7 Smart Filters from Experienced ETA Searchers

In the world of Entrepreneurship Through Acquisition (ETA), the question every searcher asks sooner or later is: “What actually makes a business worth buying?” It’s not just about the size of the deal, the industry it’s in, or how flashy the numbers look on a broker's teaser. At SMBash we try to help searchers and operators understand the impact of each of these filters.

The most successful searchers and operators consistently apply a specific set of filters — not to eliminate all the “maybes,” but to help them spot the rare “yes.” This post dives into 7 core filters that many buyers use when evaluating small to medium businesses (SMBs) for acquisition.

If you attend SMBash, you'll be able to speak to searchers and operators in person. The variety of industries and methods for filtering searches are vast. There is not a one size fits all model, but we think these filters are a good start.

1. Consistent, Recurring Revenue

The holy grail in SMB acquisitions? Predictability.

Seasoned searchers prioritize businesses with consistent, recurring, or repeatable revenue models. This could be true subscription revenue (like managed IT services), recurring service agreements (like pool maintenance or pest control), or steady re-orders in niche manufacturing.

📌 Why it matters:

Predictable cash flow allows for more confident forecasting, smoother operations, and safer debt servicing — especially when using SBA or seller financing.

Red flags:

Highly seasonal businesses, or those reliant on one-time project revenue (like custom homebuilders), tend to introduce more risk than many searchers want to take on.

2. The Owner's Role is Not the Entire Business

You’re not buying a job — you’re buying a machine.

That’s the mindset behind this critical filter: Can the business operate without the owner doing everything? If the seller is the rainmaker, technician, sales closer, and operations manager all in one, you’re walking into a fragile system.

🎯 Look for:

• A competent second-in-command

• Documented processes

• Systems and SOPs

• A customer relationship structure that’s not owner-dependent

📉 Caution:

If the top customers only do business with the seller personally, that business’s value may walk out the door post-acquisition.

3. Strong Margins and Clean Financials

Numbers don’t lie — but they do need to be readable.

Healthy gross and net margins indicate pricing power, efficient operations, and room to grow. But equally important is how those numbers are presented — are the financials clean, consistent, and clearly separated from the owner’s personal expenses?

✅ Good Signs

• The books are boring — in a good way. Predictable, steady growth with no wild swings suggests operational maturity and disciplined spending.

• Margins aren’t just strong, they’re defensible. A business with high margins and a reason why (like niche positioning, repeat customers, or premium pricing) is far more attractive than a business with just one good year on paper.

• Revenue minus expenses actually matches cash in the bank. If what you see in QuickBooks lines up with deposits and withdrawals, it shows transparency and accuracy in financial reporting.

• A real P&L and balance sheet exist—and make sense. Clean statements that reconcile, with no mystery categories or “miscellaneous” bloat, are a breath of fresh air.

• Margins have survived turbulence. If the business stayed profitable through economic shocks, pandemics, or industry shifts, that resilience is worth a lot.

• Clear separation between business and personal. No murky expenses, no owner's kid’s car lease buried in the utilities. It means fewer headaches in due diligence—and fewer surprises post-close.

• Consistent reinvestment. You can see that retained earnings are being used for training, tools, or growth initiatives—not just owner distributions.

❌ Watch Out For

• Year-over-year revenue looks great—until you dig. If revenue grew 40% last year but margins fell off a cliff, it may mean growth was bought, not earned.

• One customer makes up half the income. High customer concentration puts pressure on margins and negotiating power. If that account walks, so might the profit. (more on this in the next section)

• Margins look too good to be true. Sometimes, sellers leave out key costs (like the owner's time or rent they don't pay themselves). You want real numbers, not illusions.

• You need a decoder ring to read the books. Custom Excel sheets with no standardization, or round-number guessing games, make it hard to trust anything you're told.

• They "don’t really use a CPA.” That can be fine in the early days, but if they’re making seven figures and still rely on napkin math… run.

• They explain away missing income with “we just do a lot in cash.” That might sound like a feature, but in acquisition land, it’s a bug. You can’t buy what you can’t verify.

• Add-backs are everywhere—and questionable. If EBITDA is being inflated by non-recurring expenses that seem oddly recurring, the margins aren’t what they seem.

4. Low Customer Concentration

This filter protects you from disaster. If one or two customers make up more than 20–30% of the company’s revenue, you could lose half the business overnight with a single contract termination.

📌 Ideal scenario:

• Diverse customer base

• Low churn

• Long-term contracts or repeat behavior

• Strong Net Promoter Score (NPS)

🔍 How to find it:

Ask for revenue by customer over the past 24 months and calculate what % each one represents. This is often where deal-killers show up early in diligence.

5. Sticky Industry, Not Sexy

The most reliable businesses aren’t always the most exciting. In fact, most seasoned ETA buyers avoid the trendy and look for the “boring but essential.”

💡 Great examples:

• Commercial HVAC & Plumbing Services

• Niche B2B services

• B2B Janitorial & Commercial Cleaning

• Waste Management / Dumpster Rentals

• Testing and inspection services

• Local logistics or specialty manufacturing

• Linen & Uniform Rental Services

🧠 Why it works:

These industries often have less competition, higher pricing power, and clients who stay for years — even decades. What they lack in glamour, they make up for in bankable cash flow.

Are we missing some of your favorite eta businesses to buy? Let us know what you’ve been looking at or investing in by commenting on any of our LinkedIn posts! Or better yet, join us in Dallas, April 2026 for SMBash!

6. Growth Potential Without Reinvention

Searchers don’t want fixer-uppers — they want businesses with solid foundations and clear levers for growth. The ideal company doesn’t require a brand overhaul or tech rebuild on Day 1. Instead, you’re looking for low-hanging fruit:

🚀 Tactical upside levers, meaning an aspect of the business that you’ll be able to improve easily:

• No digital marketing presence

• Manual processes that can be automated

• Pricing power not yet leveraged

• Cross-sell or upsell opportunities

• Add-on services that existing customers already want

📊 You want a business where a smart operator (that’s you) can create a meaningful boost in revenue or efficiency within 6–12 months — without lighting the place on fire.

7. Cultural Fit + Post-Close Support

Many searchers skip this — and regret it.

No matter how great the margins are, if the seller is burned out, bitter, or disorganized, you could be walking into chaos. Look for sellers who are motivated, helpful, and aligned with your goals.

🤝 Good signs:

• The seller offers a 3–6 month transition period

• They want to see the business succeed under your leadership

• They’re open to seller financing (showing confidence in you)

🌟 Bonus:

Seller referrals, introductions, and training can help you retain staff and customers — and make your first year dramatically smoother. Sadly, we have had many speakers on our stage tell stories of sellers that made things difficult for the buyer post-close. Come to SMBash, leave with knowledge you didn't know you needed.

Final Thought: No Deal is Perfect — But Your Filters Keep You Focused

Every acquisition involves trade-offs. The business might have great customers but a messy P&L. It might have strong processes but thin margins. The key is knowing which trade-offs you’re willing to accept — and which ones break the deal.

Experienced searchers don’t buy perfect businesses.

They buy good businesses with strong fundamentals, using these filters to avoid costly mistakes and spot hidden opportunities.

Want More Frameworks Like This?

📍Join us at SMBash 2026 — the conference for searchers, buyers, and operators in the ETA space. You’ll hear real stories from people who’ve walked this path, get actionable due diligence tips, and meet the service providers and deal partners you’ll need to succeed.

🗓️ April 22–24, 2026 | Dallas, TX

🎟️ Tickets now available