The 10-Step Guide to Selling Your Business for Maximum Value

Ready to sell your business? Trying to figure out if you’re ready to sell your business? In the middle of trying to sell your business and realizing that, yikes, you may be in over your head?

Take a deep breath and follow this 10-step process to sell your business stress-free with a solid exit strategy.

Step 1: Identify Your Reasons for Selling

The first thing you’ll need to do is find your “why.” Understanding your motivation helps shape the entire process and guides the decisions you make along the way.

For instance, if you're selling because you want to retire, you may be looking for a smooth transition and a deal that ensures long-term stability for your staff. If you're pursuing new ventures, you might prioritize a quicker sale to free up capital for your next project.

Burnout, on the other hand, may drive you to seek a more hands-off approach, maybe delegating most of the process to a broker.

Whatever your reason, each will come with unique considerations, influencing how you structure the sale and the timeline you set.

Step 2: Prepare Early for the Sale

Once you’ve identified the exact reason you want to sell, you want to prepare early, ideally 12-24 months before you want to sell. This advanced preparation allows you to position your business in the best possible light for potential buyers.

First, take the time to clean up your financials—buyers want to see clear, accurate, and organized records, since they’ll be scrutinizing your profitability and growth trends. We’ll get into this more later.

Strengthening operations is another key step, as a well-run business is more attractive to buyers and may command a higher price. This involves streamlining processes, improving efficiency, and ensuring that your business runs smoothly without bottlenecks.

You’ll work on refining your workflow, investing in staff training, or upgrading technology to improve productivity. A business with strong, self-sufficient operations is more appealing to buyers because it signals stability and potential for future growth, making it easier to transition under new ownership.

Lastly, reducing owner dependency ensures that the business can continue to thrive without you, making the transition smoother for the buyer and reducing their perceived risk. Early preparation gives you time to address these aspects, maximizing your business’s value.

Step 3: Get a Professional Business Valuation

Next, you’ll want to get a professional business valuation, which provides an objective assessment of what your business is worth.

One key measure used is EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), which shows buyers your company’s profitability. Comparable sales in your industry can also be an indicator of value because they show what similar businesses have sold for in the market.

• Check out common industry multiples & sales prices >> 

Here are three popular valuation methods:

• Income Approach: This method focuses on your business’s ability to generate future income, typically using discounted cash flow analysis.
• Market Approach: This compares your business to similar ones that have recently been sold, offering a real-world reference for pricing.
• Asset-Based Approach: This evaluates your business’s net asset value by subtracting liabilities from the total value of its assets.

Enlisting the help of a bookkeeper during this stage is a great way to make sure your financial records are accurate and up-to-date, making the valuation process smoother and more precise.

Step 4: Organize Financial and Operational Documents

Now it’s time to get the paperwork in order. Organizing both your financial and operational documents is an important step in preparing your business for sale that you just cannot overlook.

Potential buyers will want to review these records during the due diligence phase to assess the health and stability of your company. Having everything organized and readily available not only speeds up the due diligence process but also builds trust with buyers.

Key documents you should have in order include:

• Financial statements – Balance sheets, profit and loss statements, and cash flow statements from the past 3-5 years.
• Contracts – Copies of all vendor, customer, and lease agreements.
• Tax returns – Business tax filings for the past 3-5 years to verify your financial claims.

Ensuring these documents are well-prepared can prevent delays and help you present your business in the best possible light.

Step 5: Decide on DIY or Hiring a Broker

When it comes to selling your business, one of the important early decisions you’ll need to make is whether to handle the sale yourself (DIY) or hire a professional business broker. Each approach has its benefits and drawbacks, and the best choice depends on your specific circumstances, resources, and goals.

Let’s break down the key differences between the two methods.

Selling on Your Own (DIY)

Selling your business on your own gives you full control over the process. You’ll handle every aspect of the sale, from marketing to negotiating with potential buyers. This path may be a good option if you’re trying to save on broker fees and feel confident in your ability to manage the sale.

However, selling a business can be complex and time-consuming. If you're not familiar with business valuations, legal requirements, or negotiation tactics, you could struggle to get the best deal or close the sale quickly. It also requires a significant time commitment, which could distract you from running your business.

Hiring a Business Broker

Business brokers are professionals who specialize in selling businesses, and they can guide you through every step of the process. They know how to value your business, market it to qualified buyers, and handle negotiations. A broker can also maintain confidentiality, which may be important if you don’t want your employees or customers to know the business is for sale.

However, hiring a broker typically involves paying a commission—often a percentage of the final sale price. While brokers can save you time and increase your chances of finding the right buyer, you’ll need to weigh the potential costs against the benefits they offer.

Pros and Cons of Selling on Your Own

Pros: Selling on Your Own

• Full control over every part of the sale process and negotiations.
• No broker fees, allowing you to keep more of the sale proceeds.
• Direct communication with buyers, making the process more personal and transparent.

Pros and Cons of Hiring a Business Broker

Pros: Hiring a Business Broker

• Expertise and experience, ensuring the sale is handled professionally and efficiently.
• Access to a wider pool of potential buyers, increasing the likelihood of a quicker sale.
• Confidentiality management, as brokers know how to keep the sale under wraps until the right time.

Step 6: Marketing Your Business for Sale

Marketing your business effectively is important to attracting the right buyers. Start by listing your business on online marketplaces that specialize in business sales like BizBuySell or BusinessesForSale.

These platforms have a wide reach and are often the first stop for serious buyers. You should also leverage your personal and professional networks to spread the word. Referrals can sometimes lead to quicker and more qualified leads, especially if you’re in a niche market.

Creating a compelling and accurate listing is key. Make sure your listing highlights the strengths of your business like its profitability, customer base, and growth potential. Include important details like financial performance, operational processes, and any unique selling points that differentiate your business from competitors.

