Whether you're dreaming of retirement, ready for a new venture, or simply feeling it's time to move on, selling your business is one of the biggest decisions you'll ever make. You might be wondering, "How do I sell my business?" or "How much is my business worth?" Let's walk through everything you need to know, without the usual jargon and confusion.

In this article, you will learn how to:

• Understand what it means to sell your business

  Explore key factors that shape value and guide your sale.

• Prepare your business for sale

  Get steps to organize financials and attract buyers.

• Value your business accurately

  Learn methods to assess your businesses’s worth

• Identify the ideal buyer for your business

  Explore buyer types and evaluate offers to find the right fit.

Step 1: are you ready to sell your business?

Market considerations

Timing can be everything when it comes to selling a business, and market conditions play a significant role in determining your success.

• Industry trends and economic climate: A thriving industry or favorable economic conditions can boost your business’s valuation. Conversely, a downturn might suggest waiting for a more opportune time.

• Competitor activity: Are competitors merging, acquiring, or exiting? These movements can indicate a shift in market dynamics that could impact your timing.

• Buyer interest: A surge in buyer interest for businesses like yours can be a strong indicator that the time is right. Look for signs of an active market with plenty of potential buyers.

Personal and financial considerations

Selling a business isn’t just a financial transaction—it’s a personal and emotional journey, too. Before moving forward, consider these factors:

• Readiness for transition: Are you emotionally ready to step away? Have you thought about what comes next, and are you prepared to navigate the transition?

• Financial goals: Whether you’re retiring, reinvesting, or pursuing new opportunities, make sure the sale aligns with your long-term financial objectives.

• Tax implications: Timing your sale to minimize tax liabilities can make a substantial difference in the net proceeds you walk away with. Consult a financial advisor to ensure you’re maximizing your outcome.

Timing the sale of your business

The "perfect time" to sell might not always be obvious, but several indicators can signal a strong opportunity.

• Increased buyer demand: Markets fluctuate, but periods of high buyer interest can be a golden opportunity to sell. For example, during economic recoveries or industry booms, buyers may compete for strong businesses, driving up valuations.

• Potential for higher taxes:Tax policies change, and proposed increases are often announced in advance. If you foresee tax rates rising, completing a sale beforehand can help you preserve more of your earnings.

• A growing sales market: An uptick in demand for your products or services can make your business especially appealing to buyers. Rather than trying to perfectly “time the market,” focus on showcasing solid sales growth and future potential.

Step 2: Preparing to sell your business

Imagine walking into a meeting with potential buyers, confident that you have a clear, documented answer to any question they might ask. That's what good preparation should feel like. But too often, business owners scramble to gather information at the last minute, watching good buyers walk away. Let's break down exactly what you need to prepare, why it matters, and how to present it effectively.

The three questions every buyer asks

When preparing your business for sale, focus on answering these key questions that drive every buyer's decision:

“How profitable is this business really?”

Buyers need to trust your numbers before they can value your business. Here's what you need to show them:

Core financial documents:

• Last 3-5 years of tax returns

• Monthly profit & loss statements

• Balance sheets and cash flow statements

💡Quick tip: Work with your accountant to separate personal and business expenses, as well as document any one-time or unusual expenses. Prepare clear explanations for any significant trends or changes.

“What risks am I taking on?”

Buyers pay more for businesses with lower risk. Help them understand yours:

Legal and compliance records:

• Current licenses and permits

• Employee agreements and customer contracts

• Any past or pending litigation documents

“How does this business really work?”

Show buyers how your business operates and generates revenue:

Operational documentation:

• Vendor relationships and terms

• Employee roles and responsibilities, including systems and processes

• Marketing strategies and sales pipeline forecasts

Why it matters

• Builds credibility

  Instills confidence in the accuracy of your claims.

• Supports accurate valuation

  Provides a foundation for determining your business's worth.

• Strengthens negotiation power

  Allows you to justify your asking price and address buyer concerns confidently.

Step 3: Understanding your business's true value

Think of your business's value like a puzzle with two main pieces: how much money it makes (cash flow) and how valuable that money stream is to buyers (the multiplier). Let's break this down into simple terms while keeping all the important details you need to know.

The basic formula (that isn't so basic)

Business Valuation = Pre-Tax Cash Flow x Valuation Multiplier

Sounds simple, right? But here's where it gets interesting - and why so many business owners either over- or under-value their business.

Understanding your true cash flow

Buyers look at your business's cash flow differently than you might. They focus on one of two numbers, depending on your business size:

For larger businesses ($1-2M+ in sales): EBITDA

EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization) looks at your pre-tax profit, with add-backs for interest expense and non-cash expenses such as depreciation on your equipment or buildings. This is the standard for bigger businesses, typically those with revenues over $1-2 million.

Example:

For smaller businesses (<$1-2M in sales): SDE

You can think of SDE (Seller's Discretionary Earnings)of this as "total owner benefit" - it includes:

• Your regular business profits

• Your salary and benefits

• Personal expenses run through the business

• One-time or unusual expenses

Example:

💡 Quick Tip: Not sure which to use? If you're running a small business where you're actively involved, SDE is probably your metric.

💡 Quick Tip: The topic of add-backs can become quite contentious between business owners and buyers, as some expenses are less obvious to categorize as personal or genuine business expense. To get an accurate estimate for this figure, it is highly recommended to engage a professional CPA.

The multiplier: What makes your business more valuable?

If the topic of add-backs was contentious, then the valuation multiplier is down straight controversial. Owners want to argue for a higher number, while buyers want to insist on the right number being lower. So how do we decide what number is the right one?

