Ten Steps To Sell Your Small Business

For many owners, selling a small business is one of the most consequential events of their lives. It can also be a lengthy and complex process, and how well you prepare for it will have a direct bearing on what you walk away with.

Whether you’re approaching retirement, pursuing a new venture, or responding to an inbound offer, you need a well-conceived plan. That’s precisely why business exit strategy consulting exists: to help owners move through the process with preparation and confidence. 

This guide will outline the 10 key steps involved in selling a small business, from initial preparation through closing, so you’ll have a better idea of what to expect and how to make the most of it. 

How Long Does It Take to Sell a Small Business? 

It usually takes at least eight months to sell a small business, according to the California Association of Business Brokers (CABB), which also notes that “this figure seems to increase yearly.” Several variables will likely impact how long it takes for a particular business sale to close, including market conditions and financial performance.

When Should I Start Planning to Sell My Business? 

Advisors typically recommend starting the planning process at least 18-24 months before going to market. Combined with how long the actual selling process takes, this means the end-to-end process of selling your small business is not measured in weeks or months, but years (ideally).

How to Sell Your Small Business: A Step-by-Step Guide

Every business (and business sale) is different, but successful sales tend to follow a similar framework. Here are 10 key steps to selling a small business.

Step 1: Prepare Your Business For Sale

The process of selling a small business is made much easier with adequate preparation time. Most buyers are looking for a buyer-ready business. That means you’ll need to reduce owner dependency and make your business “turnkey” for buyers by documenting processes, stabilizing personnel, and getting your financial records in order. As mentioned above, your preparation should begin sooner rather than later, at least 18 months in advance.

Step 2: Define Your Exit Goals

Take some time to reflect and clarify your personal, financial, and timeline objectives. That way, every decision that follows, whether related to price, deal structure, or transition terms, will align with your preferred outcomes. 

If you work with a small business exit advisor, they’ll help you to bring these objectives into focus and keep them at the forefront of the sales process.

Step 3: Get a Professional Business Valuation

This step requires you to hire a professional appraiser or small business broker to determine a realistic market price based on Seller’s Discretionary Earnings (SDE) or EBITDA multiples, as well as current market trends and business assets.

Step 4: Gather and Organize Essential Documents

Compile at least three years of tax returns, GAAP financial statements, balance sheets, and cash flow reports. The more complete and organized your records are, the more likely they’ll be to withstand buyer scrutiny during due diligence.

Step 5: Assemble a Team of Advisors

It’s your small business, but selling it is more of a team sport. Your advisory team should include: 

• A specialized business broker or Mergers and Acquisitions advisor (M&A advisor) to handle valuation and marketing
• A corporate attorney to manage legal documents and maintain required confidentiality
• A Certified Public Accountant (CPA) for deal structuring and tax implications
• A wealth advisor or financial planner to help you maximize net proceeds, minimize tax liabilities, and align the sale with the exit goals defined in Step 2

Depending on the specifics of your business and sale objectives, your advisory team might also benefit from additional members, like industry consultants or an estate planning attorney.

Step 6: Develop a Marketing Strategy

In the context of selling a small business, “marketing” means working with a broker to create a Confidential Information Memorandum (CIM) and identify potential buyer profiles, which could include competitors, private equity firms, or strategic buyers.

Step 7: Protect Confidentiality with NDAs

Require all prospective buyers to sign a Non-Disclosure Agreement (NDA) before sharing any sensitive financial or operational information, including potential customer information. While an NDA is not a legal requirement, it’s not something you want to neglect. It protects your Intellectual Property (IP), provides a legal basis for action if the buyer breaks confidentiality, and generally indicates a serious buyer.

Step 8: Identify, Vet, and Negotiate with Buyers

Before any negotiation can take place, you need to thoroughly screen all potential buyers for financial capacity (e.g., proof of funds) and industry experience. Then, you can negotiate on things like deal structure, tax implications, and contingencies, rather than on price alone. 

Deal structure, for example, might include arrangements like an earn-out (where part of the payment is tied to future business performance), a seller note (where the seller finances a portion of the purchase price), or an equity rollover (where the seller retains a stake in the business post-sale).

Step 9: Sign a Letter of Intent (LOI) and Navigate Due Diligence

A Letter of Intent simply formalizes agreed-upon terms between seller and buyer. Once the LOI has been finalized, the buyer due diligence phase begins. As potential buyers evaluate your business through its financial and operational records, you’ll be expected to cooperate fully and transparently.

Step 10: Close the Sale and Transition Ownership

Finally, it’s time to execute final agreements prepared by your attorneys, transfer all assets, and commit to a structured handover or transition plan. This often includes training the new owner to ensure the long-term success of the business.

How Do I Find Qualified Buyers for My Small Business?

Three of the most common approaches are to do it yourself, use a broker, or work with an exit strategy consultant.

The “DIY” approach might be viable if you’re an experienced owner who has an understanding of what the process involves, as well as the time to devote to finding a qualified buyer. To find buyers on your own, you have several potential avenues to consider, including online marketplaces, targeted outreach to strategic buyers, professional networks, investors, or private equity groups.

For most small business owners, those upfront commission savings are outweighed by what a broker or exit strategy consultant brings to the table.

Do I Need a Business Broker to Sell My Business?

Working with a business broker is not required, but working with either a business broker or exit strategy consultant is highly recommended. 

While trying to sell your business on your own might save you a small percentage on commissions, a broker will help maximize valuation, maintain confidentiality, find and qualify buyers, and manage what can be a time-consuming sales process. Brokers have also been through many small business sales before, so they bring a great deal of experience and insight to the process.

Can I Sell My Business Without a Broker?

Yes, you can sell your business without a broker (see above), but you risk undervaluation, breaches of confidentiality, and potential legal liabilities. You also have to source and qualify potential buyers on your own, and devote hours of work (on top of everything else you do as a small business owner) to tasks you wouldn’t otherwise have to worry about. 

Ultimately, if you’re not an experienced seller of small businesses, you should probably use a broker. 

What Is a Business Exit Strategy Consultant, and Do I Need One?

A business exit strategy consultant is a type of professional advisor who specializes in helping business owners plan, prepare for, and execute the sale or transfer of their business. 

Like a business broker, a business exit strategy consultant will help you meet your exit goals when leaving your company and will also help with business valuation. But a business broker only serves as an intermediary for the transaction itself, unlike an exit strategy consultant who becomes a strategic partner for the entirety of the business sale process.

While a business broker primarily focuses on finding a buyer and executing the transaction, an exit strategy consultant helps more with preparation and maximizing value. They’ll start working with you months or years before a planned sale, helping to clarify your own objectives, identify operational issues that could impact the valuation of your business, and more.

Depending on deal size and complexity, your team could also include an investment banker, but that’s usually for larger businesses. If you’re unsure about who should be on your advisory team, an exit strategy consultant can help you work through that, too.

Planning to Sell? Milestone Can Help

The process of selling a business starts long before you vet your first potential buyer. The owners who get the best returns are the ones who treat exit planning as a strategy in itself, rather than an afterthought.

That’s where Milestone comes in. We bring together accounting, CFO services, and HR expertise under one roof, so you’re working with one integrated team (rather than coordinating between three separate firms).

Our process is built around your business instead of a one-size-fits-all checklist. It starts with a Discovery, where we get to know your business and your exit objectives. From there, we move through the Strategy and Execution phases, working toward transaction readiness well before you go to market.

If you’re thinking about selling in the next few years, or just want to learn more about what the process might look like for you, we’re ready to talk when you are. Reach out today.