Courtesy of Hughes Commercial
Selling a small business isn’t like selling a house—and it’s not like selling commercial real estate, either. It’s more nuanced, more emotional, and often more complex.
If you’re a business owner thinking about an exit (now or a few years out), it’s worth understanding how the sale process actually works—and how to prepare for it.
Here’s a step-by-step breakdown of what to expect when selling a business:
1️⃣ Valuation: What’s It Really Worth?
Before anything hits the market, you need to know what your business is worth. Most small businesses are valued based on SDE (Seller’s Discretionary Earnings) or EBITDA, with a market multiple applied.
Factors that impact value:
Recurring vs. one-time revenue
Profit margins
Dependence on the owner
Industry outlook
Financial cleanliness
Tip: Clean books = better value. The fewer adjustments needed, the more confident buyers will be.
2️⃣ Packaging: Telling the Right Story
Once you have a valuation, the next step is preparing a Confidential Information Memorandum (CIM)—a document that tells the full story of your business, including:
Business model
Financials
Market opportunity
Assets and equipment
Key risks and transition plan
This isn’t fluff—it’s a strategic tool to attract serious buyers and reduce time-wasting inquiries.
3️⃣ Marketing: Quiet, but Targeted
Unlike selling real estate, business sales are confidential. You won’t put up a sign or blast it on social media. Instead, your advisor will:
Pre-screen buyers
Use blind listings
Require NDAs
Market directly to strategic or financial buyers
You don’t want employees, customers, or vendors knowing too early.
4️⃣ Buyer Meetings & Offers
When a qualified buyer expresses interest, you’ll typically:
Hold a confidential meeting
Share limited financials
Receive a Letter of Intent (LOI)
The LOI outlines price, deal structure, and due diligence terms. It’s non-binding but sets the tone.
5️⃣ Due Diligence: The Deep Dive
This is where the buyer reviews everything—from financials to contracts to operations. They may also:
Conduct a site visit
Talk to key employees (with permission)
Review tax returns and payroll reports
Evaluate legal or environmental risk
Pro tip: Be ready. Unorganized sellers lose deals during diligence.
6️⃣ Closing the Deal
After due diligence wraps up, final deal documents are signed. Common elements include:
Asset or stock purchase agreement
Non-compete clause
Training/transition period
Allocation of purchase price (for taxes)
Then comes funding, transfer of licenses, and formal ownership transition.
Final Thought:
Most business owners only sell once. But buyers? They do this all the time. That’s why it pays to have the right advisor in your corner—someone who knows the process, understands value, and protects your interests.
