Most first-time buyers make the same handful of mistakes, and almost all of them are avoidable.
For those not familiar, entrepreneurship through acquisition (ETA) means buying an existing, profitable small business and running it, rather than starting one from scratch. You skip the startup risk and take on the operator risk.
Here are the 7 lessons I would give anyone starting out.
1. Buy a boring business with customers who stay
The best first acquisition is rarely exciting.
Rick Ruback and Royce Yudkoff, who teach ETA at Harvard Business School, call the target an "enduringly profitable" business: one that keeps earning under a new, inexperienced owner. Their first filter is recurring customers with real switching costs, ideally 60% to 80% of revenue.[1]
A coffee shop has repeat customers, but one bad cup and they walk next door.[1] A pool service or an HVAC maintenance contract keeps its customers through a price rise or a mistake.
Skip cyclical businesses, turnarounds and fast growth on your first deal. You are learning to run a company. Do not also try to reinvent one.
Typically this rules out companies like SaaS, or other tech companies.
2. The search takes longer than you think
Ruback and Yudkoff put the typical search at roughly 18 months from start to close.[2]
The odds are lower than they used to be. Stanford's 2026 search fund study found 58% of concluded searches acquired a business, and only 48% of funds started from 2021 to 2024.[3]
Two habits help. Searchers with a partner acquired 58% of the time against 43% solo, and 74% of those who signed a first letter of intent within 6 months went on to buy.[3]
Budget for 2 years of living costs and treat the search as a full-time job.
3. An asking price is a starting point
Every price on a listing is an ask, not a sale price.
On deals brokers reported to BizBuySell in 2025, the typical business sold for 0.87 to 0.97 of its final asking price, with a median across metros of 0.92.[4] That ratio hides earlier price cuts.
One Houston buyer paid $1.4 million for a remodeling business advertised at $1.7 million, and later sold it for $1.2 million because the numbers he bought on were stale.[5]
As of October 22, 2026, the median asking price across the 4,947 active and under-contract listings on NextCompany is $2,085,000. That is what sellers are asking, not what buyers are paying.
4. Learn the difference between SDE and EBITDA
Most small businesses are marketed on SDE, and a multiple of SDE is not a multiple of EBITDA.
In short, seller's discretionary earnings (SDE) is the cash the business produces for one owner-operator, with the owner's pay added back. EBITDA subtracts a market wage for the owner's job, so for the same company SDE is the larger number.
This matters the moment you replace the owner. One tree-care buyer planned $80,000 to replace the 2 departing owners and needed $260,000 once he priced real hires. On a purchase at 2.5x $500,000 of SDE, the multiple he actually paid on EBITDA rose from 3.0x to 5.2x.[6]
As of October 22, 2026, the median NextCompany listing that states both figures asks 4.16x its SDE. Price the general manager you will need before you compare it to anything.
Also, realize that SDE, and EBITDA are only two ways to measure profitability of a company and both are imperfect.
5. Brokers are your deal flow
Most businesses for sale reach the market through a broker, and the broker works for the seller.
That does not make them the enemy. Brokers call back the buyers who answer quickly, show proof of funds and close what they start.
Expect patience. The IBBA and M&A Source survey puts a Main Street deal at 6 to 10 months from engagement to close, and 11 to 12 months in the lower middle market.[7]
Yudkoff estimates roughly 3,000 small business brokers in the United States.[8] Build a list of the ones in your region and your industry, and talk to them before a listing goes public.
6. Deals die in diligence, so start it early
In Stanford's 2026 study, the most common reason a signed letter of intent fell apart was something found in diligence, cited by 79% of respondents.[3]
Find it before you sign, not after. Ask about customer concentration, recurring revenue and 3 years of monthly financials on the first call.
