How To Sell Your Business and Make a Successful Exit

Sara Friedman

Published: August 24, 2022

You’ve done it: You took an idea, built it into a thriving business, and now you’re ready to sell. Congratulations — few entrepreneurs make it to this point. But now it’s time to ensure you make the right deal for your most prized possession.

How to sell a business

Entrepreneurs choose to sell their businesses for many reasons, ranging from retirement and health problems to co-founder conflict and just plain boredom. In 2021, 8,647 businesses were sold, a 14% jump from the year before. 

Regardless of why you’re moving on, there are actionable steps you can take so that your business is sold at the right time, for the right price, and to the right buyer. 

Steps to selling a business

1) Educate yourself — Spend some time researching how to sell (you’re doing that now!) and figure out if you need to make any changes to get your business ready for the process. Common actions include adding business processes to make the business scalable, adding features that would open up a new market, or filing patents to lock down intellectual property.

2) Get organized — Do your due diligence by organizing your bookkeeping and financials and getting ahead of anything that could slow down the sale (such as signoff from other shareholders or active lawsuits or legal proceedings). Write a business memorandum: the company’s history, overview, and successes (highlight wins such as high talent retention or pivoting amid the pandemic). 

Also consider your business’s employee contracts, intellectual property issues, and federal and state tax requirements. To ensure you have time to fix all potential red flags, hire a third-party accounting firm to audit your financial statements a year or two before the sale. 

3) Get a preliminary business valuation — Turn to experts (e.g., business brokers, merger and acquisition advisers) to understand how much your company is worth, then consider if you’re willing to accept that price. 

4) Identify who should be your buyer — Find the why when thinking of your ideal fit. For example: Does the buyer have the cash to buy, or do they need financing? Have they bought companies before? Who would need to approve the deal on the buyer’s end (internally: founders, board members, management; externally: investors, banks)? Will they keep your team employed after the sale? 

5) Assemble your team — Putting together a team early can prevent a lot of stumbling down the road. Professionals who could help with the process include: 

  • Corporate finance attorney 
  • Business broker 
  • M&A adviser
  • Personal tax accountant 
  • Company auditor 
  • Sell-side bankers 

6) Go to market — For small businesses, owners can list their companies anonymously on business broker sites. For larger ventures, owners should identify potential suitors by looking at direct rivals and companies in related industries.  

7) Follow the deal to close — Deals can fall through days before closing; stay on top of it along the way by responding to requests within 24 hours, scheduling weekly calls with advisers, and pushing legal counsel to move documents forward quickly. 

A tip: Time is your enemy. Resist any efforts made to push the closing date. 

8) Prepare for life after sale — Your business is your baby: You should be hands-on when planning your company’s transition (this includes how the new owner will interact with your employees and customers). But entrepreneurs also need to give thought to life after their exit, from retirement planning and managing sale proceeds to future personal and professional goals.

When to sell your business 

Knowing exactly when to let go of your venture can be intimidating, but experts agree you should decide whether selling is in your future at the very beginning. 

“The best time for entrepreneurs to consider selling their business is when they start their company,” says business broker Katie Milton Jordan . “Consider what you want your company to do for you. Are you creating a company that you want to sell or a company that will create an independent stream of income just for you?”

When weighing the pros and cons of an exit, also think about the financial health of your company. “You want to be selling when your company is performing well, you’re cashed up, and you’re growing,” says David Raffa , a corporate finance expert. “The worst possible thing you can have is to sell in the slope part of your year.”

Along with financial considerations, the right time to exit your business is a deeply personal decision that only you can make. For Cindy Summers, founder of Sugar Fixé Pâtisserie, moving on felt right once her business no longer challenged her or fit her lifestyle.

“My passion is building businesses and creating great customer experiences. Once my business was established, I became more of an operator. This didn’t give me the mental gymnastics I needed to stay inspired,” she says.

Additionally, the nature of her business made it difficult for Summers to find work-life balance. “I was married but kid-free when I started the business. Three kids later, and there was an emotional conflict between my family, employees, and customers. Busiest times in a bakery are weekends and holidays. This meant missing out on a lot at home,” she says. 

Some other common life experiences that lead to exits include:

  • Illness 
  • Co-founder misalignment or conflict 
  • Boredom 
  • Retirement 
  • Shifting life priorities 

Jordan advises owners to sell their companies before the “five D’s”: death, divorce, disease, disengagement, and downturn. Making an exit prior to those events can ensure you get a fair price for your creation.

“Most entrepreneurs tend to get out too late, when they have no gas left in the tank, and the growth rate of the business is a big piece of the value you get in the end,” says Raleigh Williams, who sold his escape-room business for $26m. “Ending on a high note is something that pro exit entrepreneurs do versus amateurs.”

How much to sell your business for 

Della Kirkman , a CPA and business investor, uses a simple calculation to get entrepreneurs started: “A quick and easy formula is to determine the five-year weighted average of EBITDA and multiply it by the range of multiples that are appropriate for your type of business.” Kirkman says she most often uses a multiple between three and five. 

