How to Buy a Small Business: Expert Insights from the Salt Lake City ETA Panel
Chris Barrett
Introduction
Buying a small business is one of the most accessible paths to entrepreneurship—but it’s also full of landmines. At a recent live panel hosted by Chase Murdock of Durable at Edison House in Salt Lake City, three professionals deeply embedded in the acquisition entrepreneurship world came together to share real-world insights on what it takes to get a deal done.
The panel featured:
Chris Barrett, founder of Midwest CPA, who helps buyers make sense of messy financials through quality of earnings reports and post-close advisory
Eric Hsu, M&A attorney and founder of Clear Focus Law, who specializes in small business acquisitions from LOI to close
Matthias Smith, founder of Pioneer Capital Advisory, who helps buyers navigate SBA financing and bank underwriting
Together, they broke down what actually works when buying a business: from structuring your deal team and funding the acquisition, to spotting red flags and negotiating working capital. Whether you’re early in your ETA journey or actively hunting deals, this panel offered tactical, honest advice to help you avoid rookie mistakes and close with confidence.
Why Buying a Small Business Is on the Rise
Buying a small business isn’t a fringe idea anymore—it’s becoming one of the most accessible and attractive ways to become an entrepreneur. As panelist Chris Barrett noted, we’re in the middle of a massive generational transition. Millions of baby boomers are retiring and looking to sell their businesses, many of which are profitable, stable, and underpriced relative to their cash flow.
At the same time, more aspiring entrepreneurs are realizing that they don’t have to build from scratch. Entrepreneurship Through Acquisition (ETA) offers a faster and often less risky path to owning a business—and building wealth. MBA programs, Twitter communities, podcasts, and playbooks have made the process more transparent, creating a surge of interest in how to buy a small business.
Understanding SBA Financing for Acquisitions
Financing is one of the biggest hurdles for first-time buyers, but it doesn’t have to be. Matthias Smith gave a practical overview of how buyers can leverage the SBA 7(a) loan program to acquire a business with limited upfront cash.
- 10%–15% down is required, often split between the buyer and a seller note
- The SBA-backed loan covers up to 90% of the purchase price
- 10-year amortization, no balloon payments
- Additional capital can be included for working capital and closing costs
The catch? Not all lenders are created equal. Each bank overlays its own credit standards on top of SBA requirements, so working with a financing advisor who knows which lenders are best for your specific deal is essential.
Making Sense of the Financials with a Quality of Earnings
Financial due diligence is where good deals get validated—or fall apart. Chris Barrett, founder of Midwest CPA, explained the critical role of a quality of earnings (QoE) report in evaluating the true earning power of a business.
A QoE report adjusts for:
- One-time or non-operating income/expenses
- Owner add-backs and personal expenses
- Accounting errors or inconsistent bookkeeping
- Seasonal or unusual revenue spikes
Chris also highlighted working capital as a frequent deal killer. Many sellers don’t understand how much working capital needs to stay in the business to keep it running post-sale. Buyers need to calculate this number accurately and set expectations early to avoid surprises later.
The Legal Framework of Buying a Small Business
Eric Hsu, M&A attorney at Clear Focus Law, brought a legal lens to the discussion, especially around how to write a smart letter of intent (LOI) and navigate deal structure.
- Treat the LOI as a roadmap—not just a placeholder offer
- Be specific about purchase price, working capital, seller notes, and transition support
- Avoid vague language that can lead to misunderstandings
- Understand the legal difference between asset vs. stock sales
Eric emphasized that strong buyer-seller relationships are critical. Deals with open communication tend to survive; transactional ones often don’t.
Common Mistakes That Kill Deals
No panel on how to buy a small business would be complete without war stories. The panelists shared several common reasons why deals fall apart:
- Financing gaps due to poor lender fit or post-close liquidity issues
- Overstated earnings that unravel under diligence
- Ambiguous LOI terms leading to disputes later
- Seller cold feet triggered by delays or miscommunication
- Undisclosed liabilities or tax issues that surface too late
The takeaway? Move quickly, stay transparent, and keep all stakeholders aligned throughout the deal.
Building the Right Deal Team
If you’re serious about buying a small business, don’t try to wing it. Successful buyers build a strong team early—and each advisor plays a critical role in de-risking the process.
Your core team should include:
- A CPA experienced in small business acquisitions and QoE analysis
- An M&A attorney who understands deals in the $1M–$10M range
- A capital advisor or lending expert, especially for SBA deals
- Optional: A mentor or peer group for support and accountability
Each panelist emphasized: start building this team before you find a deal, not after. A good team won’t just help you close—they’ll help you avoid the wrong deal entirely.
