There's a person on the internet right now telling you to quit your job and buy a laundromat. They've got a YouTube channel with great lighting and a confident voice, and they make it sound like the most obvious decision in the world. Find a business, get an SBA loan, replace your income, be your own boss by next quarter.

I need you to slow down.

I'm not here to tell you that buying a business is a bad idea. I bought one. It changed my life. I want to help you do the same thing. But the version of this story that the internet is selling right now is dangerously incomplete, and I've watched enough people get excited by the highlight reel to know that somebody needs to talk about the parts they're leaving out.

Let's start with SBA loans.

SBA loans are one of the most common ways people finance a small business acquisition, and for good reason. The terms are relatively favorable. The interest rates are reasonable. The repayment periods are long enough to give you room to operate. Every business acquisition guru will tell you about SBA loans because they make buying a business feel accessible, and they are. That part is true.

Here's the part they skip: SBA loans almost always require you to put up collateral. And we're not talking about the business itself. We're talking about your personal assets. Your house. Your savings. And in many cases, the assets of your spouse, even if your spouse has nothing to do with the business.

Read that again. If you take out an SBA loan and the business fails, the bank can come after your home. Your spouse's assets. The property your family lives in. This is not a hypothetical worst case. This is how the loan is structured.

This is actually one of the reasons I didn't use an SBA loan for my acquisition. I didn't want to put my house up as collateral, and I didn't want to include my wife Chelsea as a guarantor on the financial side of the business. I'm happy to compensate her for the work she does within the business, but I wasn't willing to create a situation where, if something happened to me or the business failed, she'd be saddled with that debt. I ended up using seller financing instead, which I'll get into in a future issue.

But most people don't know that seller financing is even an option, because the gurus don't talk about it. SBA loans are the default recommendation, and nobody stops to ask whether you've fully thought through what you're putting on the table.

Now let's talk about the most common piece of advice in this space: "Find a business that replaces your current income from day one."

On the surface, this makes sense. If you're making $120,000 a year at your job, find a business that can pay you $120,000 a year right away, and the transition is seamless. No pay cut, no savings runway, no stress.

The problem is math. A business that generates enough cash flow to pay you $120,000 a year is not a small business. That's a significant operation with a significant purchase price, which means significant debt. And significant debt means that if anything goes wrong in the first year or two, you're not just a little underwater. You're drowning.

This is where key person risk becomes critical. In my case, key person risk wasn't about a single figurehead. It was about my stylists. I acquired a salon with four stylists, and each one of them carried a consistent, recurring book of business. If any one of them left purely because of the ownership change, that was a 25% reduction in our predictable revenue. If two left, that was 50%. If all four walked, I would have owned a building full of empty chairs and a loan to pay off.

I was able to work through that by understanding what each person needed and tailoring my approach to give them a reason to stay. One year in, we've held on to every single one of them. But I was aware of the risk from day one, and I planned for it. A lot of buyers don't.

When I was at a business buying workshop, I sat next to someone who was planning to buy a service business, a landscaping company, and put their 18-year-old son in as the primary operator and manager. Think about that for a second. You're buying a business where the existing employees are already nervous about a change in ownership. They're already wondering if they should stay. And now they find out that their new manager is an 18-year-old with no experience in the industry.

Even some of the people presenting the workshop seemed uncomfortable with how bad of an idea this was, but were nervous to say it outright. And that's the problem. Depending on who's coaching you, whether it's a workshop instructor, a business broker with a commission on the line, or a guru selling a course, they may not tell you about the red flags. They have a vested interest in the deal going through. You're the only person at the table whose incentive is to get it right.

There's a third piece of readiness that's less about money and more about you. Owning a business, especially a local one with employees, requires skills that most people haven't tested under real pressure. Can you sit down with an employee and have a hard conversation about their performance? Can you mediate a conflict between two people on your team who aren't getting along? Can you let someone go and handle that conversation in person, with respect, and then move forward?

I was fortunate. I'd spent six and a half years as a manager my career in tech. I'd had those difficult conversations. I'd navigated interpersonal conflicts on teams. I'd learned, sometimes the hard way, how to give direct feedback and make tough calls. When I bought the salon and suddenly had to manage stylists who didn't know me and weren't sure they trusted me, that experience was the foundation I stood on.

If you don't have that foundation yet, that's okay. But recognize it as a gap. You can work to develop those skills while you're still employed, in environments where the stakes are lower. Role-playing difficult conversations might sound hokey, but it genuinely makes a difference to go through the motions before you're doing it for real with someone's livelihood on the line. And if management isn't something you ever want to do yourself, you can hire for it. The same way I don't handle my own books (I leave that to an accounting firm), you can bring in someone with the interpersonal skills the business needs. But know that going in. Don't find out on day one.

The responsible path is not always "buy a business this year." Sometimes the responsible path is: spend the next six months or a year getting ready.

Start by being unemotional about what type of business you actually want. You're going to have an inclination, just as a person excited about buying a business, to make a deal work. To force the numbers. To convince yourself you can see it. You have to temper that and force yourself to go slow and be methodical.

In my case, I originally looked at trade businesses: electricians, plumbers, HVAC companies. I found out that in most states, there are ownership requirements tied to licensing. A plumbing company might need a master plumber within a certain percentage of the ownership structure. That meant I'd need to partner with someone I was just getting to know, and for my first acquisition, I wasn't comfortable with that.

So I looked at what I actually wanted in a business. I wanted employees who were skilled and licensed, because their expertise in the craft meant I could focus on running the business instead of training people to do the work. I wanted a model where the employees had a natural incentive to provide excellent service and keep customers coming back. And I wanted something where my tech background in systems, operations, and customer experience would be a genuine advantage.

A hair and nail salon checked every box. The stylists are licensed professionals who get better at their craft over time. In Virginia, it's common practice for stylists to be paid exclusively on commission, which creates a fascinating dynamic. Their earning potential in a busy salon is substantially higher than what they'd make with an hourly wage and a small commission at a traditional salon in other states. But it also means they have no incentive to stay if the salon isn't bringing in business. That puts real responsibility on me to handle the marketing and keep new clients coming through the door. In return, I can expect them to deliver an excellent experience and build a loyal book of business. It's become the foundation of a really strong reciprocal relationship that's working well from both sides.

None of that happened by accident. It happened because I took nine months to research, evaluate 32 deals, and figure out what I was actually looking for before I committed to anything.

The gurus don't make money telling you to wait. I don't make money telling you to wait either. But I'd rather you do this right in a year than do it wrong next month because what isn’t a mass movement but a movement of the masses to build that hundred dollar empire on every block.

Next issue, I'm going to get into the actual search process: where to find businesses for sale, how to read a listing, and what the red flags look like. But I wanted to write this one first, because none of that matters if you're not ready for it yet.

Michael

I’m building out a suite of products and services to help people like you consider buying or starting then scaling a local small business. If you’re interested in learning more, let me know.