Meeting with experts to get a professional valuation of your business is the most accurate way to find the right number. Therefore, get started with assembling a team of advisers early in the selling process, and find professionals who work closely with your industry whenever possible. The more niche their experience, the more they’ll be able to guide your sale appropriately. 

Third-party experts can also ensure the business is ready to be sold. “A lot of business owners don’t realize their company can’t be transacted and isn’t packaged properly to go to market,” Jordan says. “That’s why it’s important to ask questions and get educated as soon as possible.” 

A common roadblock Jordan sees is solopreneur businesses. For those who wear every hat at their firm, buyers feel they are essentially buying a job rather than a company. Another reason for a difficult transaction could be if a business is tied up in any sort of legal proceedings. 

To make a business more appealing to buyers, Jordan suggests depersonalizing your operations.

“Business owners create a business and a system in a way that’s easy for them to run, built around their strengths and personality, because they work so hard around the clock,” says Jordan. “When it comes time to sell, their quirks are not the quirks of the new owner.”

She suggests that owners create manuals, standard operating procedures (SOPs), and automations where possible. 

“Just like when someone buys a new car and you hand them the set of keys and the owner’s manual,” she says. “If you have a company you can hand off with an owner’s manual, you have something that can be transacted.”

Once you have the right deal, stay active in the process until the very end. 

“As a founder, so much of your net worth is tied up in this transaction,” Williams says. “Outsourcing that process and not being involved, or expecting a lawyer or broker to be as involved in the details to the same extent you need to be, is unwise.”

Where to sell your business 

If you’re wondering  where to sell your business , the right place depends on its size. For small solopreneur-owned ventures, owners can list their companies anonymously on business broker sites such as BizBuySell ).

There are many different business sites. Some target specific cities or states, as buyers often want to acquire local businesses. Experts recommend researching the best site to list using a simple Google search that includes your location. 

For larger companies, Raffa says that entrepreneurs can spearhead the selling process directly through a sell-side banker rather than list on a business broker website. 

“In that situation, you should do rounds of approaches,” he explains. “Make a list of 100 potential buyers, and start with the first 10-30 ideal ones, and work down that list.”

Raffa advises assembling your list by including companies 5-10x your size in your business space (often competitors), companies in a closely related space, companies in a similar industry who are struggling and need a new edge, and companies that want to enter your geographic market.

He notes that when reaching out to potential buyers, likely only half will engage with you, and they should sign NDAs before you disclose further financial information and insider business details. 

Alternatively, you can start with companies lower down the list to dip your toe in, understand the typical questions asked, and circle back to your ideal buyers when you feel more prepared.

When Williams began the process of finding a buyer, he approached direct competitors first, a tactic he says is helpful across industries. 

“People in the same industry or adjacent to the industry are the easiest people to do deals with because they understand what they’re looking at,” he says.

It’s also common for business owners to get inquiries from companies or investors interested in acquiring. Even if a sale isn’t in your immediate plans, don’t ignore the opportunities, which may lay the groundwork for a deal down the road. 

Life after exiting 

Selling doesn’t have to mark the end of your career — aspirations for the future can actually be baked into the terms of the sale. 

“The options are endless,” says Kirkman. “Whatever they can dream up and negotiate into the deal, they can have.”

Kirkman says this includes options such as:

  • Annuity in perpetuity: a profit share for the life of the business
  • Retaining ownership of a brick-and-mortar building to create a future rent stream
  • Taking a revenue share for any new clients brought into the company 
  • Selling your business on a partial installment basis to spread out the payments (which can help with tax deductions) 
  • Staying on as an employee (often called an acqua-hire) 
  • Stay with the business as a consultant 

Whatever you choose, be sure to put time into the decision-making process. If a clean break feels like the right move, it likely is. If you’re not quite ready to say goodbye, that’s OK, too. 

Plus, your exit might just be the first of many, and you can use the experience to inform your future ventures.

“Most entrepreneurs after they’ve exited something realize that the ends won’t justify the means nearly as much as they thought they would,” Williams says of running a business that’s purely profit-driven. 

“They tend to actually move into the thing that they wanted to do all along, but were scared there wasn’t enough money in,” says Williams. “And they tend to make way more money in the thing they actually enjoy doing than their first exit.” 

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Selling a Business: A Step By Step Guide

Reviewed by

February 23, 2021

This article is Tax Professional approved

When considering selling a business, it’s time to get the compensation you deserve for all of the blood, sweat, and tears.

By understanding all the moving parts behind a business sale, you can worry less about the process and focus more on the outcome: getting a fair price for all your hard work.

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How to sell a business, step by step

While every entrepreneur’s journey is different, these are the steps you can typically expect to take when selling a business.

Step 1: Determine your commitments

While preparing to sell a business, it shouldn’t suffer. Selling a business takes time and energy. Getting too caught up in the process can get in the way of servicing your customer base.

Chart out an exit strategy to prepare for the sales process well in advance. For example, have a plan in place for any outstanding invoices and get the financial records up to date for prospective buyers.