Think of your multiplier as a risk score - the safer your business seems to buyers, the higher your multiplier they will be willing to apply. Below is a list of some of the more important factors that buyers would look at:

Real example: Tale of two plumbers

To illustrate this point, let’s take a look at the plumbing industry, which typically attracts valuation multipliers of 3-6x - but which one is the most appropriate for your business?

Why the huge value gap?

The service business is worth more than twice as much because:

1. Predictable revenue: Long-term maintenance contracts vs. project-based work

2. Customer diversity: 200+ buildings vs. 3 main contractors

3. Economic protection: Buildings need maintenance in any economy

4. Less competition: Harder to displace an existing service provider

💡 Quick Tip: Aside from the risk of the business, the overall buyer demand for your industry will also affect the multipliers - if there are many buyers looking for your type of business, and there aren't many for sale, this will naturally push the multiple up. You can see how many potential buyers are looking for your business here.

Important reality checks

1. Market conditions matter

   • Recent sales of comparable businesses establish market benchmarks

   • Economic conditions affect multiples

   • Industry trends impact buyer interest

2. Get professional help

   • CPAs can verify your SDE/EBITDA

   • Business brokers know current multiples

   • M&A advisors understand market conditions

3. Be realistic

   • Your business is worth what buyers will pay

   • Historical sales set expectations

   • Multiple offers validate value

Step 4: Finding and reaching the right buyers

Selling your business involves two crucial questions:

1. Who are the right buyers for your business?

2. How do you reach them?

Let's explore both aspects to help you make informed decisions about your sale process.

Who buys businesses?

Each type of buyer brings different perspectives, resources, and priorities to the table. Understanding these differences is crucial - it helps you target the right buyers and structure deals that align with their goals while meeting your needs.

💡 Quick tip: to maximize competitive tension, it is recommended to engage with buyers from all three buyer pools which can increase your sale price by up to 40%.

How to reach these buyers

When it comes to selling your business, you have two main approaches: doing it yourself or engaging professional help. Each path has distinct advantages and challenges that need to be carefully considered.

Option 1: Direct sale (do it yourself)

Taking control of the sale process by identifying and negotiating directly with potential buyers. This could mean selling to someone you know (family, employees, business partners) or to buyers who approach you directly.

💡Quick tip: Running a sale process on your own works best if you already have a specific buyer in mind or are selling to family/employees.

Option 2: Auction (engage professional help)

Working with experienced M&A professionals who manage the entire sale process, from preparation through closing. These advisors typically bring process expertise, buyer networks, and negotiating experience to maximize your outcome.

Types of professional help:

What to look for in any advisor

Before engaging professional help, carefully evaluate these key areas:

Looking ahead: The evolution of business sales

The M&A landscape continues to evolve. While relationships remain at the heart of every successful sale, technology is reshaping how businesses and buyers connect. Modern approaches now combine:

• Data-driven buyer matching for broader market reach

• Streamlined due diligence processes

• Digital deal rooms and secure document sharing

• Automated market analysis tools

At OffDeal, we've pioneered a technology-first M&A approach that identifies hundreds of potential strategic and financial buyers for your business, dramatically increasing your chances of a successful sale at a significantly higher price.

Contact Us to learn more about modern approaches to selling your business.

Step 5: Closing the deal successfully

Selling your business is like running a marathon - the final stretch requires as much strategy and focus as the start. Let's walk through the key stages of getting your deal across the finish line.

Stage 1: Opening the conversation

Think of sharing information about your business like peeling an onion - you start with the outer layers and work your way in:

• Begin with a high-level business overview (industry, size, location)

• Share basic financials once buyers sign an NDA

• Reserve detailed operational information for serious buyers

This graduated approach protects your confidentiality while quickly identifying qualified buyers.

Stage 2: Negotiating the right deal

Once serious buyers emerge, you'll move into deal negotiations. The key milestones:

• Review and compare initial offers

• Negotiate deal structure and terms with preferred buyer(s)

• Sign a Letter of Intent (LOI) with your chosen buyer

• Enter exclusive negotiations for final due diligence

Remember: The highest offer isn't always the best offer. Consider factors like payment terms, transition requirements, and the buyer's ability to close.

Stage 3: Sealing the deal

The final stage involves:

• Working through due diligence requests

• Negotiating the final purchase agreement

• Planning the ownership transition

• Closing the transaction

Most buyers will want you to stay involved for 6-24 months post-closing to ensure a smooth transition. Factor this timeline into your personal plans.

💡 Quick tip: From start to finish, most business sales take 6-12 months to complete. Add in preparation time and post-closing transition, and you're looking at a 2-3 year journey. Starting early gives you the best chance of maximizing your outcome.

Your next chapter starts now

Selling your business is a major milestone that requires preparation, strategy, and the right support. By understanding your business’s value, preparing thoroughly, choosing the best sales method, and executing a smooth close, you can ensure a successful outcome and a strong foundation for your next venture.

Summary:

1. Evaluate your readiness:

   Assess your personal, financial, and market readiness to sell.

2. Organize key documents:

   Gather financial records, legal documents, and operational details.

3. Explore buyers:

   Identify potential buyers and tailor your approach to attract the right one.

4. Get expert help:

   Engage brokers, advisors, or accountants to guide you through the process.

5. Plan the transition:

   Outline steps for a seamless transfer of ownership and operations.

Next steps

Every business sale journey is unique. Whether you're just starting to explore your options or ready to meet potential buyers, we're here to help guide your path forward.

Schedule a free confidential consultation to:

• Understand your business's potential market value

• Learn about the current buyer demand for your business

• Explore timing considerations

Schedule call with OffDeal M&A Expert

OffDeal leverages advanced technology and expertise to help small business owners achieve the same quality of M&A service previously reserved for large corporations. Our mission is to ensure every business owner has the opportunity to maximize their value when they're ready to sell.