Transparency and accuracy build trust with potential buyers, so ensure all information is up-to-date and accurate to avoid future complications in the sale process. A well-crafted listing can make all the difference in generating interest and attracting the right buyer.

Step 7: Screen Potential Buyers

Screening potential buyers ensures that only serious, qualified candidates move forward in the sales process. Not every interested party will be financially capable or a good fit for your business, so it’s important to vet each buyer carefully.

Start by confirming their financial ability to purchase your business. You can request proof of funds, like bank statements or pre-approval letters, to ensure they have the resources necessary to complete the transaction.

You should also look into their motivation for buying—are they genuinely interested in growing your business, or do they have other intentions?

Beyond financial qualifications, it's important to gauge whether the buyer’s experience and vision align with the future of your business. A buyer who understands your industry or has experience running similar businesses is more likely to ensure the ongoing success of what you’ve built.

Asking the right questions during buyer meetings will help you assess their seriousness and suitability, ensuring you can proceed with confidence.

Examples of Questions to Ask During Buyer Meetings

1. What is your source of funding for this purchase?
2. Have you owned or operated a similar business before?
3. What attracts you to this specific business?
4. How do you plan to grow or manage the business after the sale?
5. What is your timeline for completing the transaction?
6. Are you willing to sign a non-disclosure agreement (NDA) to protect confidential information?
7. How do you plan to handle employee and customer transitions post-sale?

Step 8: Negotiate the Deal

Negotiating the sale of your business is arguably the most important step in the process and requires a clear understanding of your priorities, including price, payment structure, and contingencies.

Prepare for back-and-forth discussions where flexibility and clear communication will help you reach a mutually beneficial agreement. For instance, if the buyer pushes for a lower price, you might negotiate better payment terms like a larger upfront sum or performance-based earn-outs.

A business broker is key in this process, especially if you're unfamiliar with the complexities of negotiations. They advocate for your best interests, helping you avoid common mistakes like revealing too much or compromising too quickly, while also navigating the legal aspects to ensure your contract includes essential protections.

Tips for Negotiating the Best Terms

• Be clear on your minimum acceptable price but leave room for negotiation.
• Structure payments to minimize risk, like using a mix of upfront and deferred payments.
• Include contingencies to protect yourself, such as performance-based clauses or financing conditions.
• Stay open to compromises that align with your goals, like accepting a lower price in exchange for better payment terms.
• Use an attorney to review contracts and protect your interests legally.
• Let the buyer make the first offer, giving you room to adjust the deal in your favor.
• Remain calm and professional throughout negotiations to build trust and avoid emotional decisions.

Common Negotiation Mistakes to Avoid

• Revealing too much too soon, which can weaken your negotiating position.
• Focusing only on price and neglecting payment terms or other important factors.
• Agreeing to contingencies without proper legal review, which can lead to future complications.
• Failing to walk away from a bad deal due to desperation or emotional attachment.

Involving a business broker at this stage can reduce the chances of making these mistakes. They provide objectivity, negotiation expertise, and industry knowledge to help you secure the best possible outcome.

Step 9: Close the Deal

Now it’s time for the final active step: closing the deal!

This final step involves finalizing all the legal and financial aspects of the sale, including signing the final contracts, transferring ownership, and completing any required legal filings.

At this stage, you'll work closely with your lawyer to ensure all necessary documents are properly prepared and that the terms of the sale are clearly outlined. The buyer will also conduct any final due diligence, ensuring everything is in order before the ownership officially changes hands.

Lawyers, accountants, and brokers play essential roles during the closing process. Your lawyer ensures that the contracts protect your interests and comply with legal requirements, while your accountant helps manage the financial aspects, such as tax implications and the proper transfer of assets.

A broker can help organize and follow the final steps, keeping the process smooth and ensuring all parties stay on track to complete the sale.

Step 10: Plan for Life After the Sale

Once the sale of your business is complete, it's time to plan for what comes next.

Whether you're transitioning into retirement or exploring new ventures, how you handle the profits from the sale can shape your future. Work with financial advisors to invest wisely, ensuring that your wealth is managed in a way that aligns with your long-term goals.

You might choose to diversify your investments, set up passive income streams, or plan for retirement security.

Beyond the financial aspects of selling, transitioning from business ownership to a new phase of life can be a huge change filled with emotion. If you’re retiring, it’s important to plan how you’ll spend your time and stay engaged in activities that are meaningful to you.

If you’re moving into new ventures, taking time to recharge before jumping into your next project can help you approach it with fresh energy and focus.

Frequently Asked Questions

What are the steps to selling a small business?

The steps to selling a small business include preparing your business by organizing financials and operations, getting a professional valuation, marketing it to potential buyers, screening buyers, negotiating the deal, and working with legal and financial professionals to close the sale successfully.

How much should a small business be sold for?

The sale price of a small business depends on multiple factors including its profitability, assets, market conditions, and industry. A common method is to base the price on a multiple of earnings (EBITDA), usually between 2 to 5 times, or by comparing to similar businesses recently sold in the market.

How do I calculate the value of my small business?

To calculate the value of your small business, you can use a multiple of its earnings (EBITDA) or net profit, usually ranging between 2 to 5 times, depending on your industry and market conditions. You can also instead use the asset-based approach, subtracting liabilities from the total value of your assets.

How do you sell ownership of a business?

To sell ownership of a business, you'll need to draft a legal agreement outlining the terms of the sale, transfer of shares or assets, and finalize it with the buyer. It’s a good idea to work with a lawyer to ensure the contract is legally sound and protects both parties.

How fast can you sell a small business?

The average time to sell a small business ranges from 6 to 11 months.