How to Sell Your Business
A plain-English guide for owners of $2M–$50M companies who are ready — or just starting — to think about an exit.
1. Get clear on your goals
Full exit or partial? Stay on for a transition or step away? Price, speed, certainty and legacy trade off against each other. Knowing your priorities shapes which buyers make sense.
2. Know what your business is worth
Buyers price lower-middle-market companies on adjusted EBITDA multiples. Clean financials, recurring revenue, a management team and low customer concentration all push the multiple up. Get a free valuation range.
3. Prepare before you go to market
Three years of financials, tax returns, customer and vendor summaries, key contracts and an org chart. Fix obvious issues — owner dependence, messy books — before buyers find them in diligence.
4. Find the right buyer — confidentially
Options include individual acquirers, search funds, private equity firms, strategic competitors and ESOPs. Each pays differently and treats your team differently.
5. Negotiate the LOI and structure
Price is one line. Cash at close, seller notes, earnouts, working capital targets, asset vs stock sale and your post-close role matter just as much.
6. Diligence, closing and transition
Expect 60–120 days of diligence. A good process keeps the deal on track and your business running strong until the wire hits.
Questions about selling
Can I sell my business without a broker?
Yes. Many owners sell directly to an acquirer or private equity group. We can make a direct offer or introduce qualified buyers, and refer you to a broker only when that serves you better.
Should I sell as an asset sale or stock sale?
Buyers usually prefer asset sales; sellers often prefer stock sales for tax reasons. The right structure depends on your entity type, liabilities and tax position — always confirm with your CPA and attorney.
What is an earnout?
An earnout pays part of the purchase price later if the business hits agreed targets. It can bridge valuation gaps but adds risk; we help you weigh cash at close versus contingent payments.
What is a working capital peg?
The normal level of working capital the buyer expects at close. If you deliver less, the price drops dollar for dollar; if more, it usually rises.
Why do business sales fall apart?
Most often: earnings that don't survive quality of earnings, undisclosed issues, buyer financing problems, and seller fatigue during diligence.
Your exit options, side by side
Sell 100% to a strategic buyer
A competitor or adjacent company. Often pays for synergies, but may consolidate your brand, office, or team.
Sell to private equity (majority recap)
Sell 60–80%, keep a minority stake, and get a second payday when the PE firm sells. Best with $1M+ EBITDA and a team that can scale.
Sell to an individual or search fund buyer
Often SBA-financed, typically for smaller deals. Expect a seller note and a hands-on transition.
Family, management or ESOP
Preserves legacy and culture. Usually lower price and slower cash, often seller-financed.
What a realistic timeline looks like
Months 0–2: Prepare
Clean financials, add-back schedule, key-contract review, confidentiality plan, and a decision on your exit path.
Months 2–4: Market
Teaser and confidential information memorandum, NDAs, buyer calls, and indications of interest.
Months 4–5: LOI
Compare letters of intent on price, cash at close, earnout, seller note, working capital peg, and exclusivity length.
Months 5–9: Diligence & close
Quality of earnings, legal and operational diligence, purchase agreement, then funds wired and transition begins.
The deal terms that matter more than price
Two offers at "$12 million" can be worth very different amounts to you. Look past the headline:
- Cash at close — how much hits your account on day one.
- Earnout — money paid later if targets are hit. Tie it to revenue or gross profit you can control, not buyer-adjusted EBITDA.
- Seller note — you lend part of the price to the buyer. Check interest, term, and whether it is subordinated to a bank.
- Working capital peg — the level of receivables, inventory and payables you must deliver. A peg set too high quietly cuts your price.
- Escrow / holdback — a slice held 12–24 months to cover claims. Negotiate size, duration and what triggers it.
- Asset vs stock sale — changes your tax bill, sometimes by a lot. Model both with your CPA before you sign an LOI.
- Your role after close — length of transition, pay, title, and non-compete scope.
Why deals fall apart — and how to prevent it
Earnings don't hold up
A buyer's quality of earnings review finds lower EBITDA than you marketed. Fix: commission your own sell-side review first.
Surprises in diligence
Undisclosed lawsuits, tax notices, or customer losses. Fix: disclose early; bad news told late kills trust.
Financing falls through
Lenders cut the loan after reviewing the business. Fix: ask buyers for proof of funds and lender letters before granting exclusivity.
Seller fatigue
Months of document requests while running the business. Fix: build a data room before going to market.
Seller readiness checklist
- 3 years of financial statements and tax returns, reconciled
- Trailing-12-month P&L and current balance sheet
- Add-back schedule with receipts
- Customer list with revenue by customer (kept confidential until late diligence)
- Key contracts, leases, licenses and permits — and whether they can be assigned
- Org chart, key-employee agreements and pay
- Equipment list and condition
- Your personal goals: price floor, timing, role after close