How to Sell Your Business

Selling a business typically takes 6 to 12 months from start to finish, with total selling expenses around 15% of the sale price. Planning early, staying transparent, and working with the right professionals make the process smoother and considerably more profitable.

• Prepare your business — organize financial records, address risks, and improve operations over 1–2 years
• Create a Confidential Information Memorandum — outline financials, operations, and growth potential for buyers
• Find buyers — screen prospects carefully and require NDAs before sharing sensitive information
• Negotiate and handle due diligence — resolve buyer concerns and provide clear, organized documentation
• Close the deal — finalize the purchase agreement, transfer ownership, and manage the transition

Step 1: Get Your Business Ready for Sale

Buyers often form their opinions within minutes, so dedicate at least a year to organizing three to five years of tax returns, profit and loss statements, balance sheets, and general ledgers, and prepare a Trailing Twelve Months statement so buyers aren’t relying on outdated numbers. As Taylor Wallace of Baton Market puts it, buyers can live with “not perfect” — they rarely live with “not explainable.” Resolve pending lawsuits, tax delinquencies, and problematic contracts before going to market, review contracts for change-of-control clauses, and address customer or supplier concentration. Small upgrades and reduced owner dependence both increase perceived value ahead of a sale.

Step 2: Create a Confidential Information Memorandum

A CIM addresses roughly 90% of the questions buyers typically ask upfront. For lower-middle-market businesses, 30 to 60 pages is typical, covering an executive summary, business overview, financial performance with an add-back reconciliation, market analysis, operations, management team, growth opportunities, and risks with mitigations. Out of roughly 50 interested buyers, only about 20 to 25 will sign an NDA and receive the full document, so a phased approach — starting with a blind teaser — protects sensitive details until buyers are vetted. Selling expenses, including CIM preparation, generally run about 15% of the final sale price.

Step 3: Find and Screen Buyers

Buyers generally fall into strategic buyers, financial buyers, and individual investors. Building a “no contact” list of competitors who shouldn’t receive information, then using a phased outreach approach starting with a one-page blind teaser, keeps confidentiality intact — as John Norton of ACT Capital Advisors notes, the longer a company is on the market, the more likely word gets out. The NDA is the first legally binding step and sets the tone for negotiations; most are unilateral, protecting the seller’s disclosures. Maintain a shortlist of two to three serious buyers at all times, and set an indication-of-interest deadline of three to four weeks to keep momentum.

Step 4: Handle Negotiations and Due Diligence

Offers are typically based on Adjusted EBITDA or Seller’s Discretionary Earnings, with the “working capital peg” agreed upon in the Letter of Intent. Over half of business sales fail during due diligence, so resolve outstanding issues beforehand, assemble a team of trusted advisors, and set up a Virtual Data Room to share documents in stages. As Nadia Macleod of RP Emery & Associates puts it, make sure the buyer hears everything — negative and positive — before they find it themselves, since surprises give buyers leverage to renegotiate the price down.

Step 5: Complete the Sale and Close the Deal

The purchase agreement should include the full terms both sides agreed to: price, payment schedule, representations and warranties, indemnities, restrictive covenants, price adjustments, and any escrow or holdback. Typically 90% of payment happens in cash at closing, with the remaining 10% often financed by the seller. A 30 to 90 day transition plan — training, customer introductions, and vendor handoffs — helps preserve the business’s value, and many sellers stay on as consultants for six months to a year. Final closing steps include executing the bill of sale, filing IRS Form 8594, and settling outstanding debts and licenses.

Plan Ahead

As Cortney Sells, President of The Firm Advisors, puts it: if you want to sell your business and retire at 65, don’t call an advisor when you’re 65 — call at 62. A professionally prepared CIM, organized financial records, and a clear transition plan are what separate a smooth, profitable sale from a drawn-out one.