You don’t need to know the exact amount of time needed to take care of every task, but it will help you come up with a timeframe for a successful sale. It will also help you plan what kind of professionals you need to hire.

Step 2: Hire professionals

Knowing how to sell a business is important, but equally important is knowing where to bring in help.

To jump to our overview of professionals to hire, click here . But as a quick rule of thumb, start with an accountant and attorney. Outside of that, it’s up to you to determine how much help you need from appraisers, brokers, or consultants.

Once you’ve found and contacted them, any of these professionals should be willing to sit down with you for a free consultation. Here are some useful questions to ask an appraiser , a broker , and a consultant .

Step 3: Make improvements to the business

Before selling a business, invest in improving its profitability and the efficiency of its day to day operations. This will help you get the biggest sale price possible by boosting the value of your business. The changes you make will depend on the type of business, but here are some ideas to get you started.

Put on a fresh coat of paint

If you have a brick and mortar location, simple updates—new fixtures and furniture, or even a (literal) fresh coat of paint—can help the business look more desirable to potential buyers.

Smooth out the operations

The business operating system (BOS) is the rulebook for how the company runs and how employees work together to achieve goals. A BOS that’s disorganized or poorly implemented doesn’t look good, and hurts the profitability of the business. Replace it with a new system, or revise the current one to make it more efficient.

Sell, sell, sell

Focusing on boosting sales before selling a business will make it look more attractive to buyers. This is especially the case with individual buyers—as opposed to organizations—who may be looking to benefit from the immediate cash flow that comes with buying a high-revenue business.

Diversify the client list

If more than 20% of your business consists of a single client, you could be at risk of giving buyers cold feet. After all, if that client decides they don’t like the new owner and decides to churn, it will put a huge dent in the profitability of the business. Leading up to a sale, try to take on new clients and diversify your portfolio, so this is less of a risk.

Step 4: Organize your financials

When it comes to financials, prospective buyers want as much transparency as possible. You’ll need at least three years of clean financial statements (balance sheet, income statements) to present to prospective buyers. Make sure that all income is accounted for.

You should also make sure you have a bookkeeping solution in place, so you can guarantee the new owner ongoing, up-to-date financial info.

Finally, if you have any assets on your business books that you’d like to keep for private use—such as vehicles or equipment—be sure to transfer them off the books. These assets need to be legally transferred into your possession, so they’re not falsely recorded as belonging to the business you’re selling.

Step 5: Set the sale price

Does your business rely on proprietary information or specialized knowledge? If so, you’ll get the most realistic business valuation from an appraiser or broker.

If you’re determining your own asking price, you should generally plan to set it at one to four times the seller’s discretionary earnings (SDE).

The SDE consists of:

  • Your business’ annual net income before taxes
  • Money your business makes from investments
  • Depreciation and amortization of business assets
  • Your personal compensation and benefits
  • Non-recurring expenses.

The number by which you multiply the SDE—one to four—is determined by the current state of the market, your business’s competitiveness, and other factors. These are hard to pin down, but a qualified business consultant can help you figure out the SDE multiplier when selling a business.

Step 6: Get your paperwork in order

Besides financial records, you need certain legal documents to be prepared before you make a sale. The most important is the asset purchase agreement —a legal contract for selling your business’s physical and intellectual property.

This document typically runs 25–50 pages in length, and draws on your financial records. Often, the asset purchase agreement will also list your obligations as former owner. Most commonly this means staying on with the business for a set period, to consult with the new owner.

A non-compete may also be required. This would state that you do not intend to start a new business that would be competition to the old one you just sold.

Preparing one of these documents is a time-consuming task, which is why it’s important to hire an attorney who can handle it for you.

Step 7: Prepare a selling memo

The selling memo is an integral document when selling a business.

You provide the selling memo to prospective buyers, giving them all the information they need about the business so they can consider making a serious offer.

Your selling memo will include:

  • An overall description of the business
  • Information on the location
  • The business’s strengths
  • An overview of the competitors
  • A description of the products/services
  • Information on the day-to-day operations
  • The marketing plan
  • Key employees and managers
  • Growth projections
  • Potential buyer concerns
  • Financial information
  • The asking price and terms of sale

Check out ExitAdviser for a comprehensive rundown of the selling memo , and online tools to help you put one together.

If you hire a broker, they will prepare the selling memo for you.

Step 8: Put the business on the market

One major challenge you face when advertising a business for sale is maintaining confidentiality. If clients or employees find out you’re planning to sell, they may get skittish. And competitors could interpret the decision as a sign of weakness, and take advantage of it.

That’s why it’s usually wise to hire a broker. Not only will they have a large network to draw on, they’ll know how to discreetly approach potential qualified buyers.

However, in the event you do decide to sell a business without help from a broker, online services have made doing so easier than it once was.

BizBuySell.com tags itself as the biggest business for sale marketplace in the world, and will even help you find a broker if you change your mind about going it on your own.

Step 9: Negotiate the sale

When the right buyer is ready to purchase the business, they’ll submit a letter of intent to purchase . This document is non-binding; either you or the buyer can back out at any time.

