First-Time Buyers

How do I evaluate a business?

Look at cash flow, customer base, team, and what changes after the owner leaves.

Practical Explanation

Evaluating a business has four core lenses: financial (margins, trends, working capital), customer (concentration, retention, contracts), operational (team, systems, owner-dependence), and strategic (industry tailwinds, defensibility). Strong businesses score well across all four.

Real-World Example

A buyer scoring a $2M HVAC business: 18% EBITDA, top customer = 4% of revenue, full management team, recurring service contracts. Strong target.

Typical cash required

N/A.

Experience required

Lean on a CPA and an industry mentor early.

Advantages

✓Filters out bad deals before LOI
✓Surfaces negotiation leverage

Risks

!Analysis paralysis
!Overweighting one lens

Frequently Asked Questions

How long should evaluation take?

Initial screen: a few hours. Full LOI-ready diligence: 30–60 days.

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