Kody Wirth is a content writer and SEO specialist for Palo Alto Software—the creator's of Bplans and LivePlan. He has 3+ years experience covering small business topics and runs a part-time content writing service in his spare time.
9 min. read
Updated January 4, 2024
Selling a business is as complex as starting one. If you want to do it right and maximize the value of your business, you must take specific steps.
This article will cover what to do before, during, and after the sale to ensure you’re legally covered and have a plan to exit gracefully.
*Disclaimer: All content in this guide is intended to be general information, and nothing constitutes legal advice.
Understanding your motivation for selling not only shapes your approach but can significantly influence the outcome of the sale. Potential buyers will likely ask why you’re selling, and you need a good answer.
It usually comes down to one (or a few) of the following reasons:
Organized and strong financials will pull a lot of weight in convincing prospective buyers of the value of your business. Your financials tell the story of your business and provide a glimpse into profitability and potential. It’s not all that different from pitching to investors when pursuing funding.
When preparing to sell, your financials will be under the greatest scrutiny. You’ll likely need to provide at least the last 3-5 years of data. To ensure everything is correct, consult a licensed accountant or financial advisor to review your financials and tax returns. The last thing you want to do is have gaps in reporting.
If you’ve written a business plan, you have already addressed this information and may just require a small update. If you haven’t, use the one-page business plan format to quickly create a brief summary.
A professional valuation is the process of determining the economic value of a business. You can do this yourself, but it will be easier and more credible if you hire a professional appraiser.
An appraiser will evaluate:
They will also factor in external market conditions and industry trends to finalize the estimated value of your business. This number or range can be used to set the sale price for your business
This valuation method leverages common sense and experience to provide you with an approximation of your business value. It can be a great option to use before hiring a professional.
Hiring a business broker or investment bank can significantly streamline the sale of your business. They will guide you through the complexities of the sales process, handle paperwork, and ultimately help you land the best deal for buyers and sellers.
Here are the services a broker should provide:
While hiring a good broker isn’t necessarily cheap, it will save you time, help you avoid mistakes, and ensure the transaction goes smoothly. If you’re transitioning ownership to a family member, employee, or other trusted party, you could do this yourself. However, you must involve a lawyer to confirm that everything is done correctly and is legally binding.
Tip: When hiring a broker, be wary of those who demand large upfront fees, make over-optimistic valuations of your business, or lack references from previous sales.
Ideally, your broker will promote your business and seek out buyers for you. However, even with this support, identifying the right buyer and finalizing a sale can still take months or even years.
To keep the process moving and ensure you don’t waste your time, here are a few best practices to follow:
Ideally, you’ll end up with multiple interested buyers. This will give you greater leverage and more options if a deal falls through.
Dig deeper: How to position your business to be acquired
Speaking of deals, once you have reached a potential agreement, it’s time to get all the documents and legal details in order.
You should work with a lawyer at this stage to safeguard your interests and ensure a smooth transition to the new owner. Here’s an overview of the essentials they’ll help you assemble:
Successfully selling your business isn’t the end. You now need to plan how to manage any profits from the sale.
You may want to start another business, support charitable causes, or enjoy the fruits of your labor. Planning ahead can reduce tax liabilities and ensure the money serves your long-term goals.
While we can’t account for everything, here are some of the most common financial considerations to plan for post-sale.
Don’t rush any decisions about how you’ll use your newfound wealth. Take the time to consider all options and speak with financial and tax advisors to discuss your goals, investment options, and the pros and cons of specific decisions.
Selling a business is a common exit strategy—but it’s not the only option.
There are strategic benefits to combining with another business. The key is to find a partner whose business objectives and culture align with yours. Once the merger is complete, you can explore stepping back and allowing other leadership to take over.
If you have family members, heirs, or trusted employees interested in the business—consider transferring ownership to them. This eliminates the drawn-out process of finding a buyer and can be especially meaningful for family-owned enterprises.
While not a common option for small business owners, initiating an initial public offering (IPO) can raise capital and potentially provide an exit by gradually selling your stake.
Liquidating your company assets may be the best option if your business isn’t profitable and you can’t find a buyer. While it’s often a less lucrative exit strategy, you’ll at least recoup something from your business.
Deciding to sell your business is a huge milestone in your entrepreneurial career. It’s not something you should do rashly. By taking the time to plan properly—you’ll increase your chances of getting your asking price.
Check out our other business management resources to learn how to grow and prepare your business long before considering a sale: