Most people buying their first business don't know what the sequence is, which makes it hard to tell whether a conversation is progressing or drifting. This is the shape it usually takes.
The stages aren't bureaucracy. Each one exists because it's the cheapest point to discover a particular kind of problem — and taking them out of order generally means paying to learn something you could have learned for free.
The sequence
| Stage | What happens | What ends it |
|---|---|---|
| 1. Screening | You look at listings and off-market opportunities against your own criteria. Most get one look and no more. | You find something worth a conversation. |
| 2. First contact | You reach out to the broker or owner and qualify the deal fast — enough to know whether it's real, roughly priced right, and actually available. | You want the confidential detail. |
| 3. NDA | You sign a non-disclosure agreement and receive the real name, exact location, and actual financials. | You have enough to price it. |
| 4. Letter of intent | You make a written offer: price, structure, terms, and how long you need. Mostly non-binding, with important exceptions. | The seller accepts, counters, or declines. |
| 5. Due diligence | You verify everything the seller told you — financial, legal, operational — inside an agreed window, usually with exclusivity. | The numbers hold, or they don't. |
| 6. Purchase agreement | Lawyers paper the deal. The terms from the LOI become binding obligations with real detail attached. | Both sides sign. |
| 7. Closing | Funds move, the business changes hands. | You own it. |
| 8. Transition | The first 90 days: employees, customers, suppliers, cash. The seller is usually contracted to help for a period. | You're running it on your own. |
Financing doesn't wait its turn
The one thing that trips up first-time buyers: financing isn't stage 6.5. It runs in parallel with stages 4 through 6, and the work starts before you sign an LOI.
Talk to lenders while you're still deciding what you can afford — an SBA lender will tell you what they'll underwrite and on what earnings figure, and that number should shape the offer you make rather than surprise you after it. A diligence period that expires while you're still waiting on credit approval is the most common self-inflicted wound in a small acquisition.
Passing is a result
At every stage, the honest options include stopping. A buyer who has passed on eleven businesses for specific, recorded reasons is in a stronger position than one who has drifted through the same eleven and can't say why none of them closed.
Write the reason down when you walk. Months later it's the only reliable record of why a business felt wrong, and it's what stops you re-opening the same deal when it's relisted at a slightly different price.
What actually kills good deals
Not bad businesses — those are supposed to die. The two real failure modes are administrative:
Losing track. You'll be talking to several sellers at once, at different stages, each waiting on something different from you. The deal that dies quietly is usually not the bad one; it's the one you didn't follow up on for three weeks. Whatever you use to track it — software, a spreadsheet, a notebook — the requirement is that you can see what's stalled without thinking about it.
Stages that are aspirational rather than true. A deal you've labelled "in diligence" when no documents have arrived isn't in diligence. Being honest about where a conversation actually is, rather than where you'd like it to be, is what makes the sequence useful at all.
How long it takes
Longer than you expect. Screening to closing is normally measured in months rather than weeks, and the two stages that consume the most calendar time are diligence and financing — which is the argument for starting the financing conversation early and for asking for a diligence window with some slack in it.
Next: what the earnings figure a business is priced on actually means, and which documents to request from a seller once an NDA is signed.