What To Look For Before Buying A Business: 5 Things To Check

Buying a business is a little like buying a house.

Online it appears beautiful. But when you move in you discover that the windows leak during a storm, the foundation shows signs of cracking, and the owner has been covering the holes in the walls with his bare hands while keeping the walls from collapsing.

A buyer has to ask: what happens when the owner isn’t there?

The buyers are still there. In Q2, there were 2,117 small-business sales , according to BizBuySell. Buyers are also more selective, the data shows. They wanted recurring revenue. Clean financials. Lower capital needs. Businesses that didn’t need the previous owner standing in the middle of every decision.

Before buying a business, look at five areas: recurring revenue, market demand, operational complexity, profit margins and competitive or regulatory risks. A strong acquisition should also be able to operate without depending heavily on its current owner.

Alex Hormozi, co-founder and managing partner of Acquisition.com, described a similar list in a May 2026 video: stickiness, a growing market, low complexity, high margins and something unique.

Here are the five things I would look for.

1. Look For Recurring Revenue And Repeat Customers

A pest-control company gets paid because someone found ants in the kitchen.

It gets paid again because the ants come back.

The same is true for grass, pools, payroll, bookkeeping, IT support and software. The work has a way of finding its way back onto the calendar.

If you don’t have recurring customers, you will always be in the sales business.

Service businesses made up 40% of the businesses sold through BizBuySell in the second quarter. The report said buyers were drawn to companies with “recurring revenue, lower capital requirements, and transferable operating models.”

Andrew Stokely of Franchise Broker Group in Tennessee said, “Home services and anything with recurring revenue are still on fire.”

That can be a subscription. It can also be a pool route, a monthly bookkeeping client or a business owner whose Wi-Fi stops working every few weeks.

The customer doesn’t need to be persuaded all over again. Their problem has already done that.

2. Make Sure The Market Is Growing

A search trend becomes useful when you look at who is searching.

Customers search for the thing they need. Founders search for a business they can start.

“House cleaning near me” has more than doubled on Google over the past five years. “How to start a cleaning business” rose about 9% between January and August 2026, compared with the same period in 2025.

The two searches are moving at very different speeds.

Dropshipping has had the opposite problem. “ How to start a dropshipping business ” fell 72% from last year. Laundromat and vending-machine searches have barely moved after years of online hype.

The founders who win these markets usually notice customer behavior before the “easy passive income” videos arrive.

3. Evaluate How Dependent The Business Is On Its Owner

Restaurants make this lesson very clear.

One employee doesn’t show up. A delivery is late. The fridge starts making a noise nobody likes. There is a lease renewal to discuss, food costs to watch and a health inspector who could walk in at any time.

Hormozi defined operational complexity as “the number of variables that you need to actively manage to expand production.”

Every business has moving parts. The issue is whether each new customer adds another small fire for the owner to put out.

A franchise may come with systems that have already been tested. An e-commerce business may have a fulfillment partner. A field-service business with contractors will operate differently from one that must hire, schedule and retain a large team.

If an owner can’t leave for two weeks, they have built themselves a job with better branding.

4. Check The Business’s Profit Margins

Revenue makes a great LinkedIn post.

Margin keeps the company alive when a customer pays late, a supplier raises prices or the team needs another person.

Hormozi said: “In a perfect world, you’d want something that costs a penny that you could sell for a buck.”

The real world has a wide range.

Aswath Damodaran’s January 2026 margin table puts application software at roughly a 72% gross margin. Grocery retail kept around 1.3 cents in net profit for every dollar of sales.

That gap changes the kind of bad month a business can survive.

High margins do not make a business untouchable. They give an owner room to make an adjustment before the bank account starts making the decision for them.

5. Understand The Business’s Competitive And Regulatory Risks

A business can be perfectly legal, useful and profitable until the rulebook changes.

The FDA said on February 21, 2025 that the semaglutide shortage had been resolved. That changed what compounders could legally produce. Telehealth brands built around compounded versions had to rethink the model.

There is a second version of the same problem in software.

Relay appears on TechCrunch’s list of AI products that did not make it . Larger platforms added similar automation to their own products.

Warren Buffett called the protection an “enduring ‘moat’”.

For a small business, that could be a license, local reputation, proprietary data, a relationship nobody wants to lose or years of operational knowledge.