It’s rare for a buyer to back out, though. By this point, they’ve already invested significant time in researching the business and putting together an offer.

Now, you may either accept the offer, or enter into negotiations with the potential buyer. Negotiating the sale of the business is its own special art form, and you may want to draw on advice from a business consultant during the process.

Step 10: Finalize the sale

Once you accept a letter of intent, you should expect to wait while the buyer performs due diligence. They’ll take a set period of time, from two to four months, to do this.

For the sake of due diligence, they’ll examine your business’ assets and liabilities, financial history, inventory, staff structure—just about anything that affects the day-to-day running of your business.

Due diligence is your buyer’s chance to get an in-depth look at your business, and make any necessary last minute moves—borrowing extra cash, or looking for additional staff—before officially taking over.

The sale of your business is completed when you and the buyer sign the asset purchase agreement prepared by your attorney, and any other supporting documentation that may be required depending on the specifics of your business.

The professionals you need to hire

A guide on how to sell a business can give you the steps you need to take, but professionals can ensure you’re getting the maximum value and cover you legally. That’s why it’s best to get a little help from your friends—“your friends,” in this case, being paid professionals.

At minimum, you’ll need to work with an attorney and an accountant.

An attorney can help you prepare the legal documentation for the transfer of assets, and make sure nothing you’re doing is likely to get you sued.

An accountant prepares the financial records you need to prove to prospective buyers your business is worth investing in.

Then, you should consider hiring an appraiser . For a fee— typically $3,000 to $7,500 for small businesses—an appraiser will tell you how much your business is worth so you’re getting the maximum value.

An appraiser will survey:

  • How much money your business owes
  • How much others owe your business
  • Your business’s inventory, and other assets
  • Past tax returns
  • Your receivables and sales

Then, they’ll take into account the condition of the market, and your business’s place in it, to determine an asking price that will be attractive to buyers while also getting you the best price.

However, you won’t need to hire an appraiser if you hire a business broker . A broker will both appraise your business, and put it on the market for interested buyers. Typically, they’ll charge 5–10% of the commission price. Brokers find business buyers for you by preparing a prospectus for it, listing it on marketplaces, and tapping into a large professional network.

Finally, before putting up the “For Sale” sign, consider hiring a business consultant . Someone with experience in your industry can tell you ways to improve your business before making a sale so it will look more attractive to potential buyers.

Who to sell a business to

Equally important as how to sell a business is who you’re going to sell it to.

You can sell a business to a variety of individuals or entities. There are pros and cons to dealing with each.

Selling a business to an individual on the market

This is like selling your house on the market. You put it out there, and see which individual shows the most interest in becoming a small business owner (for the highest price).

Pros: Since the business is up for sale on the open market, you have the highest chance of finding someone willing to meet the conditions of the sale—for instance, an all-cash closing.

Cons: To sell on the open market, you will likely need to hire a broker who charges commission.

Selling a business to a family member

Roughly one-third of business sales are between family members. This can take the form of handing off the business to the next generation of owners.

Pros: As the business gradually changes hands and your family member takes over, you’ll still have some say in how the business is run. Also, a change of hands between family members means a smoother transition for staff and clients.

Cons: It’s unlikely you’ll be able to get the highest possible asking price for the business when selling to a family member.

Selling a business to partners

If the business operates as a partnership, you have the option of selling your shares to your partner. Most likely, when you formed a partnership, you signed a buy-sell agreement. This document outlines the price and procedure you need to follow to make the sale.

Pros: Following a predefined path for making the sale requires minimum effort on your part, and has a low impact on staff and clients.

Cons: Even as the buy-sell agreement makes for a quick change of hands, you may find yourself stuck with a price that seemed attractive when you signed the contract, but has become less appealing as the business has increased in value.

Selling a business to an employee

A trusted employee who’s great at their job and knows the business inside and out could make the perfect business owner—and the ideal buyer.

Pros: You can plan the sale well in advance. The first step is setting up a legally-binding partnership with an employee. Then, you’ve got plenty of time to arrange the hand-off, and extract yourself from daily operations, before the employee takes over completely.

Cons: As with selling to a family member, selling to an employee is unlikely to get you top dollar for the business.

Selling a business to multiple employees

You may be able to sell the business to qualified employees, if you have an Employee Stock Ownership Agreement (ESOP) in place.

Pros: Taking advantage of existing relationships with employees means you don’t need to put the business on the market. Existing employees are also more likely to run it successfully than a buyer you’ve never met before.

Cons: The ESOP needs to be put in place well before you make the sale. Setting it up demands extra paperwork and professional help .

Selling a business to another business

Large businesses and private equity groups buy companies as investments. In that case, they’re not looking to set it up with a new owner, but to use parts of the business—market share, competitiveness, profitability—to benefit a larger, similar business in their portfolio.

Pros: You’re more likely to secure a better selling price from another business than from individuals, and get an instant payout.

Cons: Depending on the sale terms, you may need to continue managing the business for a fixed period during the transition.