Summary Transcript
Chase Murdock: Welcome out to the Durable Small Business Series. We pulled this together last-minute—thanks for showing up on a powder day. This event is about bringing together Main Street business builders, not just the usual tech crowd.
Eric Hsu: I’m the founder of Clear Focus Law. We’re a boutique M&A firm that helps buyers through the entire acquisition lifecycle—pre-LOI through diligence, negotiation, and closing.
Chris Barrett: I run Midwest CPA. We specialize in working with acquisition entrepreneurs. We help pre-close with quality of earnings and post-close with tax, bookkeeping, and strategy. Small business financials are often a mess. We clean them up and help buyers understand what they’re really getting into.
Matthias Smith: I run Pioneer Capital Advisory. We help buyers solve SBA financing. Every bank has different credit boxes. We help match the deal to the right lender, and then help get it across the finish line quickly.
Why ETA is Having a Moment (00:12–00:18)
Chris Barrett: Boomers are retiring. Their businesses need new owners. Add that to the rise of MBA ETA clubs and communities like Twitter and Searchfunder—more people are realizing buying a business is a real path to wealth, and cheaper than you’d think.
Matthias Smith: You can often acquire a business for the same down payment it would take to buy a house. SBA financing fills the gap, especially when layered with seller notes and investor capital.
How SBA Financing Works (00:18–00:23)
Matthias Smith: The SBA 7(a) program exists to make business ownership accessible. You can finance up to 90% of the total project cost. Most banks want 10%–15% down, often split between cash and seller financing. They’ll also look for working capital and lender fees to be baked into the loan.
Chris Barrett: SBA is the reason many buyers get their first deal done. But structure matters—make sure you don’t underestimate post-close liquidity.
What Quality of Earnings (QoE) Is and Why It Matters (00:23–00:27)
Chris Barrett: QoE helps validate earnings and spot red flags. Sellers often overstate EBITDA. We come in to normalize earnings, spot bogus add-backs, and make sure you’re not overpaying.
Working capital is also a big deal. Many sellers don’t understand what needs to be left in the business. Buyers often assume it’ll stay. That misunderstanding alone can kill a deal.
What Kills Deals (00:27–00:34)
Matthias Smith: Working capital surprises. A buyer thinks $500K will stay in the business. The seller thinks it’s $100K. Nobody talked about it up front.
Eric Hsu: Cold feet. If the seller senses the deal is shaky or dragged out, they’ll bolt. Most of my dead deals had one thing in common—sellers lost confidence.
Chris Barrett: Time kills deals. You need to move fast, be organized, and make sure you’re the one people are waiting on—never the other way around.
The Importance of the Buyer-Seller Relationship (00:27–00:34)
Eric Hsu: The deals that survive are the ones where the buyer has a strong relationship with the seller. Weekly calls. Check-ins. Talk about the transition. Build trust. If you go dark, your deal dies.
Chris Barrett: Search can be lonely. That’s why it’s important to be in a peer group, or at least active in the ETA community. This is a long journey. Don’t do it solo.
LOI Strategy and Deal Structuring (00:34–00:40)
Eric Hsu: A strong LOI is your first chance to get everyone on the same page. Don’t be vague. Define working capital targets. Outline transition expectations.
Chris Barrett: Build buffer into your LOI offer. Assume earnings might come in 5–10% light after QoE. If they don’t, great—you win. If they do, you’re not backpedaling on your number.
Audience Q&A (00:40–01:11)
Q: How do you find good deal flow?
Matthias Smith: BizBuySell, Axial, and local brokers are a start. But also get scrappy—network with commercial bankers, CPAs, and attorneys. Get known in your niche.
Eric Hsu: Don’t underestimate direct outreach. Once you know your target industry, start emailing and calling. Relationships create deals.
Q: Asset sale or stock sale—what’s better?
Eric Hsu: Asset sales are safer. You avoid liabilities. But sometimes stock sales are necessary—federal contracts, licenses, EIN continuity, etc. If you do a stock deal, consider an F-reorg for tax and liability protection.
Chris Barrett: Asset sales also give you a step-up in basis. That means bigger depreciation write-offs, which can offset income post-close.
Q: Does SBA prefer certain industries?
Matthias Smith: They stay away from cannabis, gambling, and adult services. Otherwise, they’ll lend on most businesses if the earnings are stable. For manufacturing, they might offer higher guarantees. For SaaS or niche service, make sure you’re working with a bank that understands that space.
Q: What if I need more liquidity post-close?
Matthias Smith: It’s hard to add a line of credit after closing. Do it upfront. Even if you don’t need it now, it can save your deal later.
Disclaimer
The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting, or investment advice. You should consult a qualified legal or tax professional regarding your specific situation.
