Buying an operating company is the fastest route to ownership that actually works. You inherit revenue, a team, and customers who already know where to call, and you skip the years most startups spend finding out whether anyone wants the thing.
The risk sits somewhere else. Buy well and you own an asset that funds a life. Buy badly and you have purchased a job with debt attached to it.
This walks through the process for the Chattanooga market specifically, including the Tennessee licensing and tax mechanics that surprise buyers coming from out of state, and the fact that three of the six counties in this metro are in Georgia.
Step 1: Define the Buy Box
The buyers who close good deals know what they want before they start looking. The ones who spend eighteen months and never close are usually "open to anything."
• Budget, all in. Purchase price is one line. You also need the equity injection, closing costs, working capital and a personal cushion. A $1M business typically requires $200,000 to $300,000 of total cash at closing.
• Your actual experience. Buyers who match their skills to the business outperform, and it is not close. Operations background points at service and manufacturing. Sales background points at B2B.
• Hours you want to work. Some companies need sixty hours from the owner. Some run with a manager and need twenty. Decide which one you are buying.
• Where. The submarket matters here. A business on Signal Mountain, one in Ooltewah and one in Fort Oglethorpe serve different customers, draw from different labor pools and sit in different states for tax purposes.
Step 2: Find the Opportunities
Marketplaces
BizBuySell, BizQuest and similar platforms are the visible inventory and a reasonable place to start. Understand that every other buyer is reading the same listings, and that a listing which has sat for eight months is usually priced wrong or carries a problem.
Brokers
Working with a broker gets you in front of businesses before they are publicly listed, and often ones that never will be. It also filters out the opportunities that do not fit you, which is worth more time than most buyers expect.
Direct Outreach
The best deals in a market this size frequently involve an owner who had not decided to sell until someone credible asked. In a metro of 588,000 people, the professional network of attorneys, CPAs and bankers is small enough that relationships genuinely produce deal flow. That is a real structural difference from Atlanta.
Step 3: The License Does Not Come With the Business
This is the step out-of-state buyers most often discover late, and in the trades it can delay a closing by months.
Tennessee requires a contractor license before contracting, bidding or negotiating a price whenever the total project cost is $25,000 or more, administered by the Tennessee Board for Licensing Contractors. Subcontractors need their own license when contracting directly with a contractor for electrical, mechanical, plumbing, HVAC or roofing work at or above the same threshold. Tennessee looks at the complete project cost including labor and materials, and separate phases or purchase orders cannot be used to get under the number.
The state line makes this sharper. If the company works both sides, licensure is needed in both:
• Electrical. Tennessee and Georgia have a trade exam waiver arrangement, though the Tennessee business and law exam still has to be passed.
• HVAC and plumbing. Georgia does not offer reciprocity here. A Tennessee-licensed HVAC or plumbing contractor cannot perform compensated work in Georgia without a Georgia license.
Restaurants have their own version. A liquor-by-the-drink license from the Tennessee Alcoholic Beverage Commission is issued to a licensee, and a purchaser taking over alcohol inventory has to hold the same type of license the seller held. Medical practices have a stricter version still, covered below.
The practical instruction: find out on day one what the business is licensed for, who holds the qualifying credential, and how long your own application will take. Then put that timeline in the letter of intent.
Step 4: Evaluate the Opportunity
The Financials
Three years of returns, profit and loss statements and balance sheets. Look at revenue trend, margin against industry norms, and whether cash flow supports both the asking price and the debt service you are taking on. SDE or EBITDA is the number that matters, depending on size.
Why the Owner Is Selling
Retirement, burnout and health are ordinary answers. A declining trend, a departing anchor customer or a shifting regulatory picture are answers you need to hear before you commit. Every reason deserves scrutiny; not every reason is a problem.
Customer Concentration
One or two customers above 20% to 25% of revenue is a real risk you are inheriting. In this market pay particular attention to businesses selling into the Volkswagen supply chain. Volkswagen employs about 5,200 people here, its workforce voted to join the UAW in April 2024 and ratified a first contract in February 2026, and a supplier’s cost structure is exposed to what happens at the anchor.
The Lease
Metro industrial vacancy was about 2.7% with average asking rent near $7.76 per square foot in the third quarter of 2025. In a market that tight, a lease with little term remaining and a landlord who will not commit is frequently the largest single risk in the deal, because your alternative space does not exist at a price you modeled.
Step 5: Financing, and What Changed in 2025
SBA 7(a)
Still the workhorse for acquisitions in the $500K to $5M range. SOP 50 10 8 took effect June 1, 2025 and changed the arithmetic:
• A complete change of ownership requires a minimum 10% equity injection of total project costs, which the SBA defines as all costs required to complete the change of ownership regardless of the source of funds.
• A seller note counts toward that injection only on full standby for the life of the SBA loan, meaning no principal and no interest payments at all, and only up to half of the required injection.
• A second subordinated seller note on limited standby sits outside the equity calculation and can be structured to stay out of the coverage analysis during underwriting.
Budget forty-five to ninety days from application to funding, and start the lender conversation before you write an LOI.
Seller Financing
Beyond the SBA rules, a seller willing to carry paper is generally a good signal. Terms of three to five years at market interest, secured by the business assets, are ordinary. Where a Chattanooga note is secured by real property, remember Tennessee’s indebtedness tax of $0.115 per $100 of indebtedness less the first $2,000, payable on recordation.
