Buying and Selling a Business: The Complete 2026 Guide

Buying a business and selling a business look like opposite transactions, but they share the same underlying mechanics. Both sides need a defensible valuation, a clear deal structure, a tight diligence process, and the right legal and financial support. Both sides face the same set of decisions: do you use a broker, an M&A advisor, or do you work directly with the counterparty? Do you accept earn-outs and rollover equity, or push for all-cash close? How do you handle the tax structure, escrow, and post-close transition? This guide covers all of it.

We’re CT Acquisitions, a buy-side advisory firm headquartered in Sheridan, Wyoming. We work with 100+ active capital partners (PE, family offices, search funders, strategic acquirers) who acquire founder-owned businesses across the U.S. The buyer pays our fee at closing, sellers pay nothing. This page is the comprehensive resource for both sides of a business buy-sell transaction. Use the table of contents below to jump to the section that matters for your situation.

How a business buy-sell transaction actually works

Most owner-operated businesses sell through one of four paths, each with very different mechanics, fee structures, and outcomes. Understanding which path applies to your situation is the most important decision you’ll make as a buyer or seller.

Path 1: Traditional broker auction

The seller hires a Main Street broker or M&A advisor, signs a 6-24 month exclusivity agreement, pays a $5K-$100K retainer (more for larger M&A engagements), and the broker markets the business to a pool of 30-200 potential buyers through anonymous teasers, NDAs, and a confidential information memorandum (CIM). At closing, the broker collects a 6-12% success fee on the sale price. Total seller cost on a $5M deal: typically $300K-$600K. Total time: 9-18 months.

Path 2: Direct buyer-to-seller

An interested buyer reaches out directly, or the seller approaches a known competitor or strategic acquirer. The two parties negotiate without intermediaries (or with just a transactional attorney on each side handling documentation). Total seller cost: legal and accounting fees only, typically 1-2% of deal value. Total time: 60-120 days. The catch: this works only when both sides already know each other or when the buyer pool for a particular business is small enough to identify directly.

Path 3: Buyer-paid sell-side advisory (the path we operate)

A sell-side advisor with a buyer network introduces the seller to a small set of pre-qualified capital partners. The buyer pays the advisor’s fee at closing as part of their cost of acquisition; the seller pays $0. This works because PE firms, family offices, and search funders pay deal-sourcing fees as a normal part of their business. The structural advantage: the advisor isn’t economically incentivized to push the seller toward acceptance at any price (the way a traditional broker is, since the broker only gets paid if the deal closes). See our full breakdown of the buyer-paid model.

Path 4: Auction process via investment bank

For deals over $25M EBITDA, sellers often use a full-process investment bank to run a structured auction. Fees are typically 1-3% of deal value plus a retainer of $100K-$500K. This works well for businesses large enough to attract strategic and PE bidders willing to commit serious resources to the diligence process. For most lower-middle-market businesses ($1M-$25M EBITDA), the investment-bank approach is overkill.

Valuation: how a business is actually priced

Business valuation is more art than science, but the art has structure. Here are the methods buyers and sellers actually use, with the contexts each one fits:

EBITDA multiple method (most common)

The buyer applies a multiple to the seller’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization). Multiples vary by sector, size, recurring revenue percentage, and owner dependency:

• Home services (HVAC, plumbing, electrical, roofing): 4.0x to 7.5x EBITDA, with the upper end requiring 50%+ recurring service-agreement revenue and a stable management team
• B2B services and professional services: 4.5x to 8.5x EBITDA, with recurring revenue, low customer concentration, and growth above 10% per year driving the upper end
• Healthcare services: 5.5x to 10.0x EBITDA, with provider retention, payer mix, and growth trajectory driving the upper end
• Light manufacturing and specialty: 4.0x to 7.5x EBITDA, with customer diversification, defensible IP, and capacity utilization driving the upper end
• Logistics and distribution: 4.5x to 8.0x EBITDA, with customer retention, fleet ownership, and lane defensibility driving the upper end

SDE multiple method (for smaller businesses)

For owner-operated businesses with under $1M of EBITDA, buyers often use Seller’s Discretionary Earnings (SDE) instead. SDE adds back the owner’s salary, personal expenses run through the business, and one-time items. Multiples are typically 2.5x to 5.0x SDE, with the upper end requiring strong systems and a path to owner-independence.

