When people talk about buying a small business, the focus is usually on the purchase price.
That’s a mistake.
What matters just as much — sometimes more — is how much cash you have available after the deal closes. From my experience, not having enough cash creates pressure, stress, and bad decisions early on.
Here’s what I wish I had understood before buying a small business.
The Purchase Price Is Only the Starting Point
Buying a business doesn’t end when the money changes hands.
Right away, you start paying for:
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Rent
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Utilities
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Payroll
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Inventory
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Repairs
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Permits and fees
Even if the business is already operating, cash goes out fast.
I learned this while breaking down the real costs in How Much It Really Costs to Start a Small Food Business in California.
Working Capital Is Not Optional
Working capital is the cash you use to keep the business running day to day.
You need it for:
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Slow weeks
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Unexpected repairs
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Delayed permits
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Inventory shortages
Without working capital, every expense feels like an emergency.
This is where many buyers underestimate how fragile the early months can be.
Slow Business Early Is More Common Than People Admit
One of the hardest parts of buying a small business is how slow things can feel at the beginning.
Even after taking over, improving operations, and reopening, sales don’t always bounce back right away. Customer habits take time to return, and momentum doesn’t reset overnight—especially if the business was disrupted or closed for any period.
This is why having enough cash matters so much. Slow early sales don’t always mean the business is broken. Sometimes they simply mean the business is restarting from zero while expenses continue at full speed.
Without working capital, slow months can feel overwhelming. With it, they become part of the transition rather than a crisis.
You Need an Emergency Buffer (Even If Things Look Good)
Something will go wrong.
Equipment breaks. Inspections get delayed. Sales fluctuate.
Having an emergency buffer:
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Reduces stress
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Prevents rushed borrowing
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Gives you time to make better decisions
Many of the mistakes I talk about in Mistakes I’d Avoid If I Bought a Small Business Again came from not having enough margin for error.
Debt Payments Shrink Your Real Cash
Loans don’t just cost money — they reduce flexibility.
Monthly payments:
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Limit how much cash you can reinvest
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Add pressure during slow periods
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Affect every decision you make
I explain more about how borrowing changed my experience in Is Taking a Loan to Start a Small Business a Mistake?.
Cash Flow Determines How Long You Can Survive
Cash flow isn’t about profit on paper.
It’s about timing:
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When money comes in
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When bills are due
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How long you can operate without growth
Poor cash flow makes even good businesses feel like they’re failing. I explain why this happens in Why Poor Bookkeeping and Cash Flow Kill Small Businesses.
So, How Much Cash Is “Enough”?
There’s no single number, but a safer approach is to have:
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3–6 months of operating expenses
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Extra funds for repairs and upgrades
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A buffer that covers loan payments during slow months
Buying a business without this cushion turns small problems into big ones.
Final Thoughts
Cash doesn’t guarantee success, but a lack of cash almost guarantees stress.
If you’re thinking about buying a small business, plan beyond the purchase price. The money you keep available after closing often matters more than the deal itself.
Disclaimer
This article is based on personal experience and is for educational purposes only. It is not financial advice.
