Arizona Business Buyer's Guide

Why buy instead of start

A business you buy pays you the month you take the keys. The customers, the staff, the phone number and the lease already exist, and so does a track record a lender can underwrite. A startup has none of that, and most of its first two years go to building what you could have bought.

So the reason to buy is immediate income from a history you can check. The rest of this guide is about checking that history before you pay for it.

The tradeoff is price. A seller charges for the history, usually as a multiple of what the business earns, so you pay up front for income a startup would take years to reach. Whether that's a good trade comes down to two questions. Are the earnings real, and will they still be there after the seller leaves? A business that runs on the owner's personal relationships is worth less to you than the same numbers with a manager in place.

If you want real examples while you read, every business I have on the market is on my Arizona listings page, and the Phoenix ones are grouped on businesses for sale in Phoenix. If you own a business and you're reading this to see how buyers will look at yours, here's how I sell a business in Arizona.

What you are actually buying

Most Main Street deals in Arizona are asset sales. You buy the equipment, the inventory, the name, the phone number, the website and the goodwill, usually through your own new company. The seller keeps the old entity, its cash, its receivables and its debts. A stock sale, where you buy the entity itself, comes up when something valuable can't move any other way; a contractor license is the common Arizona example, covered below. For the tradeoffs, see asset vs. stock sale in Arizona.

The number that prices the business is Seller's Discretionary Earnings. The IBBA defines SDE as earnings before income taxes, non-operating and one-time items, depreciation and amortization, interest, one owner's entire compensation and benefits, and personal expenses the business pays³.

Ed calls SDE the top of the dam: all the cash the business produces for one working owner before anything is released downstream to pay the loan, the owner's salary or the next piece of equipment. You are buying that water level, so measure it yourself.

The 10–20% of gross sanity check

Before you trust any SDE figure, divide it by annual sales. For most owner-operated businesses I see, SDE lands between 10% and 20% of gross revenue. That's a rule of thumb from my own deals, not a law. A lean service company can run higher, and a high-volume, low-margin business can run lower.

Say a restaurant does $1.2 million in sales and claims $180,000 of SDE. That's 15%, which is believable on its face. If the same restaurant claims $420,000, that's 35%. The number could still be right, but the seller owes you an explanation and the paperwork behind it before you go any further.

The low end deserves the same question. SDE under 10% can mean a business that is struggling, but it can also mean an owner who runs family members through payroll or buys a truck every year. Those are add-back conversations, and they cut both ways: every dollar the seller adds back is a dollar you have to believe will be there once you own it.

Three ways to verify what it earns

1. Rule of thumb. Industry rules of thumb (a multiple of monthly sales for a bar, a multiple of SDE for a service company) are a first filter. They tell you whether the asking price is in the neighborhood. They never tell you what to pay.
2. Ask the seller. Ask how much the business put in their pocket last year, all in. Then ask them to show you. Owners know their number; the question is whether the tax returns agree.
3. Recast the financials. Start from net income on the federal tax return. Add back the owner's salary and payroll taxes, one owner's health insurance, interest, depreciation and amortization, and one-time expenses. Every add-back needs a document behind it. What's left is SDE you can defend to a lender. Which add-backs hold up is its own subject.

Then tie it to the bank. Twelve months of deposits should line up with reported sales, and the Arizona sales-tax returns should line up with both. A business that can't reconcile those three doesn't have an earnings number yet.

How deals actually get financed

Most buyers start at their own bank and hear no. In my experience the reason is collateral: a small-business sale is mostly goodwill, and goodwill is not something a bank can repossess. The Federal Reserve's 2026 survey of employer firms found insufficient collateral among the top reasons small-business applicants were turned down⁴.

Most of my deals close with an SBA 7(a) loan. SBA's current rulebook for lenders, SOP 50 10 8.1, applies to loans that get an SBA loan number on or after October 1, 2026⁵. Here's what matters to a buyer⁶:

• The maximum 7(a) loan is $5 million⁶.
• An outside buyer must put in at least 10% of the total project cost, and for a first acquisition the lender can't waive it⁶.
• A seller note counts toward that 10% only if it is on full standby, meaning no principal or interest payments for the entire term of the SBA loan, and it can cover no more than half of the required injection⁶.
• The acquisition portion amortizes over 10 years at most, with no balloon, unless real estate is part of the deal⁶.
• Anyone owning 20% or more of the buying company personally guarantees the loan⁶.
• The lender wants debt service coverage of at least 1.25 times for an outside buyer, an independent business valuation, and on deals of $3 million or more, a quality-of-earnings report⁶.
• Seller earnouts are out. The seller can stay on as a consultant for up to 24 months, not as an owner or employee⁶.
• Every owner must be a U.S. citizen or national living in the U.S.⁶

The classic structure I learned is a third down, a third from the bank, a third carried by the seller. Plenty of deals without a government-backed loan still look like that. With an SBA loan in 2026 the numbers change: you put in at least 10%, a full-standby seller note can cover up to half of that 10%⁶, and the lender decides whether any other seller note can be paid while the SBA loan is outstanding. Ask about that before you write the offer, not after.

The bank is the big dog. Its terms set your down payment, your seller note, your working capital and your closing date. Talk to an SBA lender before you talk price.