Revenue multiple method (high-growth businesses)

For high-growth businesses (typically 30%+ year-over-year growth) where current EBITDA understates future earning power, buyers may use a revenue multiple. SaaS businesses commonly trade at 3-8x ARR; high-growth services businesses might trade at 1-2x revenue. Most lower-middle-market deals do not use revenue multiples; this is more common in venture-backed contexts.

Discounted cash flow (DCF)

The most rigorous method, where the buyer projects future cash flows and discounts them to present value. DCF is used most often when the business has predictable, growing cash flows (especially recurring revenue) and when the buyer has a sophisticated finance team. For most owner-operated businesses, DCF gets used as a sanity check on the EBITDA multiple, not as the primary valuation method.

Deal structure: the parts of a deal that aren’t price

Sellers focus on price, but the deal structure often determines whether you actually walk away with what you negotiated. Here are the structural elements that matter as much as the headline number:

Asset sale vs. stock sale

An asset sale transfers the company’s assets and liabilities individually; a stock sale transfers ownership of the entity itself. Buyers prefer asset sales because they get a step-up in tax basis (more depreciation deductions). Sellers prefer stock sales because the seller pays long-term capital gains rates (typically 20-23.8%) instead of ordinary income rates on depreciation recapture. The negotiation here often involves a 5-10% price adjustment to compensate for the tax difference.

Earn-outs

An earn-out ties a portion of the sale price (typically 10-30%) to the business hitting performance targets after closing. From the buyer’s perspective, earn-outs reduce risk by aligning seller incentives with future performance. From the seller’s perspective, earn-outs are dangerous because the buyer controls the business after closing and may consciously or unconsciously underperform to avoid the earn-out payment. The right earn-out structure includes specific, objective metrics (typically revenue or EBITDA hitting predefined thresholds), a defined measurement period, and protections against buyer manipulation.

Rollover equity

Rollover equity means the seller takes a portion of their proceeds in equity of the buyer’s post-close company instead of cash. PE-backed buyers commonly request 10-30% rollover. Rollover equity has two big upsides for sellers: (1) it allows participation in the buyer’s upside if they grow the business successfully, often resulting in a “second bite at the apple” that exceeds the original sale price, and (2) it can be tax-deferred if structured correctly. The downside: the seller’s retained equity is illiquid until the buyer exits.

Escrow and indemnification

The buyer typically holds back 5-15% of the purchase price in escrow for 12-24 months to protect against post-close claims (undisclosed liabilities, breaches of representations and warranties). Negotiating the escrow amount, holdback period, and the “basket” (the dollar threshold below which the buyer can’t make claims) matters significantly. RWI (representation and warranty insurance) is increasingly common in deals over $5M, transferring this risk to an insurer for a one-time premium of typically 2.5-5% of the policy limit.

Working capital adjustment

The deal will include a target working capital level the seller must deliver at closing. If actual working capital is below the target, the seller pays the difference; if above, the buyer pays. This sounds boring but routinely creates 6-figure post-close adjustments. Get the target working capital definition negotiated tightly in the LOI.

The diligence process: what buyers actually examine

Due diligence is where most deals die. The buyer typically requests 200-1,500 documents over a 30-90 day period. Categories include:

• Financial: 3-5 years of P&L, balance sheets, tax returns, AR aging, customer concentration analysis, EBITDA add-back schedule
• Customer: top customer revenue history, contracts (especially auto-renew clauses), churn analysis, NRR/GRR for recurring revenue businesses
• Operational: employee org chart, key employee retention agreements, vendor contracts, IP assignments, lease agreements
• Legal: entity formation documents, ownership history, prior litigation, regulatory compliance, environmental issues
• Tax: sales tax compliance (often the biggest landmine for service businesses), payroll tax, prior IRS audits, state nexus analysis
• HR: employee classifications (W-2 vs 1099 audit risk), benefits, workers comp claims history, harassment / discrimination claims

Most diligence findings result in a “re-trade”, the buyer comes back with a lower price citing what they found. The honest industry reality is that 40-60% of deals see a re-trade between LOI and close, with average price erosion of 5-15%. Going into diligence with a clean financial system, current legal docs, and a thorough working knowledge of your own EBITDA add-backs minimizes re-trade exposure.

