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How to buy a small business (legally)
An interview with Hal Stanton, M&A Attorney at Groundswell.
Bryan Shankman
April 17, 2025
Welcome to this week’s edition of The Workbench, a resource-rich weekly newsletter and podcast for home services entrepreneurs.
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This week, I had the pleasure of chatting with Hal Stanton from Groundswell, a boutique law firm specializing in SMB acquisitions. Hal also creates content for for the “Entrepreneurship Through Acquisition” community on SMB transactions.
Hal offered actionable insights on how home service operators can strategically prepare for optimal valuation, avoid common acquisition pitfalls, and set themselves up for a smooth transition when they're ready to sell.
The 7 Key Takeaways
Below are the 7 most essential insights from my conversation with Kent that you can apply to your home services business today.
1. Take buying a business seriously
Selling your business is likely one of the most important financial transactions you'll ever face - more significant than buying a home. Waiting until the last minute to involve legal and financial advisors can lead to unforeseen complications that might have been easily avoided.
The biggest mistake is not treating it like it's the acquisition or the sale of your life. If you think you're going to treat it like any other kind of business transaction you've done, you'll probably delay getting advisors involved. By the time your lawyer comes in, they might pick up on something that could've been minor heartburn caught early. It's crucial to treat this seriously given the amount of money changing hands.
2. Keep financials clean
Clean financial records directly impact the valuation of your business. When sellers mix personal and business expenses or fail to properly account for cash transactions, it creates headaches during due diligence and often significantly lowers the sale price.
Most businesses are valued as a multiple of EBITDA, so the question is: How do you make sure your EBITDA is the EBITDA that's used to value the business? Are you running personal expenses through your business? That's going to be a problem. You might have to take some short-term pain in your accounting today to maximize your valuation tomorrow
3. Beware of key man risk
Buyers are wary of businesses overly dependent on the current owner. If the owner holds all client relationships or operational knowledge, the business becomes riskier - and less valuable - to potential buyers. Building out clear processes and systems, and diversifying client relationships, can significantly improve your business's marketability.
Is the owner holding a lot of the business in their head? Do client relationships rely solely on them? Buyers want to see systems, processes, and diversified relationships in place. Thinking about this today can make your business infinitely easier and more appealing to sell down the line
4. Taxes and employees can cause headaches
Employment compliance is critical, especially in businesses where seasonal or temporary labor is common, such as lawn care or landscaping. Mistakes in paperwork, like incomplete I-9 forms, can scare off buyers concerned about potential legal penalties.
Are your workers legitimate? Are you properly completing I-9s? These kinds of things will give buyers the creeps, because they obviously come with potential penalties if they buy the company and authorities come after them. Get ahead of these compliance issues now to make your business more attractive.
5. Prepare for life after the deal is done
Post-acquisition transitions can be tricky. A solid relationship between buyer and seller often makes the post-sale transition period smoother. Hal emphasizes that good relationships not only help close the deal but also ensure long-term success after ownership changes hands.
The thing that makes a deal go well is the buyer and seller being willing to work out any differences and focus on the long-term picture. Post-close, unlike mega-deals, small business buyers will rely heavily on the seller to help with the initial transition. If you don’t have that strong relationship, you'll struggle taking over
6. Ensure contracts are reviewed
When buying or selling a business, contract assignability can be a hidden trap. Certain valuable contracts may not automatically transfer to a new owner. Addressing these issues early can prevent the need for a costly restructuring of the deal.
Some key contracts aren't assignable to another legal entity if the purchase is structured as an asset acquisition. Sometimes you need to restructure the deal as a stock sale. Involving your lawyer early can identify these issues and save you heartburn later.
7. Why home services are attractive
Home services companies are especially attractive due to their enduring profitability, repeat clientele, and relatively straightforward operations. These attributes make businesses in the home services sector very appealing targets for acquisition.
The reason home services have become more attractive is they're enduringly profitable. They're often well-run businesses with great client bases and strong, established reputations in their communities. I think that's probably going to continue along that trend.
Looking Ahead
Hal and Groundswell remain enthusiastic about the SMB acquisition space, particularly helping self-funded entrepreneurs acquire enduring, profitable companies.
They're dedicated to bringing the sophisticated legal expertise usually found in larger corporate deals down to the SMB market, making these services accessible and affordable.
Hal looks forward to continuing to support entrepreneurs in making smart, strategic acquisitions to create lasting value.
We've dedicated our law practice to being involved in the SMB acquisition ecosystem. It's a great space, filled with exciting customers to work with. We tend to really get along well with our clients, which is great, and we're looking forward to expanding even more
Wow! You made it to the end; thanks for sticking with us.
The full interview is available on YouTube below, Spotify here, and Apple Podcasts here.