer who says they'll buy anything is harder to help than one who can explain why they are a good fit for a specific kind of business. Your background is part of the pitch to sellers and lenders alike.
When I left my corporate finance career to buy my own business, I learned just how much the answers to these three questions matter. They shaped which businesses I looked at, how much I could take on, and how quickly I could get comfortable running the one I bought.
Put the answers together
Write your three answers down. Location, budget and fit together become your buy box, the short description of the business you're looking for. Share it with brokers and lenders and you'll get better leads, faster responses and fewer wasted weekends on listings that were never right for you. When you're ready to start, my guide to buying a business walks through the next steps.
Ready to talk it through? Talk with me about selling. No cost, no obligation.
Read the transcript
What type of business should I buy? I get that question all the time, and my answer usually surprises people because it doesn't start with an industry. It starts with three questions about you.
The first is location. Does the business need to be close to home, in your city or even in your state? Or would you consider moving somewhere new to run it? That answer alone narrows your search down fast.
The second is what you can actually afford. And that doesn't mean every dollar you have. You'll need a cushion for your own living expenses plus working capital once you own the business. An SBA loan can cover most of the price, but you'll still want to put in at least 10%. So never sink everything you own into the deal.
The third is where you fit. Do you know this industry? Do you have a passion? Or are you currently in an industry that's adjacent to your target business? Do your management skills carry over to this new business?
When I left my corporate finance career to buy my own business, I learned just how much the answers to these three questions matter. Answer them first and the right business gets so much easier to identify.
Save this for when you start your own search.