Concentration is the one that hurts most after close. A Detroit telecom buyer lost his largest customer, a fifth of revenue, 8 months in. Because costs were mostly fixed, that customer was half of cash flow, and he says it pushed the multiple he effectively paid from 3.7x to near 7x.[9]
Talk to key employees before closing too. A Texas buyer of 2 outdoor design companies learned after closing that the top salesperson was owed a commission the seller never disclosed.[10]
7. Plan for a bad first year
The first year of ownership is the hardest year, and you should assume it will go worse than your model.
Ruback and Yudkoff call it the "angst chart": anxiety peaks during the search and again in year 1, which often means 14-hour days.[11]
The buyers who fail usually did not buy a bad business. They bought a fine business with no cushion: thin working capital, a single point of dependence, and debt with no room for a bad year.
The examples are not rare:
Revenue freeze: a veterans behavioral health buyer had telehealth claims suspended in his first week and delivered care for close to 2 months with no payments coming in[12]
Lost customer: the Detroit telecom buyer took 2 years to recover, and survived because his SBA rate was locked for 3 years and he cut every line item[9]
Linked debt: the same Texas buyers guaranteed their second SBA loan with their first company, and when the second failed it took the first down with it[10]
Build working capital into the deal. The behavioral health buyer got through on the working capital in his SBA loan plus his own savings.[12] An interpreter agency buyer wrapped 3 months of contractor payroll into his loan, then freed a one-time $100,000 to $150,000 by invoicing sooner.[13]
Then change slowly. Control the cash, meet every customer and employee, and save the big ideas for year 2.
Conclusion
ETA rewards patience and discipline far more than brilliance.
Buy a boring business with customers who stay, read every number as an ask, and keep enough cash to survive a first year that goes worse than planned.
I believe the buyers who follow these 7 lessons will close fewer deals, and almost none of them will close a bad one. When you are ready to start looking, browse every business for sale on NextCompany.
Cheers
Josh Bobrowsky
Asking prices are not sale prices, and nothing here is financial or legal advice.
Sources
Think Like an Owner. (2024). Rick Ruback and Royce Yudkoff, Think Big, Buy Small, Ep. 231. Think Like an Owner podcast. Rick Ruback and Royce Yudkoff on Think Like an Owner
Ruback, R., & Yudkoff, R. (2025). Season Three Questions and Answers with Rick and Royce. Harvard Business School, Think Big, Buy Small. Season Three Q&A on hbs.edu
Kelly, Zenios, and Ng. (2026). 2026 Search Fund Study: Selected Observations. Stanford Graduate School of Business, case E967. 2026 Search Fund Study at Stanford GSB
BizBuySell. (2026). Insight Report data tables. BizBuySell. BizBuySell Insight Report data tables
Acquiring Minds. (2026). Acquiring Isn't Always a One-Way Door. Acquiring Minds podcast. Acquiring Isn't Always a One-Way Door
Guesswork Investing. (2026). True Cost of Hiring. Big Deal Small Business, Substack. True Cost of Hiring
IBBA and M&A Source. (2026). The Market Pulse Survey Q2 2026. PR Newswire. Market Pulse Survey Q2 2026 release
Ruback, R., & Yudkoff, R. (2017). Why You Should Buy a Business (and How to Do It). HBR IdeaCast, episode 564. Harvard Business Review. Listen on HBR IdeaCast
Acquiring Minds. (2026). The Roll-Up with No Investors & No Clock. Acquiring Minds podcast. The Roll-Up with No Investors & No Clock
Acquiring Minds. (2026). How 1 SBA Loan Brought Down 2 Businesses. Acquiring Minds podcast. How 1 SBA Loan Brought Down 2 Businesses
Bleizeffer, K. (2025). Think Big, Buy Small: Harvard Podcast Spotlights The Growing World Of Acquisition Entrepreneurship. Poets and Quants for Execs. Read on Poets and Quants for Execs
Acquiring Minds. (2026). Surviving a 2-Month Revenue Freeze in Year 1. Acquiring Minds podcast. Surviving a 2-Month Revenue Freeze in Year 1
Acquiring Minds. (2026). The $150k Hiding in the Business He Bought. Acquiring Minds podcast. The $150k Hiding in the Business He Bought