Buying a business for sale in Southern California: what to check first

How small businesses are priced

Most small businesses sell for a multiple of seller's discretionary earnings (SDE): the profit before taxes, plus the owner's salary and benefits, personal expenses run through the business, one-time costs, interest, depreciation and amortization. Larger businesses, roughly above $5 million in revenue, are usually priced on EBITDA instead.

Multiples vary by industry. Average SDE multiples from closed small-business sales reported to BizBuySell for Q3 2021 to Q2 2026 include:

Averages are a starting point, not a price. Try your own numbers with our business valuation calculator, which loads these industry averages and adjusts for size.

Where to find businesses for sale

• Online marketplaces: the largest pool of listed businesses, but also the most competition from other buyers.
• Business brokers and agents: listings that come with financials and a seller who is ready to sell.
• Direct outreach: letters and calls to owners in your target industry; many owners near retirement have not listed yet.
• Your network: CPAs, attorneys, lenders and suppliers often hear first when an owner wants out.

What moves the price up or down

• Owner dependence: a business that runs without the owner is worth more.
• Customers: repeat customers and contracts add value; one big customer adds risk.
• Licenses and permits: check which ones transfer to a new owner and which must be reapplied for.
• Clean records: tax returns that match the profit the seller claims.
• The real estate: how many years are left on the lease, the rent, and whether the property can be bought.

Financing the purchase

Many buyers use an SBA 7(a) loan. Buyers often put in about 10% of the price, and some deals use seller financing for part of it. The business's cash flow must cover the loan payments with room left for the new owner to earn a living, so lenders look closely at the SDE and the records behind it.

Common deal structures

• Asset sale or stock sale: most small deals are asset sales, which change how taxes and old liabilities are handled. Ask your CPA and attorney.
• Seller note: the seller finances part of the price and is paid over time.
• Earnout: part of the price depends on future results.
• Transition period: the seller stays for weeks or months to train the buyer and introduce customers.

Do not skip the real estate

A business with a short lease can lose its location right after you buy it. Before you sign, review the lease term, renewal options, assignment rules and rent increases, or price an option to buy the building. If the business needs a new or larger space, see our pages on industrial space for lease in Los Angeles and Orange County.

A simple buyer checklist

1. Three years of tax returns and profit and loss statements.
2. Customer list, contracts and how much the top customers buy.
3. Staff, key employees and whether they will stay.
4. Licenses, permits and any pending legal issues.
5. The lease, or the property if it is included.
6. Equipment condition and inventory.