Further reading

  • How to Find an Accountant
  • Accounting Outsourcing: How to Hand off Your Financial Tasks (With Recommendations)
  • How to Know If Your Small Business Is Financially Healthy
  • How Long to Keep Business Tax Records and Receipts

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The six steps to selling a small business.

How to sell a business in six steps

Wondering how to sell your business so you can make the most of your labor of love? First off, congratulations! Selling the business that you worked so hard to create and build is a big choice, and one that comes with planning, goal setting, searching (for buyers, and maybe even some soul-searching, too), valuations, and a whole lot more. So before you start advertising your business in the local classifieds, start here: how to sell your business— the right way. To help guide you, we’ve made a list of six simple steps that you can follow all the way to the bank. 🏦 How to sell a business in six steps:

  • Time your sale properly
  • Organize and prepare your finances
  • Determine the value of your business
  • Decided whether or not to use a broker
  • Find a buyer

Ready to move from for sale to sold? Well, getting there will take longer than reading a few bullet points, but you’ve got to start somewhere! Let’s begin.

Step 1: Deciding to sell your business

Deciding to sell your business isn’t always an easy choice to make. It’s typically not a quick one, either. When you’ve reached this point, it usually means you’re in the midst of change, and that’s totally okay. Here are just a few reasons why people make the decision to put the proverbial “for sale” sign on their business:

  • A career or a life change. For example, a divorce, a death in the family, illness, or, in terms of your professional life, you’ve decided that you’re ready for your next move and a total career change. This could be anything making the switch from running a boutique graphic design agency to opening a bakery or moving from owning a catering company to becoming a full-time accountant. You do you—and sell your business to help you get there.
  • Retirement. You’ve put in your time and have decided to call it quits and join the flock of snowbirds who travel south six months of the year. We wouldn’t blame you. ✈️
  • Differences: Perhaps after five years in business together, you and your partner have decided that you want different things, and selling the business is the best way to achieve your respective goals. Don’t stress, this happens. And when it does, it’s best to have the agreements made up in advance of the sale.
  • It’s just not working for you: You feel overworked, underpaid, or simply bored. When this happens, you’ve got a call to make: should you stay or sell?

Whatever the case, it’s important to know the reason behind your decision. Not only will it help you sleep better at night, but potential buyers will want to know. Knowing the owner’s motivation can be a big part in their own decision making, helping them understand the reasoning behind the sale and how that might play a part in the future success of the business. When selling, remember to be open and transparent. This creates trust and a smoother process from start to finish.

Step 2: Time your sale properly

Making the decision to sell your business usually doesn’t happen overnight. But even if you magically woke up with the idea and decided to move it from dream to reality, the plan to get you there can take months—sometimes even years. This is why planning well in advance is key to making the most out of your business decision. Allowing for ample space and time in the process gives you the opportunity to make improvements that will increase the business’s valuation. For instance, you might want to clean up your finances , look at ways for reducing operational costs, and create a few campaigns to build up your sales. Or, if applicable, focusing on customer retention by launching a loyalty program, or executing a few tactics that will strengthen your brand awareness. While these tips do take time to go from ideation to implementation, they can make your business much more attractive to buyers. 

Step 3: Organize and prepare your finances

We just mentioned cleaning up your finances, but before you can do that, you’ve got to bring them all together in one organized place. Start with financial statements like balance sheets, P&L statements , and your tax returns from the past three to four years. If you’ve got the time, take the extra step to review them all with an accountant or Wave Advisor to make sure everything is in good order. You’ll also want to go into list-making mode to put together the following information:

  • Equipment: What’s being sold with the business? 
  • Contacts: Who are your suppliers? What are their related transactions? Anything outstanding? 
  • Lease: How long is your current lease? What utilities are included? Are there options to renew? ‍

All of this information can go into an information packet for your potential buyer. This packet will provide an overview of your business, how it’s managed, and the day-to-day operations. It’s helpful for the buyer to have, so they can take over operations as seamlessly as possible.

Step 4: Valuate your business

How much is your business worth? That’s the question you want to find out as you prep for sale so you have a realistic listing price in mind. Emphasis on realistic. Don’t price the business too high or too low. When you do that, you’ll be stuck with less money than you deserve, or you’ll find that buyers are passing on the opportunity because the cost is too much. To help you get the right answer, look at hiring an appraiser to complete the valuation. As a third party, they’re neutral to the situation and have nothing to gain from the sale. Plus, they can draw up the necessary documentation that you’ll need throughout the process. Now, let’s take a step back to step two: timing your sale properly. When valuing your business, you need to give yourself enough time to get all your ducks in a row, which includes the time to boost your valuation. This can be done through cost-cutting tactics and initiatives to increase revenue, brand awareness, and customer retention. You know, all the things that a buyer wants to see before they sign the dotted line. 🖊

Step 5: Consider using a broker

When you’re selling your business, there are two ways you can go: with a broker or without one. If you’re selling to a close friend or relative, a broker might not be needed. If you decide that’s the case, you can save yourself a few bucks. But speaking of dollars, you might want to explore hiring a broker if you want the biggest bang for your buck. Brokers work off commission, so they’ll do what they can to help maximize the sale and their take-home amount. To help with the sale, they can handle the logistics of selling your business, freeing up your time so you can keep the business in good order until it's sold. For example, they might be working quietly in the background with their network of buyers to get the highest price. But before you decide to hire your broker, be sure to set your expectations, including advertisements, communication, and commission. This makes for a successful and transparent relationship, and a smoother sale.

