When you’re ready to move on from your business, selling it can provide the financial freedom to explore new opportunities. However, landing the right deal requires careful planning.
“Today's … buyers are increasingly sophisticated and diligence processes [are] more rigorous,” said Sidharth Ramsinghaney, Director of Strategy and Operations at Twilio. “Successful transactions require professional preparation, transparent documentation, and structured transition planning. The days of handshake deals based on simple multiples are long gone.”
Here's a step-by-step process for preparing your business for sale, as well as a rundown of who you can count on for support during this process.
How long does the business sale process typically take?
On average, it takes about 10 to 12 months to complete the sale of a business, including choosing a buyer and completing the closing process. However, this time frame can fluctuate depending on your asking price, proposed terms, business location, and the industry’s market.
To ensure the process is smooth and timely, Ramsinghaney advised starting the preparation process well in advance.
“Successful exits require a 'clean house' strategy starting 18 to 24 months before going to market,” he said. “From my experience, sellers who invest in professional preparation typically achieve higher valuations.”
[Read more: How to Prepare for an Acquisition as a Small Business]
Preparing to sell your business: 8 steps to take
It’s not enough to put a for-sale sign on your business. Before you sell, follow these steps to ensure you’re prepared.
1. Determine your goals for the sale
Why do you want to sell your business? Every small business owner will have a different answer to this question, but knowing what you want out of a sale is crucial for a successful transaction. Common goals include maximizing profit from the sale of your business, making sure your employees will be well cared for, having a quick and clean transaction, and securing a legacy for your business.
List your goals and organize them by priority. Although it will be difficult, figure out which goal is the most important to you. When the time comes for negotiations, you may not be able to achieve all of your goals, but clearly outlining your priorities will help ensure you actually achieve the ones that are most important to you.
2. Get a business valuation
Before you can start fielding offers for your business, you'll have to know what your business is worth from an outside source. Getting a professional valuation gives you an idea of what your business is realistically worth, as well as its market position, financial situation, strengths, and weaknesses.
You can get a business valuation from a few different objective sources. These can include local accounting firms, regional business brokers, and investment banking firms. To get the fairest result, make sure that whoever is performing the valuation has access to the most current national data regarding transactions in your industry.
“[A mistake sellers make] is unrealistic valuation expectations,” Ramsinghaney said. “Sellers [should] focus on building a compelling growth story backed by clean financials and a strong management team that can operate independently.”
[Read more: What Is a Business Valuation and How Do You Calculate It?]
3. Organize your books and paperwork
Prospective buyers will generally ask for at least three years’ worth of your financial information to review before they make an offer. Take an internal perspective of your business, books, and paperwork to make sure that everything is organized, accurate, and easy to review before you begin the sale process. The more formal and thorough your financial statements are, the easier it is for buyers to review them, and you'll be better off.
“It is best to prepare financial documents well in advance of planning to sell a company,” said Crystal Stranger, CEO of Optic Tax. “Financials are not something to rush. Tax regulations, including state tax risks, can come back to bite you when selling a company.”
Ramsinghaney added that three essential elements you’ll want to prepare as part of this process include:
- Normalized EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) with clear add-backs.
- Detailed customer retention analytics.
- Documented growth initiatives.
Successful exits require a 'clean house' strategy starting 18 to 24 months before going to market.
Sidharth Ramsinghaney, Director of Strategy and Operations at Twilio
4. Review your tax obligations and history
The importance of correct tax paperwork cannot be more clear. Without it, sellers could face legal risks, including hefty fines and penalties, especially if their tax liabilities are discovered after the sale. Inaccurate or incomplete tax records may also delay the sale process or force a lower sale price.
“I have seen hundreds of thousands held back from a sale deal because of [tax issues like] a missed state tax return or sales tax issues,” Stranger explained. “Often, these issues could have been resolved for just a few thousand dollars prior to the sale, but end up costing hundreds of thousands if discovered in due diligence.”
To avoid issues when selling your business, ensure you meet all your tax obligations and that your company has a solid, healthy history. In some cases, having three years’ worth of tax returns may be sufficient for review. However, whenever a business is being prepped for purchase, it is always better to have more financial information than less.
5. Build a support team
While your lawyer and accountant hold invaluable knowledge about your business, you may need to bring in other experts who can assist with the actual sale of your company and guide you through the process. You can connect with a business broker to help sell your business, as well as transaction lawyers and accountants to ensure every detail of the sale is accounted for. Although it might sound like just another expense, hiring professionals to handle your sale can minimize the chance of errors, annoyance, and unexpected financial troubles in the future.
Unless you’re in an emergency situation, plan the sale of your business as far in advance as possible. Transaction lawyers and accountants can do their best to maximize the value of your sale when they have a generous time frame to work with. As professionals, they can offer you instructions on how to reduce and negotiate your debt as well as generally boost the financial health of your company.
[Read more: How Do I Prepare to Sell My Business?]
6. Inform your employees and customers of your intent to sell
While confidentiality agreements often govern business sales, informing employees at the right time is key to maintaining morale, financial stability, and buy-in. Communicate with relevant stakeholders—including internal leadership and essential employees—when permitted by your agreement to avoid risking the deal. Require NDAs before disclosing details, and be transparent about how the sale will affect everyone involved.
When appropriate, inform customers and important vendors so they understand the transition and what to expect from the business moving forward.
“Notify [clients and suppliers] as soon as the deal is approved, but be strategic with the time frame and ensure the details are set in stone,” suggested John Silvestri, General Counsel at Craveworthy Brands. “Put an emphasis on the success of the business and the minimal disruption that will occur as the new buyers come in.”
7. Market your business and find buyers
Once you have everything internally straightened out, you can market your business to attract buyers. There are a few different types of avenues you can use to find them. This can include going through a professional, such as a broker or real estate agent, or marketing yourself through traditional or digital media, your existing network, or word of mouth. The method you choose will depend on what industry you're in, the location of your business, and the size of your organization. To help gauge the best way to market, look at how businesses of similar size and structure were sold off and how they found buyers.
8. Make a sales agreement and transfer ownership
After you’ve found a buyer and negotiated a sales price, work with a lawyer to create a sales agreement and transfer ownership to the buyer. This process could go back and forth for some time, as there are many specific documents that need to be created and carefully executed. Work with your lawyer and your buyer's legal representative to ensure clear communication between both parties during this process.
Managing the post-sale ownership transition
Once you’ve found the right buyer for your business, follow these steps to ensure a seamless ownership transition for all involved.
- Establish a transition strategy. A well-structured transition plan helps the new owner take over by outlining business responsibilities, timelines, and goals. Ramsinghaney advised creating a detailed 100-day plan covering customer communication, employee retention, and operational integration.
- Reassure employees and customers. Sudden changes can create uncertainty, so keeping open lines of communication and providing clear expectations can help maintain stability. Introduce the new owner and address concerns early to ease the transition.
- Ensure knowledge is transferred. The new owner should have access to necessary business insights, operational procedures, and vendor relationships. To help them transition smoothly into their role, offer support through documentation, training sessions, or advisory periods.
- Hand over legal and financial responsibilities. Enlist legal and financial advisors to help finalize contracts, transfer necessary licenses, and settle outstanding debts. This ensures the new owner takes over the business in good economic and legal standing, preventing potential disputes down the road.
Most importantly, you’ll want to prioritize clear and timely communication throughout every stage of the process.
“Critical stakeholders should be identified and managed through a structured communication cascade to maintain business momentum,” said Ramsinghaney.
Rachel Barton and Dan Casarella contributed to this article.
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