What goes in a buy box

The short version

• A good buy box covers four things: the type of business, the size, the location and how involved you plan to be.
• Many buyers add a fifth: the kind of seller they want to buy from.
• Be specific enough to rule things out. A buy box that fits everything helps no one.
• Set the size by earnings, not revenue, and keep it loose until you know your ceiling.
• Once it is written, use it everywhere: with brokers, owners, lenders and your own team.

The four core parts

1. The type of business. Name an industry, or a kind of work: commercial HVAC, specialty distribution, IT managed services, professional services. A category is fine. "Any business" is not.

Think about what you know. Experience in an industry, or in running a team, makes you a stronger buyer and a stronger loan applicant.

2. The size. State a range of earnings, not revenue. Buyers and lenders value businesses on what they earn for an owner, measured as SDE or EBITDA.

• SDE, seller's discretionary earnings, is what the business produces for one full-time owner, including the owner's own pay. It is usual for businesses earning under about $1 million.
• EBITDA, earnings before interest, taxes, depreciation and amortization, is what the business earns after paying someone a fair salary to run it. It becomes more common once EBITDA passes about $1 million. Brokers and lenders differ, so always ask which measure a number uses.

Leave the range wide for now. Step 3, Work out what you can afford, shows how your cash and a lender's limits set your ceiling. Then come back and tighten it.

3. The location. Name a home base and a radius or drive time. Most buyers of small businesses want one they can reach regularly. Be honest about how far you will really travel.

4. Your involvement. Say whether you plan to run the business day to day or hire someone to run it. This changes which businesses fit, how they are priced and how a lender looks at the loan.

An optional fifth part: the seller

Many buyers name the kind of seller they want: an owner who is retiring, a founder with no family member to take over or a business with a long-tenured team. It tells brokers you understand what makes a good handover.

Specific enough to rule things out

Test your buy box against a few real listings. If it fits almost all of them, it is too broad. If it fits none, it is too narrow. Aim for something that rules out most of what you see and fits a handful.

Be realistic about size

The size you name has to match what you can actually finance. A range far above your ceiling wastes your time and the broker's. Step 3 covers how to find it.

Put it to work

Once you have it, use it in every first message to a broker or owner, at the top of any profile you create and in conversations with your lender and advisors. Consistency makes you easier to remember.

The Build your buy box tool walks you through each part and turns your answers into a short paragraph you can send.