Step 6: Find a buyer

Last but not least, you’ve got to find yourself a buyer. And you guessed it: this (likely) doesn’t happen overnight. To get you to that ideal point of having two to three potential buyers, consider boosting your advertising. This is where brokers can come in handy. Not only do they have their networks, but they’ve also got a few marketing strategies up their sleeves to help promote the sale of your business to those who are looking. Once you’ve found the buyer(s), keep in touch with them. You’ll also want to make sure they’re pre-qualified for financing before you give out any specific info about your business. Next, you’ll want to bring in your lawyer. Lawyers are extra helpful if you plan to finance the sale and need to work out the details with the buyer. On that note, make sure any agreements are put into writing, and have potential buyers sign a nondisclosure or confidentiality agreement so your business remains yours—at least until it’s theirs. Now, when it comes to price, allow yourself some wiggle room. Set a firm price or price range that you find reasonable. This lets you allow for negotiation, but on your terms. ‍ Lastly, the signed agreement. Try to get this into escrow , which means that a portion of the purchase price would be held by a third party until agreed-upon obligations are filled. These could be the transfer of assets or a resolution for any outstanding assets, as an example. ‍ After all is sold and done, you might find yourself with a few more business encounters, like a bill of sale that transfers your business assets to the lucky buyer; an assignment of lease; or a security agreement which lets you keep a lien on the business. Another legality? Your buyer might present you with a non-compete. By signing this, you’re agreeing that you won’t start a competing business that could lure your loyal customers away.

Selling a business FAQs

How much does it cost to sell a business .

This depends on the route you take. If you go with a broker and you sell your business for less than $1 million, expect to pay a commission around 10% to 12%. You’ll also have to pay fees associated with marketing, lawyers, potential transfer fees, and any improvements you make to your business to boost its appeal. 

How do you sell your share of a business?

The common way to sell your share of a business starts with an agreement. Try to put this in place with your business partner(s) ahead of any sale. This will help remove emotions and keep things running smoothly.

How do you sell a small business without a broker?

You don’t always need a broker to help sell your business. This can be especially true if you’re selling to someone you know, like a family member or friend. That said, you should still consult with your small business network to get their expertise and advice; trusted sources on the internet ( 👋 ); and those who’ve have sold businesses before.

The bottom line on selling your business

Selling your business comes down to six simple steps: the timing of your sale, organizing your finances, valuation, the choice to use a broker or not, and then finding a buyer. And even once all that’s complete, sometimes you need some help. Be sure to talk to your network of business owners or reach out to Wave Advisors for help. This is a big move, so you want to make sure that it’s the right one for you, and done right. Which, in the case of selling businesses, doesn’t always mean quick. But trust us: seeing that deposit enter your bank account will make all the hard work worth it.

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The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.

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Home » Business Cycle » How to sell your business

Selling a business takes strategy and timing

Would you believe that 45% of business owners spend more than 41 hours a week on their business? Are you one of them? When you started your business, you probably had dreams of financial and personal freedom, tropical vacations and a cushy retirement. To make those dreams come true, you need to know how to sell a business and develop an exit strategy.

Understanding when and how to sell a business can be overwhelming without the right resources. Yet as Tony Robbins says, “The purpose of a business is to build a system that can make money when you’re not there, and if done right, a business you can sell for a multiple.” 

You’ve done just that: grown organically , scaled your company and perhaps even recovered from a financial loss . You’re ready to reap the rewards. You need an action plan for selling a company and a checklist of items to keep you on track. 

Once you’ve sold your business, you’ll have the financial freedom – and the time – for the next phase of your life. Sounds great, right? Then why is it that 53% of business owners say they’ve given little to no thought to their transition plan? It’s probably because selling a company can seem overwhelming – but it doesn’t have to be. 

Here’s how to sell a business and see massive results.

Ready to sell your business and obtain financial freedom?

8 steps to selling a company

Selling a business is much like a Hollywood marriage: Without a solid prenuptial agreement ( exit strategy ), a divorce (business sale) can result in disaster (financial loss). Don’t let your business’ final days sneak up on you – include an exit strategy in your business plan. With the right strategy in place, you’ll have a specific goal (a certain profit margin or substantial growth in sales) to reach that will signal when it’s time to sell your business.

According to Tony, “Without an exit strategy, all you have is a job.” This means you need to stop thinking of your business as a day-to-day job and start thinking of it as an investment.

