Buying a very small business means buying a set of assumptions

What is actually changing hands

Small businesses get bought and sold constantly, and at the smallest end the transaction is nothing like the corporate version. A round, a shop, a client list, a van and a phone number — these change hands between individuals, often informally, and the price is settled by negotiation rather than by any established method.

The first useful question is what you are buying. Equipment and stock are straightforward, because they exist and can be inspected. Everything else is a claim about the future: that customers will keep coming, that the name means something, that the position on a particular street will keep producing walk-in trade. Those claims may be entirely true. They are still claims, and the price usually assumes all of them hold.

The awkward part is that the value may be the person leaving

In a very small business the owner is frequently the reason it works. They know the customers by name, they know which supplier will bend a deadline, and a good proportion of the goodwill is personal loyalty rather than loyalty to a trading name.

None of that transfers automatically. Some of it transfers with time and effort, some of it never does, and the seller is not always in a position to know which is which. The reasonable response is not to refuse to pay for goodwill but to test it: how much of the revenue comes from customers who deal with the business rather than the individual, how long they have been buying, and what has happened historically when somebody new answered the phone.

Look at the records, and at what is missing from them

Ask to see what the business can actually evidence — what it invoiced, what it was paid, what it spent, and how that has moved over several years rather than one. A single good year proves very little, and the year immediately before a sale is the year a seller has the most reason to make look healthy.

Look particularly at whether recent revenue came from a small number of customers, whether any of it is one-off work that will not repeat, and whether costs have been suppressed by deferring things that will now fall to you. A business with no recent spending on maintenance is not cheap to run. It is expensive to run, later.

Buying the assets and buying the whole thing are different transactions

Broadly, a small business can change hands as a bundle of assets, or as the entire legal entity that owns them. The distinction sounds technical and it decides something important: whether the obligations of the old business come with it. Debts, disputes, employment obligations and commitments to suppliers may follow the entity even when nobody mentioned them.

How that works, what searches are sensible and what protections a purchase agreement should contain differ substantially by country and by the structure involved. This is the point in the process to pay a qualified professional for a couple of hours, and it’s one of the few places where doing so reliably costs less than not doing so.

The handover is part of what you are paying for

A period during which the previous owner is still around, introducing customers and explaining why things are done the way they are, is often the most valuable component of the whole deal. It is also the component most likely to be agreed vaguely and then to evaporate.

Write it down: how long, how many days a week, what specifically they will do, and what happens if they stop. A seller who is reluctant to commit to any of that is telling you something about how much of the business lives in their head.

When starting from nothing is the cheaper option

Buying makes most sense when the thing being bought is genuinely hard to build — a location, a licence, a long-standing customer base, a stock of specialist equipment. It makes least sense when what is really being sold is a job with some second-hand tools attached, at a price that assumes years of future profit.

The comparison worth doing is blunt. Work out what it would cost, in money and in months, to build the same position yourself. If the answer is close to the asking price, the sale is offering you speed rather than value, and speed is worth paying for only when the market you are entering is not going to wait.