Buying another business acquires its customers, staff, equipment and reputation at once, rather than building them.
What is actually being bought
An asset purchase buys named assets — equipment, customer lists, the trading name — and generally leaves the liabilities behind. This is the common structure for small businesses and the safer one for a buyer.
A share purchase buys the entity itself, which carries everything: its contracts, its history, and its liabilities, including ones not yet known.
The distinction matters more than almost anything else in the deal, and it changes the tax position for both sides. It is a question for an attorney and an accountant before terms are agreed.
What to examine before committing
The financial records, and whether they reconcile to bank statements and tax returns. Three sets that agree is the test; the accounts alone are not.
Customer concentration, and whether the relationships belong to the business or to the departing owner. Where they belong to the owner, much of what is being paid for leaves with them.
Dependence on the owner generally, which is the largest determinant of whether the business survives the transition — see exit planning.
The staff, whether they intend to stay, and what they are owed in accrued leave.
Licences, and whether they transfer at all. In many trades they do not, and the buyer must hold their own.
Liabilities: debt, tax owed, disputes, warranty obligations on work already done, and unfinished contracts.
Price
Small businesses are commonly priced as a multiple of adjusted EBITDA, and the adjustments are where most of the negotiation happens — see business valuation.
Structuring the payment
Part of the price is frequently deferred and contingent on the business performing as represented, which protects the buyer and keeps the seller engaged through the handover.
The transition
Customers, staff and suppliers all decide whether to stay. An agreed period with the previous owner introducing rather than departing is usually the difference between buying a business and buying a list.