Selling a Business 101: The Process, The Timeline, and What to Expect
Selling a business can be one of the biggest financial decisions an entrepreneur ever makes. It’s a chance to convert years of hard work into a life-changing outcome, but it can also be a complex and time-consuming process. Without the right preparation, owners may leave money on the table or see promising deals fall apart along the way.
This guide covers the major steps involved so you’ll have an idea of what to expect and begin planning a successful exit.
Clarify Why You Want to Sell
The first step is simply deciding if the timing is right. Some founders reach a personal milestone and want to retire. Others feel burned out and are ready for a change. In many cases, selling can be a strategic decision if the current market offers a favorable valuation or if a larger company could help the business grow faster than you can on your own.
No reason is right or wrong, but having a clear motivation helps shape your timeline and approach. If you need to exit quickly, that may limit the number of buyers and reduce your leverage in negotiations. If you have a longer time horizon, you can often make improvements to increase the business’s value before looking for buyers.
It is also worth considering alternatives such as bringing in a partner, promoting internal leaders, or passing the company to a family member. Exploring these options early helps ensure selling is truly the best choice.
Prepare the Business for Sale
Once you’re confident that selling is the right move, it is time to get the business ready. Buyers will evaluate everything from financial performance to operational stability. The more organized and professional you are, the better your company will look.
A major focus should be on financial documentation. Make sure your accountant has accurate records going back at least a few years. You should be able to provide:
- Profit and loss statements
- Balance sheets
- Cash flow statements
- Tax returns
- Detailed accounts receivable and accounts payable reports
Buyers want to understand how the business really performs. If you run personal expenses through the company or have inconsistent bookkeeping, it can hurt your valuation. Cleaning up the books now can lead to a smoother due diligence process later.
On top of the financials, review your operations from top to bottom. Are key processes documented, or do certain employees keep important knowledge in their heads? Are customer contracts up to date? Do you depend on one or two clients for most of your revenue? Anything that looks risky to a buyer will weaken your negotiating power.
This is also the time to strengthen your team. A business that runs well without the owner is far more attractive. If you are the only person who can do certain things, start training others to take on those responsibilities well before marketing the business for sale.
Understand Valuation and Deal Structure
At some point, you’ll need to determine how much your business might be worth. There are different ways to value a company, but most small and mid-sized businesses are priced based on earnings. Buyers look at factors such as EBITDA (earnings before interest, taxes, depreciation, and amortization), revenue trends, and industry multiples.
A formal valuation can give you a realistic range and prevent unrealistic expectations. It may also help support your asking price when buyers want to negotiate.
It’s also important to understand that the final sale price is not the only number that matters. The structure of the deal can significantly affect the amount of money you actually receive. Common deal variations include:
- Full purchase paid at closing
- A combination of cash and seller financing
- Earn-out provisions tied to future performance
- A partial sale that allows you to stay involved
For example, a buyer might offer a higher price overall, but tie a large portion of it to achieving specific milestones after the sale. That introduces risk. A knowledgeable advisor can help you weigh the pros and cons of each structure.
Build the Right Advisory Team
Selling a business is not a do-it-yourself project. Even if you’re a strong operator or have negotiated partnerships in the past, selling is a unique process with legal, financial, and strategic complexities.
Most owners benefit from at least three types of advisors:
- Business broker or M&A advisor: helps value the business, find buyers, manage the process, and keep things confidential
- Attorney: handles legal documents and protects your interests during negotiations
- CPA or tax advisor: explains tax implications and helps structure the deal to maximize the money you keep
For larger or more complex companies, you might also involve a wealth manager who can help you plan for life after the sale.
The earlier you bring these professionals into the conversation, the better they can guide your preparation and prevent costly mistakes.
Identify and Approach Potential Buyers
There are different categories of buyers. Some are strategic buyers, such as competitors or suppliers who see the acquisition as a way to expand their market or combine operations. Others are financial buyers, like private equity firms or independent investors. Sometimes, employees or internal leaders are interested in purchasing the business.
A business broker or M&A advisor can help you market the company confidentially so your employees or customers do not become concerned prematurely. They screen interested parties and only reveal sensitive information to credible buyers who sign nondisclosure agreements.
The goal during this stage is to identify serious prospects and secure offers that are worth negotiating.
Negotiate the Offer
Once a buyer is interested, the first formal milestone is usually a letter of intent (LOI). The LOI outlines the proposed terms of the transaction, including price, structure, financing details, timeline, and transition expectations. It’s not the final contract, but it sets the framework for the rest of the deal.
Negotiation involves more than pushing for the highest price. Payment terms, personal risk, employment requirements after the sale, and tax consequences all play a role.
It helps to stay objective. Selling a business can be emotional, but the best deals are made when owners rely on data and strategy rather than reacting to stressful moments.
Once both sides agree to the LOI, the buyer will begin due diligence.
Navigate Due Diligence
Due diligence is the most intense part of the sale process. Buyers will want to examine nearly every aspect of the company to verify that the information you have provided is accurate. They may request:
- Financial records and accounting reports
- Legal documents such as business registrations and contracts
- HR files and payroll data
- Insurance policies
- Details on suppliers, customer relationships, and inventory
The more organized you are, the better this stage will go. Surprises during due diligence can delay or even derail the transaction. For example, if a large customer is not actually under contract or if there are unresolved legal issues, a buyer might demand a lower price or walk away entirely.
Good communication among the buyer, seller, and advisors is critical during this stage. Prompt responses build confidence and help keep the deal on track.
Close the Sale and Transition the Business
Once due diligence wraps up, attorneys finalize the purchase agreement and any related documents. You may need to make certain representations or warranties about the business and agree to a non-compete for a defined period.
Closing is when funds are transferred, and ownership officially changes hands. However, your work as a seller may not end there. Many deals include a transition period where the former owner stays involved for several months to hand off relationships, guide the team, or complete an earn-out. Setting clear expectations during negotiations makes this easier to manage.
For many entrepreneurs, selling is the first step toward a new chapter in life. Having a plan for what comes next can help make the transition smoother.
Set Yourself Up for Success
Selling a business is a process that often takes months or even years. Owners who start preparing early typically enjoy better outcomes. Strong financial records, clean operations, documented processes, and a solid team can all increase the value of the business in the eyes of buyers.
Most importantly, surround yourself with experienced advisors who can protect your interests and help you navigate the negotiations. With the right approach, you can turn the time and effort you have invested into a rewarding exit.
