How to Sell a Business: 5 Tips for Selling a Business

As you plan the potential sale of your business, you may find yourself unsure of the overall process. Explore this basic step-by-step process that entrepreneurs generally follow as they work toward selling a business to a new owner.

1. 1. Get your finances in order. As prospective buyers begin their due diligence process, they will want a full accounting of a company's financial records. This includes balance sheets, cash flow statements, tax returns, real estate valuations, intellectual property holdings, and any other financial statements that reveal the fiscal health of a business. Assemble these documents before proceeding.
2. 2. Get a professional business valuation. The next step in the sales process is hiring an appraiser to honestly assess your company's value. A professional valuation expert will want access to the financial documents you've assembled. They will also conduct market research and take a full accounting of your business assets and liabilities as they seek to appraise the value of your business. Using a professional appraiser will help you choose a reasonable asking price. It will also build trust between you and potential buyers, who may be skeptical of self-valuations.
3. 3. Consider enlisting a business broker. Some small business owners hire business brokers to help them connect with qualified buyers. A good broker will be familiar with all aspects of the selling process that you, as a founder and manager, might not be. They may know the selling prices of similar businesses, and they will have a strong sense of the existing customer base of business buyers. While a broker will take a commission from the final sale price, they can often save you money in the long run by connecting you to serious buyers and helping you through thorny legal documents that accompany purchase agreements.
4. 4. Time your sale. Depending on the type of business you are selling, there may be optimal times of year to put it up for sale. Often it is wise to announce the sale after you've gone through your traditional high point in annual sales (this can be different times of year for different businesses). If you are using a business broker, seek their input about the best timeframe for a listing.
5. 5. Market the sale. When you are ready to formally list your business for sale, make sure word gets out. A business broker can do a lot of this for you, but also make sure you tell friends and colleagues in your industry. Some small businesses advertise sales in trade publications where they are likely to reach industry peers.
6. 6. Identify the most qualified buyers. Look for potential buyers who can either pay all cash or who have lenders lined up and ready to go.
7. 7. Carefully work through the legal documents that will make your sale official. To safely and confidently complete a sale, you and your buyer will need to sign a number of legally binding documents—such as a deed of sale. You may also need to sign confidentiality agreements, non-disclosure agreements, and non-compete agreements. Enlist the services of a mergers and acquisitions lawyer for all such documents. You may also need the help of your certified public accountant (CPA) to plan for the tax implications of a sale.

Whether you're selling your beloved startup or you plan on flipping businesses for a living, you'll want to keep the following tips in mind.

1. 1. Use seasoned professionals. You can save a lot of money upfront by handling a sale yourself or tasking it to a family member, but in the long run, you will likely make more money and be spared many headaches if you work with professional appraisers, business brokers, lawyers, and accountants.
2. 2. Sell with your head, not your heart. It’s common for small business owners overvalue their own companies on account of an emotional attachment. Listen to your business appraiser and set an asking price that reflects your objective market research. Ultimately the true value of your company will be determined by the marketplace of interested buyers.
3. 3. Talk to peers who have sold their own businesses. You can learn a lot about the business sales process by talking to people who have been through it. They can help you understand what to expect, caution you about mistakes they may have made, and connect you to high-quality professionals who specialize in the sale of businesses.
4. 4. Be transparent whenever possible. Your business will be under the microscope the moment you put it on the market. Potential buyers will want to review your business financials, and if they don't, something strange is afoot. In most cases, honesty and transparency will pay off in the long run, so do what it takes to earn a buyer's trust.
5. 5. Be open to alternative arrangements. Sometimes, in the process of a business sale, you gain a new perspective on the marketplace and your own business's place in that marketplace. It may be that while you'd planned for a total sale, the better option would be a merger with a larger competitor. Or perhaps you'd be best suited by strategic asset sales while holding on to your core business. Successful business owners know how to pivot in a short period of time. By remaining nimble, you leave yourself open to possibilities you might not have considered before you put your company up for sale.

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