Consultant

7 Steps To Selling Your Small Business

April 7, 2025

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Selling a small business is a complex venture that can succeed or fail depending on the reason for the sale, its timing, the strength of your business, and its structure.

The seven key steps below can help you build a solid plan, find a buyer, and negotiate a transaction. If you’re successful, the final step is to manage the profits from the sale of your business.

Key Takeaways

Be prepared to communicate the reasons you’re selling and the reasons a buyer should take on the business.
Prepare the business for sale, making any improvements needed to present it at its best.
Get a business valuation and, if necessary, hire a broker to handle the sale.
Prepare the financial and operational documents potential buyers will want to see.
Launch the search for a buyer.
Once you’ve got your profits, work with a financial professional to decide the best ways to invest the proceeds.

1. Identify Your Reasons for Selling

You’ve decided to sell your business. Why? That’s one of the first questions a potential buyer will ask, and you must be able to articulate a reason.

Owners commonly sell their businesses for any of the following reasons:

Retirement
A partnership dispute
Illness or death
Exhaustion
Boredom

If you’re selling the business when it is not profitable, it will be harder to attract buyers. You must consider whether your business can attract buyers, its state of readiness, and your timing.

What Makes Your Business an Attractive Opportunity?

Your reason for selling presumably clarifies that you’re not trying to escape a bad situation. Potential buyers will also want to know why they should be interested. Various attributes can make your business attractive to buyers, including:

Increasing profits
Consistent income figures
Appealing profit margins
A strong customer base
A major contract that lasts for several more years

2. Prepare the Business for Sale

Few buyers will be interested in a business that is in shambles.

Once you’ve decided to sell, prepare for the sale as early as possible, preferably a year or two ahead of time. The preparation will help you improve your financial records, business structure, and customer base to make the business more profitable and a transaction more attractive.

These improvements will also ease the transition for the buyer and keep the business running smoothly.

Tip

Selling a business involves legwork, discussions, and, often, drawn-out negotiations. Virtual meetings on Zoom or Google Meet can help you keep in contact with potential buyers.

3. Get a Business Valuation

Determine the value of your business to make sure you don’t price it too high or too low. You can do this by hiring a business appraiser to provide you with a valuation.

An appraiser will draw up a detailed explanation of the business’ worth. The appraisal document can guide your listing price and give it credibility.

You can also back up your listing price using some key metrics. Consider evaluating your company by determining its market capitalization, earnings multipliers, or book value.

4. Hire a Broker

Selling the business yourself saves you the cost of a broker’s commission. It’s the common sense route when the sale is to a trusted family member or current employee.

If it’s not, a broker can free up time for you to keep the business running and get the highest price. Brokers need to maximize their commissions.

Discuss expectations and marketing approaches with the broker and maintain constant communication about their progress or lack of it.

Important

If you need a relatively quick turnaround, hire a business broker to speed up the proceedings and keep things on track.

5. Prepare the Necessary Documents

Financial

Gather your financial statements detailing assets, liabilities, and income as well as tax returns dating back three to four years. Review them with an accountant. Dig up any other relevant paperwork such as your current lease.

You’ll also need to develop a list of equipment that’s being sold with the business. Create a list of contacts related to sales transactions and supplies.

Make copies of these documents to distribute to potential buyers.

Operational

Your information packet should provide a summary describing how the business is conducted, an up-to-date operating manual, and information about employees and their roles.

You’ll also want to make sure the business is presentable. Any areas of the business or equipment that are broken or run down should be fixed or replaced before meeting solid prospects.

6. Launch Your Search for a Buyer

A business sale can take anywhere from a few months to years. This includes the time you take to prepare for the sale all the way to the closing, according to SCORE, a nonprofit association for entrepreneurs and partners of the Small Business Administration (SBA).

Finding the right buyer can be a challenge. Plan for ongoing advertising to attract more potential buyers. Once you have some parties interested in your business, here’s how to keep the process moving along:

Have two to three potential buyers in the pipeline just in case the initial deal falters.
Stay in contact with potential buyers.
Find out whether the potential buyer pre-qualifies for financing before giving out information about your business.
If you plan to finance the sale, work out the details with an accountant or lawyer so you can reach an agreement with the buyer.
Allow some room to negotiate, but stand firm on a price that is reasonable and reflects the company’s future worth.
Put all agreements in writing. Potential buyers should sign a confidentiality agreement to protect your information.
Try to get the signed purchase agreement into escrow.

You may encounter the following documents after the sale:

The bill of sale, which transfers the business assets to the buyer
An assignment of a lease
A security agreement, which has a seller retain a lien on the business

Fast Fact

A business broker may charge about 10% of the sale price for businesses under $1 million. While that may seem steep, bear in mind that the broker may be able to negotiate a better deal than you can get on your own.

7. Handle the Profits

Now that you’ve sold your business, it’s time to figure out what to do with the profit that you’ve made. The first instinct may be to go on a spending spree, but that probably isn’t the best decision.

Here are a few things you may want to consider:

Take some time—at least a few months—before spending the profits from the sale.
Create a plan outlining your financial goals; focus on long-term benefits, such as getting out of debt and saving for retirement.
Speak with a financial professional to determine how you should invest the money so that you can meet your short- and long-term goals.
Consult with a tax professional to learn about the tax consequences associated with the sale and your sudden wealth.

How Do I Sell a Franchise Business?

You’ll need to work in conjunction with your franchiser, as they have some say over the sale. The new buyer will need to sign a franchise agreement with the franchiser.

A variety of fees and rules are associated with owning or selling a franchise. These can be found in the FTC’s compliance guide.

Can I Sell a Small Business Without a Broker?

Many people would like to avoid the average 10% commission that a business broker can charge. But the expense may be negligible compared to the risks of selling on your own.

If you decide to go it alone, prioritize selling to a buyer you know, make use of the advice of experienced, retired owners and executives, and use all the internet resources available, such as those offered by the Small Business Administration, or the National Federation of Independent Business (NFIB).

What Does it Cost to Sell a Small Business?

If you go through a business broker and your business is valued at under $1 million, the broker’s commission is about 10% to 12%. Other fees that can crop up include attorney fees, marketing fees, and the costs of making any cosmetic or more substantial upgrades to make your business more attractive to buyers. Other fees may come up if you are transferring a lease to the new owner of your business.

The Bottom Line

Selling a business is time-consuming and, for many people, an emotional venture. A solid reason for selling or the existence of a hot market can ease the burden. So can the help of professionals, such as a business broker.

You might be able to obtain free counseling from organizations such as SCORE. Your local Chamber of Commerce may offer relevant seminars and workshops.

When all is said and done, the large sum of money in your bank account and your newfound free time can make the potentially grueling process worthwhile.

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