Step 1: Know your reason for selling

If you’re asking yourself, “Is it time to sell my business?” you probably have a reason why. You may be ready for retirement or want to move on to a new endeavor that combines passion and profit . You may want to take care of your or a loved one’s health or just want to move on to a new environment. Knowing why you want to sell will help you answer more important questions down the line, such as how much revenue you need to generate to move on to the next phase of your life.

how to sell a business

Step 2: Determine when to sell

discussing sale of a business

Understanding when to sell your business is critical for getting the best price. Don’t wait until your business is in decline to sell – the best time to sell a company is when it’s at its peak performance . Do it when you’re at the top of your game, and you will reap the benefits. You may also want to take a look at economic considerations – selling your business during a downturn or a recession will most likely not generate the same profit as it would in a robust economy.

Step 3: Get your paperwork in order

Financial records are a must. You need to have financial records from at least the past two years that cast your company in a positive light. This means revenues and profits that are steadily increasing – you don’t need to see big jumps, just a good performance that provides a solid foundation for the future.

You’ll also want a realistic business map to show the buyer how your company will keep growing. Finally, the most important thing about your financial records is honesty. Any serious buyer will do their due diligence and investigate every aspect of your business. Don’t let a good deal go south because you don’t have your paperwork in order or were not honest about something.

managing a business deal

Step 4: Find a broker

using a broker in a business deal

Learning how to sell a business is a skill you can master. We’re willing to bet the person who can best market your business is you – and if you’re selling to a family member or a current employee, representing yourself can be a good choice. However, there are many situations where using a broker is helpful. If you’re trying to keep the sale quiet, brokers use their own network to find sales leads without letting the word out to your employees or other stakeholders. Brokers can also be a great option to involve in the sales process if your business has complicated financials or an exceptionally high value.

When you use a broker to sell your business, communication is key . Ensure they know your expectations, and that you know theirs regarding fees. Confirm they’re a Certified Business Intermediary (CBI), ask them to provide a portfolio of specific marketing tactics they have used for other companies and always get referrals.

Step 5: Get a business valuation

When selling a company, an accurate valuation is essential to pricing it correctly and selling it quickly. You won’t know what to sell your business for if you’re not sure what it’s worth. Pricing a business too high or too low can result in losing out on money or not selling it at all. Find a business appraiser who can create a detailed documentation of its worth; your business broker will be able to refer you to an appraiser if they do not have one in-house.

two people making business deal

Step 6: Choose your buyer

selling a business through raving fans

If you’ve chosen the right time and properly prepared to sell your business, you may have several buyers to choose from. When you’re choosing your best buyer, there are several things to look at beyond the offer price. First, make sure the buyer can back up their offer with financing. If they’re using third-party loans, always pre-qualify them. If they have private investors or other sources of funds, carefully review all documentation, including past legal judgments.

Also consider the type of transaction – certain structures may have transitional requirements, higher taxes or less cash at closing time. You’ll want to hire a lawyer to help with vetting buyers and setting up the transaction itself. 

Look at culture fit . Check out the buyer’s prior acquisitions and see where they ended up. If the buyer is another company, ensure your cultures are compatible. And trust your gut – it’s what helped start your business, and when you’ve thought everything out and have two final buyers in mind, it’s what can be tapped into to make the final decision.

Step 7: Decide what to do with the profits

After selling your business, you need to determine what to do with the profits. If you are selling a company to fund retirement, you’ll work with your fiduciary advisor to decide if and where the money is invested. If you intend to buy or start another business, you can use the profit as a down payment or to make other necessary arrangements.

profits

Step 8: Relax and enjoy the next phase of your life

the need to relax when selling a business

If you catch yourself wondering, “What do I do with myself after I sell my business?” remember that you built your business to pursue something new. Whether your next phase involves a new endeavor or much-needed peace and quiet with family, you’ve earned the right to enjoy it.

Frequently asked questions about selling a company

How do i value my business to sell.

Working with a professional appraiser is the best way to know how much your company is worth and what the recommended selling price is. Your broker can suggest the right appraiser for your situation.

How do I sell a struggling business?

Keep the business in operation to show prospective buyers it has potential and keep all your financial paperwork in order. A broker is an asset in this scenario, as they can keep the search confidential and help you decide on a price that will be attractive to buyers but still net you some profit.

Do I pay taxes when I sell a company?

Yes. The taxes you pay will depend on the assets your business owns. The best way to handle this is to work with an experienced business broker or attorney who can help you minimize your tax burden.

How long does it take to sell a business?

This is an answer heavily influenced by your industry, how your business is priced and how aggressively you’re marketing it. The length of time it takes to sell a business is often contingent on the economy. On average, it takes around 180 days to sell a business; yours may take more or less time, depending on the previously mentioned factors.

How do I sell my business quickly?

You can increase your chances for success by working with professionals who can help you price your business competitively and market it to the right people. Still, there is no magic potion for selling a company quickly.

Ready to achieve personal and financial freedom?

Learn to keys to successfully selling your business  with  Tony Robbins’  7 Forces of Business Mastery  free content series.

© 2024 Robbins Research International, Inc. All rights reserved.

How to Sell a Business: The Ultimate Guide (2024)

Brandon Boushy

  • 3 years ago

Men making a business deal

Are you considering selling a business, but need help figuring out the process? This definitive guide to selling a business will demystify the process. Keep reading to get the most value for your business.

