Tackling Growth Delusions When Buying a Business

By Michael D. Rubin, CEO & Founder · Updated September 2026 · 738 words

Buy a business for the earnings it produces today, not the growth you expect to add, because growth that looks obvious from outside is often growth the owner has already tried, rejected or cannot capture. If a company could easily double in size, most owners would do it before selling. Treat growth as a possible bonus, and make sure the purchase works without it.

This is not an argument against ambition. It is an argument about what you pay for and what you borrow against.

Why growth looks easier from outside

Buyers spot what seems like obvious upside: no online marketing, a neighboring market left unserved, prices below competitors, a product line that could be added. Some of those opportunities are real. Many are not. The owner may have tried and failed, lacked the staff to deliver, or learned that customers in that area buy differently. Outsiders, especially buyers new to the industry, lack the context to tell which is which.

Buyers from other industries are common and often do well. The risk comes from assuming that success elsewhere translates directly into growing this particular company. Until you run it day to day, you cannot judge how best to grow it.

Stability is the real test

The question that decides whether a purchase is sound is simple: will revenue and profit hold at their current level after you take over? That depends on whether customers stay when the owner leaves, whether key employees remain, whether the market is steady, and whether earnings come from repeatable work rather than one-time jobs. A business that must grow just to cover its debt is a fragile purchase.

• Revenue from repeat or contracted customers.
• A customer base not concentrated in a few accounts.
• A team that runs daily operations without the owner.
• Several years of steady margins, not one peak year.

Pay for what exists

Sellers sometimes price in their growth plans. Buyers should not. Valuation is built on historical adjusted earnings, meaning earnings after removing one-time and owner-specific items, multiplied by a figure that reflects risk. MDR & Associates most often sees companies in the $3 million to $100 million revenue range sell at three to seven times adjusted EBITDA. A buyer who pays a multiple on projected earnings is paying the seller for work the buyer will have to do. The multiple already rewards a company with good prospects; applying it to future earnings counts the same prospects twice. See how professionals value a business on revenue, EBITDA and multiples.

Lenders take the same view. Acquisition loans, including SBA loans, are underwritten on existing cash flow. If the deal only works with growth, it probably will not finance, and if it does, the debt will squeeze you in any year the growth fails to arrive.

Test growth ideas before and after closing

Before closing, ask the seller about each idea. Was it tried? What happened? What would it cost to try again? Then budget any growth plan separately from the purchase, including the hiring, equipment and marketing it would need, and make sure you can fund it without starving the core business.

After closing, test ideas one at a time and on a small scale. Expect some to fail; that is normal, not a sign you bought the wrong company. Keep notes on each test so you learn which levers actually move this company. The ideas that work are your reward for the risk you took. The price you paid should never have depended on them.

Where real upside does come from

Some new owners do grow the companies they buy, often because they bring something the seller lacked: capital for equipment, a sales background, better systems, or simply more energy than an owner preparing to retire. Those gains are real, but they come from the buyer's work after closing. Plan them, fund them and pursue them, while keeping them out of the purchase price and out of the loan calculation. Buyers who pay for the record and then add growth of their own are the ones who come out ahead.

How MDR & Associates presents a company

When MDR & Associates represents a seller, the financial recast shows buyers the historical earnings with every adjustment explained, so offers rest on the record rather than on promises. Growth opportunities are described as opportunities, not built into the numbers. Buyers can see how we work with them on our buyer page.

Where this fitsBuy a business in Texas →

Questions owners ask next

Should I ever pay extra for growth potential?

Only when the growth is already under way and documented, such as a signed contract or a product with early sales, and even then structure helps. An earnout that pays the seller if the growth arrives lets both sides share the outcome instead of the buyer paying in advance for something that may not happen.

What if the seller insists the business is about to take off?

Ask for evidence: signed orders, a dated pipeline, customer commitments. If the seller is confident, propose tying part of the price to results. A seller who believes in the growth but refuses any payment linked to it is asking you to carry a risk they do not want.