Financing the buy side

For business buyers, here are the financing structures that get used:

SBA 7(a) loan (most common for sub-$5M deals)

The Small Business Administration guarantees up to 75% of the loan, allowing community banks to lend with less stringent collateral requirements. SBA 7(a) loans go up to $5M, require 10% buyer equity (sometimes 5% with a seller note), have 10-25 year terms, and rates typically 1.5-3% above prime. Process takes 60-120 days from application. Best for owner-operator buyers who will run the business themselves.

Senior bank debt (for larger deals)

Traditional commercial bank loans for buyers with stronger balance sheets and larger deals. Typically 3-5x EBITDA in senior debt for service businesses, 2-4x for manufacturing. Rates depend on bank relationship and deal characteristics, currently typically 7-10% for floating-rate facilities.

Mezzanine debt

Subordinated debt that fills the gap between senior debt and equity. Typical sizing: 1-2x EBITDA on top of senior debt. Rates typically 10-13%, often with warrants. Used in deals where buyer wants to stretch leverage beyond what senior banks will provide.

Seller financing

The seller finances 10-30% of the purchase price as a note paid over 3-7 years. Common in SBA-backed deals (bank requires it) and in deals where the buyer needs help bridging the financing gap. Seller financing typically carries a rate 1-3% below market commercial rates and is usually subordinated to bank debt.

Equity (PE / family office / search funder)

For larger deals, the buyer brings 30-60% equity from PE funds, family offices, or independent sponsor capital. The advantage of working with a PE-backed buyer is that they don’t face the same financing-contingency closing risk as an SBA buyer.

Tax considerations sellers underestimate

The price on the LOI is not what you take home. Tax treatment can move your net proceeds by 10-25% depending on structure:

• Asset vs. stock sale: as covered above, asset sales typically cost sellers 5-10% of proceeds in taxes vs. stock sales
• QSBS exclusion: if your business is structured as a C-corp and held for 5+ years, up to $10M of gain may be excluded from federal tax under Section 1202. This is one of the largest tax planning opportunities in the M&A space and is dramatically underused.
• Installment sale treatment: if the seller takes a note (seller financing), tax can be paid pro rata as principal is received instead of all in year 1. Useful for managing tax bracket exposure.
• State tax planning: some sellers relocate to no-income-tax states (FL, TX, NV, WY, NH, SD, TN, WA) before closing. Requires planning ahead since most states require 6-12 months of residence to avoid claims.
• Earn-out tax timing: earn-out payments received in future years are typically taxed as ordinary income (compensation) unless structured as additional purchase price. Get this structure right at LOI, not at closing.

The advisor question: who you actually need

For most lower-middle-market business buy-sell transactions ($1M-$25M EBITDA), the seller needs:

• A transactional M&A attorney (5-figure to low-6-figure flat fee or hourly): to draft the LOI, purchase agreement, disclosure schedules, and handle closing mechanics
• A CPA (typically $5K-$25K): for tax structuring before LOI is signed, working capital negotiation, and tax filing post-close
• A sell-side advisor: optional, but high-leverage. Choose between a traditional broker (paid by you, 6-12% of sale), an M&A advisor (paid by you, retainer + lower success fee on bigger deals), or a buyer-paid model (free to you, like CT Acquisitions)

The buyer typically also needs an M&A attorney and a CPA, plus often a quality of earnings (Q of E) provider for diligence (typically $25K-$100K depending on deal size).

Timeline: what 60-120 days vs. 9-18 months actually look like

The 60-120 day timeline (sequential off-market with buyer-paid advisor) compresses the same milestones as the 9-18 month broker auction process:

The compression isn’t magic, it’s structural. The buyer-paid model skips the auction marketing phase entirely, going straight to introductions with pre-qualified buyers who know what they want and how to act.