Step 6: Diligence, With the Tennessee Items Added
Everything standard applies: verify the revenue against bank statements, test customer concentration, meet the employees, read the lease, inspect the equipment, check every license and permit, and have an attorney look for litigation and compliance history.
Add these, which are specific to buying here:
• Franchise and excise registration. Tennessee taxes corporations, LLCs, limited partnerships and business trusts at 6.5% of net earnings and 0.25% of net worth, minimum $100. General partnerships and sole proprietorships are outside it. Confirm the seller has filed and paid, because arrears follow the assets in some structures.
• Business tax filings. The threshold rose from $10,000 to $100,000 of gross receipts per jurisdiction under the Tennessee Works Tax Act in 2023, and the calculation is per jurisdiction, so a company with locations in Chattanooga and East Ridge has more than one.
• Two-state registration. If crews or customers cross into Catoosa, Dade or Walker County, check that Georgia registration, payroll and sales tax have been handled.
• Personal property tax. Tennessee assesses commercial and industrial tangible personal property at 30% of value and commercial real property at 40%. Equipment-heavy businesses carry a recurring cost here that a buyer should model rather than inherit blind.
What Is Actually Buyable in This Market
The employer list here is unusually concentrated for a metro this size, and it shapes what comes up for sale. Erlanger runs close to 6,000 employees, Hamilton County Schools about 5,800, Volkswagen around 5,200, BlueCross BlueShield of Tennessee about 4,100, the Tennessee Valley Authority about 3,900, CommonSpirit’s Memorial Hospital about 3,700, McKee Foods about 3,200 and Unum about 3,100.
Four categories follow from that, and they are where most transactions in the $1M to $15M range happen:
• Industrial and commercial services. Machining, fabrication, industrial maintenance, electrical and mechanical contracting. The manufacturing base sustains them and the buildings cluster around the airport, Amnicola and the riverfront.
• Logistics and transportation services. I-24, I-59 and I-75 converge in this city, and Knight-Swift kept the former US Xpress headquarters here after acquiring it in 2023. Freight brokerage, warehousing, fleet maintenance and specialized transport all trade here.
• Home services. HVAC, plumbing, electrical, landscaping and pest control, concentrated where residential growth ran ahead of commercial, which means Hixson and North River to the north and Ooltewah, Collegedale and East Hamilton to the east.
• Healthcare and professional services. Practices, billing and back-office operations, and the professional firms that serve an insurance and healthcare employment base of this size.
Two categories to approach with more care. Restaurants and hospitality are real and there is genuine volume, though the tourism-driven ones carry a seasonality shape a lender will test hard. And any business selling into the automotive supply chain needs its customer concentration understood before anything else.
One More Thing Buyers Underrate Here
EPB, the municipal utility, has offered citywide gigabit fiber since 2010, ten gigabit since 2015 and twenty-five gigabit since 2022. For any business whose operations depend on connectivity, that is a durable and verifiable operating advantage, and it is one of the few genuinely distinctive things about operating in this city. If you are buying something with a data, logistics or back-office component, it belongs in your model.
Step 7: The Purchase Agreement
Representations and warranties, non-compete, indemnification and transition obligations are the four provisions that decide what happens when something turns out to be different than you were told. The allocation of purchase price across equipment, inventory, goodwill and the non-compete is negotiated here too, and it changes the tax outcome for both sides. Do not negotiate this document without an attorney.
Step 8: Your First 90 Days
• Learn before you change. Spend the first month understanding how the business actually runs, meeting every employee and calling the largest customers.
• Keep the people. Uncertainty drives good employees out faster than a bad offer does. Meet each one individually and tell them what you know.
• Confirm the licenses transferred or were re-issued in your name. Operating on a credential that expired at closing is a problem that compounds quietly.
• Track against your model. Compare actual results to the projections you underwrote. If something is off, you want to know in month two.
• Do not cut costs early. Understand why money is being spent before you stop spending it.
Common Mistakes Buyers Make in This Market
• Underwriting the license as an afterthought. In the trades this is the single most common cause of a delayed closing here. The credential belongs to a person, not to the company, and if that person is the seller you have a problem that has to be solved in the structure.
• Assuming Tennessee means no state tax. There is no personal income tax, and that is genuinely valuable. There is still 6.5% excise on net earnings and 0.25% on net worth at the entity, every year you own the business.
• Ignoring the second state. If the business serves customers in Catoosa, Walker or Dade County, you are inheriting Georgia obligations along with Georgia revenue. Confirm both are in order.
• Running out of working capital. Buyers put every dollar into the purchase and arrive on day one unable to make payroll through the first receivable cycle. Size the cushion before you size the offer.
• Skipping a quality of earnings review to save money. On a deal above roughly $2M, having an accountant test the earnings independently is cheap relative to what it finds. The add-backs a seller claims and the add-backs a lender allows are different lists.
• Changing things in month one. The business worked before you bought it. Find out why before you start improving it, and keep the people who know.
Ready to Start Looking?
I work with buyers across the Chattanooga metro and into North Georgia, from first-time buyers to operators making a second acquisition. If you know roughly what you want, the next step is a conversation about what is actually available and what it will take to close it.
Schedule a buyer consultation → https://calendly.com/nolan-nolanscottteam
Or call me directly at 404-247-5880. Every conversation is completely confidential.