Business Directory


What’s the Process?

If you are looking for information on how to sell a business, here is a quick summary of the steps that are usually required.  Selling a business is a much more involved process than selling real estate.  It takes a specific set of skills to properly sell a business to get a fair value.

Listing your Business for Sale with a Business Broker



Meet with a reputable business broker in your area.  Talk to them about the sales process and what they will do to help you sell your business.  Listing your business with a broker is a good decision if you want to sell your business confidentially and want to use the resources of a professional intermediary to guide you throughout the process.

Determine a Selling Price



One of the first things that arises when people ask how to sell a business is the asking price.  This is something that a business broker can help you with for most businesses.  For larger or more complicated businesses you can use the services of a professional business valuator to determine the selling price.  You also need to think about what you are selling – for instance, are you selling the business assets or shares (there are tax implications – most small businesses are structured as asset sales though).  You also need to think about work in progress at the time of the sale and how that will be transitioned and at what price, inventory, accounts receivable, etc.  These are issues you can talk to a business broker about as well as your accountant.  Determining a selling price and what exactly is for sale is an important step in how to sell a business.

Marketing and Advertising



A business broker will plan how your business will be marketed and advertised with the end goal of achieving multiple interested potential buyers while maintaining the confidentiality of the business sale.

Business Information Profile



Business buyers will need a brief ‘snapshot’ of what your business is about – a small ‘teaser’ if you will, to help them decide if they want to learn more.  A business broker with the knowledge of how to sell a business will put together this quick (and very effective) brief snapshot of your business.  It is a short description with one or two lines of general financial performance.  Rest assured, the business identity is not disclosed yet at this point.

Upon showing interest in the business, a potential buyer would then have a conversation with the business broker about themselves, their objectives and what they are looking for.  The broker will ‘qualify’ and screen a potential buyer at this point.  If deemed to be appropriate, a business broker will invite the potential buyer to sign a non-disclosure agreement and then would present the potential buyer with a fuller information package on the business that would include a information on the operations of the business, number of employees, a brief summary of the financial performance and any other pertinent “general” information about the business.  This general information is under strict non-disclosure rules to help ensure confidentiality of the sale.  After reviewing this information, a potential buyer may decide if they want to take their interest to the next level.  This is a major way a business broker can assist you in how to sell a business.

Showing the Business to an Interested Buyer

Presenting a business to a potential buyer is a major step in how to sell a business.  It’s important to present an accurate picture of the business – blemishes and all.  Buyers can be jaded after a while and realize that every business may have their speed bumps so it’s important to be forthright and not sweep anything under the rug, so to speak.  This is, however, the time to ‘show off’ your business’s accomplishments and showcase the hard work you have done to make it a success – this is the time to put your best foot forward and, effectively how to sell a business by being honest – which can be refreshing to some buyers.  There will be a lot of questions at this point from the buyer – try to answer everything you can, within reason though.  It’s important to remember that there is a point where a buyer needs to make a conditional offer and satisfy themselves through the due diligence process.

Getting an Offer and Accepting an Offer



The majority of business offers are conditional offers.  They are can be conditional on many different issues:  confirming some facts during the due diligence process, getting financing, assuming leases successfully, obtaining franchise approval, etc.  A condition offer is usually made with a refundable deposit (if the deal does not go through) and is usually seen as being without risk for the buyer until they waive conditions and go ‘firm’.

Due Diligence

During the conditional offer phase, a business buyer will conduct their due diligence – which is a critical step in how to sell a business.  Here, the potential buyer will confirm facts, go through financials and review the overall business operation very carefully.  If there ever was a time for a buyer to be extra meticulous, this would be it.  The role of the broker would be to help in facilitating the process and be a go-between for the buyer and the seller. 

If the buyer satisfies themselves that everything ‘checks out’ during the due diligence process and waives the other conditions all that is left is to close the transaction – which involves signing documents through respective lawyers and exchanging money.



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Business Directory


Perhaps the most important business transaction you will ever pursue is the sale of your business. Many business owners attempt to do it themselves and when asked if they got a good deal, many respond with “I think so,” or “I got my asking price,” or “I really don’t know,” or “It was a disaster.” Often times these very capable business people approach the sale of their business with less formality than in the sale of a home. The purpose of this article is to answer the questions – Why would I use a business broker and what am I getting for the fees I will pay?