The five pillars of how CT Acquisitions works

Frequently asked questions

What’s the difference between buying a business and acquiring a business?

There’s no functional difference. ‘Acquiring’ is the term M&A professionals tend to use; ‘buying’ is the colloquial term. Both refer to the same set of transactions where one party takes ownership of an existing operating business. Some practitioners use ‘acquiring’ to imply the buyer is a strategic or financial buyer with a portfolio approach, vs. ‘buying’ for an individual operator-buyer, but the underlying transaction is the same.

Do I need a business broker to buy or sell a business?

No. Many founders sell businesses without a broker, particularly when the buyer pool is small and identifiable, or when an inbound buyer reaches out unsolicited. The work brokers do, sourcing buyers, organizing diligence, negotiating, is learnable for an experienced operator. The key is access to qualified buyers, which can come from a buyer-paid sell-side advisor (free to the seller), the seller’s own network, or direct outreach. See our broker alternative guide for the full breakdown.

What’s the typical EBITDA multiple for a small business?

It depends heavily on sector, size, recurring revenue percentage, owner dependency, and growth trajectory. For most owner-operated businesses with $250K-$2M of EBITDA, multiples land between 3.0x and 6.5x. For larger lower-middle-market businesses ($2M-$25M EBITDA), multiples land between 4.5x and 9.0x. Use our free valuation tool for a sector-adjusted estimate based on your specific situation.

How long does a business sale or purchase actually take?

Off-market sequential transactions with pre-qualified buyers typically close in 60-120 days. Traditional broker auction processes take 9-18 months. The bulk of the time difference is in the marketing phase (auctions take 4-6 months to gather IOIs and LOIs), not the diligence phase (which is similar in both models).

What does it cost to buy or sell a business?

For sellers: traditional brokers charge 6-12% of sale price plus retainers. Buyer-paid sell-side advisors charge sellers $0. Legal and CPA fees are typically 1-2% of deal value either way. For buyers: M&A attorney and CPA fees of typically 1-2% of deal value, plus financing costs. PE-backed buyers also pay 1-2% in management fees plus deal-sourcing fees to the sell-side advisor that brought the deal.

Can I buy a business with no money down?

Effectively no, though you can buy with very low down payment. SBA 7(a) requires 10% buyer equity (sometimes 5% with seller financing). Some search-fund and independent-sponsor models combine investor equity with seller financing to reduce buyer cash to as low as 5%. “No money down” promises in the industry are typically misleading, even fully-leveraged transactions require the buyer to put significant cash at risk.

What’s the best way to find off-market businesses to buy?

Off-market sourcing typically goes through buy-side advisors (firms like CT Acquisitions that have direct relationships with founder-owners considering a sale), industry conferences and trade associations, direct outreach to potential targets, and existing investor or operator networks. The best off-market deals are usually relationship-based rather than auction-based, which is why the buyer-paid sell-side advisor model has become increasingly common. See how we work with capital partners.

How do I know if my business is ready to sell?

Five signals: (1) you have a documented track record of 3+ years of stable or growing EBITDA, (2) you have a management team that can run day-to-day without you, (3) your customer base is diversified (no customer over 15-20% of revenue), (4) your financials are clean and produced on accrual basis, (5) you have at least one strategic reason for selling (lifestyle, retirement, recapitalization, capital for growth) that you can articulate clearly. If 2-3 of these aren’t true, the conversation is about getting ready, not selling. See our 90-day pre-exit checklist.

Related research

• Free Business Valuation Tool, your business is worth in 90 seconds
• The Business Broker Alternative Guide (national pillar)
• Business Brokers by State, with a free alternative
• The Complete Guide to Selling Your Business in 2026
• What’s My Business Worth? Founder’s Valuation Guide
• Who Buys These Companies? Buyer Types Explained
• How to Sell to Private Equity, A Founder’s Walkthrough
• Owner’s Pre-Exit Checklist, 90 Days Before You List
• CT Commentary, Founder & M&A Insights