What’s the difference between starting a business from scratch and buying an existing one?

In this episode of Before You Buy or Sell a Business, Jared Johnson talks with Sathya Ramanathan, a former tech founder who grew and exited a software company before acquiring a light construction equipment dealership in the Dallas-Fort Worth area.

Sathya shares what he learned from selling his first business, working alongside new management during a two-year transition, and then moving into acquisition entrepreneurship. He explains why buying an established company can be less risky than starting one, the due diligence steps he followed, and how he evaluates deals for fit, financial health, and growth potential.

Jared and Sathya cover how to build trust with employees after a takeover, why vendor and customer relationships matter during closing, and the operational improvements Sathya is making to grow his new business. Sathya also offers candid advice on who should (and shouldn’t) buy a business, and how to match your skills with the right opportunity.

Main Takeaways:

• Buying a business can reduce risk compared to starting from scratch, but still requires careful planning
• Fit matters: match your skills to the business’s needs to add immediate value
• Strong relationships with the seller, vendors, employees, and customers smooth the transition
• Key diligence items include working capital, customer concentration, and recurring revenue
• Avoid rushing into changes before understanding the existing operation
• Flexibility on location, deal structure, and operations increases acquisition options

Episode Highlights:

[02:14] Selling a tech startup and working through a two-year transition with new management

[07:42] Why buying an established business can be less risky than starting one

[10:15] Defining location, sector, and business characteristics before searching

[13:50] The importance of customer concentration and churn in deal evaluation

[17:26] Why Sathya prefers going through brokers rather than sourcing off-market

[19:18] Asset sale vs. stock sale: flexibility in LOI and tax considerations

[21:30] Setting and negotiating a working capital target in the LOI

[28:11] What made a light construction equipment dealership the right fit

[35:03] Managing vendor, customer, and employee relationships before and after closing

[42:50] The value of patience before making operational changes

[46:12] Growth plans: marketing, digital transformation, and potential expansion

[51:04] Who should and shouldn’t buy a business

Connect with Sathya: https://www.linkedin.com/in/sathyaramanathan/

More from Jared:

If you have questions for Jared, visit: https://jaredwjohnson.com

https://www.linkedin.com/in/jaredwjohnson/

DISCLAIMER:

The views and opinions expressed in this program are those of the guests and host. They do not necessarily reflect the views or positions of my employer.

Keywords:

how to buy a small business, buying vs starting a business, working capital in acquisitions, asset sale vs stock sale, business due diligence, customer concentration risk, vendor relationships, small business transition, employee trust after acquisition, entrepreneurship through acquisition, ETA, light construction equipment business, small business growth strategy, operational improvements, acquisition search strategy