1. Confidentiality. If an owner tries to sell his own business, that process alone reveals to the world that his business is for sale. Employees, customers, suppliers, and bankers all get nervous and competitors get predatory. The business broker protects the identity of the company he represents for sale with a process designed to contact only owner approved buyers with a blind profile – a document describing the company without revealing its identity. In order for the buyer to gain access to any sensitive information he must sign a confidentiality agreement. That generally eliminates the tire kickers and deters behaviors detrimental to the seller’s business

2. Business Continuity. Selling a business is a full time job. The business owner is already performing multiple functions instrumental to the success of his business. By taking on the load of selling his business, many of those essential functions will get less attention, sometimes causing irreparable damage to the business. The owner must maintain focus on running his business at its full potential while it is being sold.

3. Time to Close. Since the business broker’s function is to sell the business, he has a much better chance of closing a transaction faster than the owner. The faster the sale, the lower the risk of business erosion, customer defection, employee problems and predatory competition.

4. Large Universe of Buyers. Business brokers subscribe to databases of businesses that enable them to screen for buyers that are in a certain SIC Code and have revenues that would support the potential acquisition. In addition they maintain databases of high net worth individual buyers and have access to private equity groups databases that outline their buying criteria.

5. Marketing. A business broker can help present the business in its best light to maximize selling price. He understands how to recast financials to recognize the EBITDA potential post acquisition. Higher EBITDA = higher selling price. He understands the key value drivers for buyers and can help the owner identify changes that translate into enhanced selling price.

6. Valuation Knowledge. The value of a business is far more difficult to ascertain than the value of a house. Every business is unique and has hundreds of variables that effect value. Business brokers have access to business transaction databases, but those should be used as guidelines or reference points. The best way for a business owner to truly feel comfortable that he got the best deal is to have several financially viable parties bidding for his business. An industry database may indicate the value of your business based on certain valuation multiples, but the market provides the real answer. An industry database, for example, can not put a value to a particular buyer on a key customer relationship or a proprietary technology. Most business owners that act as their own business broker get only one buyer involved – either another business that approaches him with an unsolicited offer or a referral from his banker, accountant, or outside attorney. Just look at the additional billion plus dollars of value created for MCI shareholders because of the competitive bidding between Verison and Quest Communications.

7. Balance of Experience. Most corporate buyers have acquired multiple businesses while sellers usually have only one sale. In one situation we represented a first-time seller being pursued by a buyer with 26 previous acquisitions. Buyers want the lowest price and the most favorable terms. The inexperienced seller will be negotiating in the dark. To every term and condition in the buyer’s favor the buyer will respond with, “that is standard practice” or “that is the market” or “this is how we did it in ten other deals.” By engaging a business broker the seller has an advocate with a similar experience base to help preserve the seller’s transaction value and structure.

8. Maximize the Value of Seller’s Outside Professionals. Business brokers can save the seller significantly on professional hourly fees by managing several important functions leading up to contract. His compensation is usually comprised of a reasonable monthly fee plus a success fee that is a percentage of the transaction value. The business broker and seller negotiate with the buyer the business terms of the transaction (sale price, down payment, seller financing, etc.) prior to turning the purchase agreement over to outside counsel for legal review. In the absence of the business broker that sometimes-exhaustive negotiation process would default to the outside attorney. It is not his area of expertise and could result in significant hourly fees.

9. Maintain Buyer – Seller Relationship. The sale of a business is an emotional process and can become contentious. The business broker acts as a buffer between the buyer and seller. This not only improves the likelihood of the transaction closing, but helps preserve a healthy buyer – seller relationship post closing. Often buyers want sellers to have a portion of their transaction value contingent on the successful performance of the company post closing. Buyer and seller need to be on the same team after closing.

Our experiences with businesses that engaged our firm as a result of an unsolicited offer from a buyer have been quite instructive. The eventual selling price averaged over 20% higher than the first offer. In no case was the business sold at the initial price. To conclude, the business broker helps reduce the risk of business erosion with improved confidentiality while allowing the owner to focus on running the business. The business broker led sale helps maximize sales proceeds by involving a large universe of buyers in a competitive bidding process. Finally, the business broker can improve the likelihood that the sale closes by buffering buyer – seller negotiations and by balancing the experience scales.



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