Walk into that conversation with a personal financial statement, two years of your own tax returns, a short resume that shows why you can run this kind of business, and proof of where your injection is coming from. Ask the lender to include working capital in the loan. Buyers who spend every dollar on the purchase price and have nothing left for the first slow month are the ones who call me in a panic in month three.

A lender runs its own checklist on you, too: credit, liquidity, industry experience. The five tests Phoenix lenders run walks through them, and SBA financing in an Arizona sale covers the seller's side.

The offer

• Never offer full price on the first pass. Tie every dollar you take off to something in the file: a thin month, an add-back without a receipt, a lease with two years left.
• Write the walk-aways in. Financing approval, satisfactory due diligence, the landlord's consent to assign the lease, and any license transfer. If one fails, you get your deposit back.
• Hold back $10,000 to $20,000 at closing in escrow for what nobody knew about: a late utility bill, a vendor invoice, an inventory count that comes up short. Release it on a date you both sign.
• Always ask for seller financing. A seller who will carry part of the price believes the numbers. A seller who won't carry a dollar is telling you something, too.

Price is only half the offer. Terms decide whether the deal works: how much cash at closing, how much the seller carries and at what rate, how long the seller stays to train you, and how inventory and working capital are handled. In most of my deals, inventory is counted at closing and paid at cost on top of the price, so you pay for what is actually on the shelves that day. How inventory is handled in an Arizona sale explains the count.

The offer usually goes in as a letter of intent. What belongs in an Arizona LOI covers the terms that matter.

Due diligence checklist

• Three years of federal tax returns and year-to-date profit and loss
• Twelve months of bank statements, tied to reported sales
• Arizona TPT (sales tax) returns for the same period
• Payroll records, W-2s and 1099s, and who actually does what
• The lease, every amendment, and the landlord's terms for consent to assign
• Licenses and permits: liquor, contractor, health, city business license
• An equipment list with age and condition, and what's leased versus owned
• Customer concentration: how much of sales comes from the top five accounts
• Supplier, franchise and service contracts, and whether they assign
• Pending lawsuits, liens and code violations
• Online reviews for the last two years
• The seller's Letter of Good Standing from the Arizona Department of Revenue¹³

Put a date on diligence in the LOI and use every day of it. Hire a CPA to recast the numbers and an attorney to write or review the purchase agreement. Don't try to save money on either one. Spend time in the business at different hours, and talk to the key employees once the seller agrees they can be told.

Most deals that fall apart here fall apart on the same few problems. Five red flags that kill Phoenix-metro sales lists them.

Arizona specifics that catch buyers late

Liquor licenses. Arizona's bar license (Series 6) and beer and wine bar license (Series 7) can move to a qualified buyer through a sale of the business, and to another location in the same county, and any change in ownership counts as a transfer⁷. The restaurant license (Series 12) is different: it depends on the restaurant getting at least 40% of its gross revenue from food¹⁰, and the statute doesn't list it among the licenses that move to a new location⁷. In practice a Series 12 buyer applies for a new license of the same series, and that's the situation the interim permit statute covers⁸. Check your own case with the Department of Liquor Licenses and Control or a liquor attorney.

Timing matters more than cost. The state has 105 days from filing to approve or deny an application, and can extend that⁹. An interim permit, $100 and good for up to 105 days, lets a buyer keep selling at the same premises while the application is pending⁸. Transferring a license from one person to another costs $300¹¹. I couldn't find a published average turnaround from the Department, so plan your closing around the full 105 days. If an SBA loan is involved, the transferable license is pledged as collateral⁶. What an Arizona liquor license is worth covers the price side.

You can handle any liquor transfer or new application yourself. Fill out the Department's forms and pay the fee, and it moves. I still highly recommend hiring a liquor license consultant. In my experience one missing document can push a closing back by weeks, and a consultant who files these every week is cheap insurance against that.

Sales tax follows the assets. Under A.R.S. 42-1110, a buyer must hold back enough of the purchase price to cover the seller's unpaid state taxes until the seller produces a receipt or certificate from the Department of Revenue showing nothing is owed¹². A buyer who doesn't withhold becomes personally liable for those taxes¹². ADOR's own guidance is to get the seller's Letter of Good Standing¹³. You also need your own TPT license: it doesn't transfer on a change of ownership¹⁴¹⁵.

Lease assignment. Arizona has no statute on commercial lease assignment; the lease controls. When a lease requires the landlord's consent, Arizona courts have held the landlord can't unreasonably withhold it unless the lease gives an absolute right to refuse¹⁶. Expect the landlord to ask for your financials and a personal guarantee, and start that conversation the week the LOI is signed. Lease assignment in an Arizona sale has more.

No bulk-sales notice. Some states make buyers notify the seller's creditors before an asset purchase. Arizona's current statutes have no bulk-sales article²¹, so the tax holdback and your own diligence are what protect you.

Contractor licenses. An Arizona contractor license is nontransferable¹⁷. Buy the assets and you need your own license and qualifying party, who needs at least four years of trade experience and must pass the exam²⁰. Buy the entity and the license can stay, but a transfer of 25% or more of the ownership has to be reported to the Registrar¹⁸, and if the qualifying party leaves, the company has 15 days to notify the Registrar and 60 days to replace them¹⁹. That is why one commercial painting contractor I have listed is a stock sale, with the seller staying on as qualifying party for up to six months.