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Let's Sell a Small Business

Let's Sell a Small Business
Will Pouncey

Let's Sell a Small Business

Who am I going to sell it to? This is probably the most common question that is asked when we or any of our real estate partners ask owners if they are interested in selling their business. There isn’t an exact answer to this question. It could be bought by an acquisition group, an individual, a private equity firm, a competitor, or even an employee. The point is that there are buyers out there, and the real question should be, “how am I going to sell it?”.

What You're Selling

If you have an established business with positive cash flow, you should NOT be selling your property or your assets or your book of business alone. Starting a business from scratch is difficult, and therefore you have something that is valuable to a buyer; a business that is already running. You have infrastructure, relationships, brand equity, experience, and cash flow. So how do you sell it? Well the short answer is you would hire us, but let’s go through the steps.

Get the House in Order

I’d be willing to bet that north of 90% of the existing articles on this topic would list “valuation” as the first step. In reality, that may or may not be the case. A lot of small business owners have been living out of the business, tax-optimizing, or maybe just not doing the best job of bookkeeping. That’s ok, there are often more important things to worry about in the course of running a small business than how the books look. Unfortunately, it’s probably the single most important thing when it comes to selling a business. You may not be ready to sell today, but there are steps we can take to get you there. We call this, “getting the house in order”, and much like cleaning off the front porch and doing the dishes before you have company, it will really help to make the right impression on a buyer.


If the house is in order, then the next step is to value the business. Depending on the industry, this can be done in a couple of ways. The key thing here is that the buyer is going to have their own opinion of what the company is worth, and so it is important for a seller to have a valuation that is defensible. You want a professional valuation that says, “the business is worth X, and here is the methodology to support it.” I hate the term “asking price” that gets thrown around so much in this sector, because it implies that an owner just picked a number based on what he or she wants to get out of it. Without a defensible valuation, a negotiation devolves into an argument about feelings. With a defensible valuation, the negotiation is now a discussion about the metrics, assumptions, and market conditions.

Marketing and Packaging

Now that we have a price, we need to convince a buyer that it is worth that price. That means we need to do some marketing. We believe it is critical to put together a good offering document, sometimes called an Offering Memorandum or Teaser, in order to grab the attention of potential buyers and distinguish your business as one of interest. When brokers/advisors skip this step, they are immediately putting the burden of creativity on the buyer, and decreasing the chance that a buyer takes the next step in the process. We need to talk about what the business does, why it does it well, what the potential is, and what the key figures are. All of this information is non-confidential and serves to help the buyer determine if they are interested in the opportunity or not. Whether buyers approach us through the active listing, or we approach buyers via our network, they will expect us to have these materials in order.

The Deal Starts

When a buyer determines they are interested, it is time to start easing into the due diligence process. Confidential information needs to be protected through NDAs and strategic timing of disclosure. You certainly don’t want a competitor getting access to your client lists and pricing before a letter of intent is signed and a deal has commenced. The key thing here is being ready before due diligence starts. Knowing all of the things that a buyer is going to ask for and having all of those documents ready to go in a packet will drastically cut down on the back-and-forth time and allow you to set the pace of when certain pieces of information are disclosed.

Back-end Operations

For buyers that are not necessarily experts in the industry/field, we will want to give them the tools to succeed. The due diligence process for them will be a bit different, as they aren’t necessarily looking to verify items, but rather to understand the back-end of the business. For these types of buyers, it is good to provide operational guides and breakdowns of how critical business processes are conducted. The last thing you want is for a buyer to get cold feet because they get worried about their own capacity to run a business. Having some empathy for the buyer and taking the time to formalize processes and operational steps can really help get a deal through, as well as help the buyer be successful post-closing. This is a big deal for you, but it is also a big deal for them, and the extra effort will go a long way.

Negotiating and Structuring

If everything checks out and the buyer decides they want to submit an offer, then the review / negotiation process begins. This stage is anything but simple and straightforward. Is there property involved? Someone may want to buy the property but not the business. Someone may want to buy the business and lease the property. How do we manage timelines? How do we evaluate offers below our valuation when we have other interested parties in the due diligence phase? This stage of the process is the longest and the most dynamic, and having a strategic advisor to help evaluate options and represent you to buyers can be very valuable.

The Contract

So you and the buyer both like the deal and want to close. It’s going to take a lot more than a handshake to make it happen. We need a contract that lays out the terms of the deal and everything that is and is not involved in the deal. Did the coffee table in your lobby belong to your mother who is expecting it back when the business moves out? Better be in the contract, because that coffee table is part of the “Furniture, Fixtures, and Equipment” of the business. Our advisors have seen disputes over things more trivial than this, so you’d better believe that items of substance need to be clearly defined in the contract.


Pick your favorite restaurant and let’s go celebrate, because the deal has closed and now you’re done…maybe. Often times buyers will want the previous owners to spend a few weeks training them post-closing, and it is generally a good practice to at least offer your services as a consultant for a period of time. Either way, we’re celebrating.

If you want to make this happen, reach out to us at, or to me personally at

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