Every business owner will eventually decide it is time to develop an exit strategy.

Whether you are selling a business to start a new one, retiring, or just passing it on to your kids, our guide will give you the steps to prepare for a sale including:

  • Define the exit strategy
  • Prepare financial statements
  • Get an independent business valuation
  • Increase the business value of your small business
  • Market to potential buyers
  • Negotiate terms and sell your business
  • Transition period

how to sell a business plan

There will be a ton of information in this guide, so make sure to download our Selling a Business Checklist to help you in the process. Keep reading for information on how to sell your business.

Step 1: Define the Exit Strategy

The first step in selling your business is defining your exit strategy. There are a variety of exit strategies that a business owner can use to sell a small business.

Which strategy is right for you will depend on a variety of factors. The most important considerations are:

  • Type of business
  • Business structure
  • Working with a broker vs. without a broker
  • Who will take control of the business after I sell my business?

After reading this section, you should know what is the best way to sell your small business.

Type of Business

Selling your small business is going to vary based on the industry the business is in. For instance, many locations have specific requirements for certain industries that may limit the prospective buyers available.

I’m sure you already know the regulations for your area, but if you need to refresh yourself on any limiting restrictions for your location and industry, the Small Business Administration is a good place to start.

This information will help when you start to market to prospective buyers.

Franchises may have special requirements that owners must go through to sell their franchise. Talk to your franchisor for more information on making a deal to sell a franchise.

Business Structure

Three cubes with the letters LLC

  • Sole Proprietorship
  • Partnership
  • Corporation
  • Comparison of business structures (need to remake chart)

Depending on how the business is structured, selling it will follow a different process. An LLC and Corporation are the easiest to transfer ownership as they are intended to be separate entities from the business owners, while a sole proprietorship is the hardest to transfer ownership as it is meant to have a single owner and the income and liabilities are tied to the person.

When you think about how to sell a small business that is a sole proprietorship remember you will be selling the assets, but the new business owner will have to reorganize the business under their name.

Alternatively, you can change it to an LLC before the sale to make the transfer easier. To set up an LLC check out this Small Business Trends article .

Other than those variances, the only real differences are the tax and legal documents, which you can find information on at the IRS website .

Broker Sales or Private Sales

There are two main ways to sell your business, brokers or private sales. Let’s explore each to establish whether your small business will benefit from a broker selling it or whether you should learn how to sell a business privately.

Selling Your Small Business with a Broker

Entrepreneurs cosnsulting a business broker

They have been through the process multiple times and are able to help guide you in getting the proper financial statements and due diligence, determining an asking price, finding potential buyers,  finding the right buyer to sell your business to, and closing the deal.

If you want to sell your business with a broker, you’ll need to reach out to one. You can search for “business brokers near me” in Google to find a business broker in your location.

Brokers will normally charge a percentage with a minimum commission that varies based on the revenue of the company being sold.

MidStreet Mergers & Acquisitions has an easy-to-understand blog of how brokers normally charge if you want to understand “how much does it cost to sell a business?”

Given the minimum commission is typically $10-12k, if your business makes less than $100k revenue per year, you will probably want to understand how to sell a business without a broker.

How Do I Sell My Business Without a Broker?

A small business for sale by an owner may result in keeping more of the business valuation once the business is sold, but unless you already have someone in mind it may not be the best way when trying to figure out how to sell a business quickly.

You’ll be responsible for gathering all the company financial statements, determining the asking price, finding potential buyers, answering all their questions, getting the best deal, and finding someone to review the closing documents before selling.

Make sure to consider the time and financial costs that will be incurred when deciding how to sell your business.

If you are trying to improve cash flow, profit, or revenue while looking for prospective new owners, you may find that it is hard work if trying to sell quickly.

If you have time to do it right and make sure to do your due diligence, you can potentially get a higher sales price and keep more of the profit.

Who Will Take Control After Selling Your Business?

A pen a question mark on a desk

There are some specific instances where getting the best value may not require all these steps. Some scenarios that may simplify the process include:

  • Employee Buyouts.
  • Plan to sell to a related person upon retirement.
  • A competitor approaches you about merging the businesses.

These scenarios could limit many of the questions that need to be considered in steps 3, 4, and 6.

In the case of merging two businesses, there are some additional considerations that are discussed in our blog Increasing Business Value through Mergers which will go into far greater detail about how to sell your business to a competitor.

Step 2: Prepare Company Financial Statements

Potential buyers are going to want to see the long-term value of the company as demonstrated through revenue, cash flow, and profit.

This information needs to be readily available because it will impact all the other steps going forward.

You should make sure to include the following documents

  • Tax returns for last 7 years (or the start of business)
  • Supplier agreements
  • Business licenses and insurance documents
  • Proof of intellectual property rights/ownership
  • Documentation of all debts and liabilities
  • Documentation of all assets
  • Anything else you think the buyer might want to know

The long-term sales growth, net working capital , and other financial information will help brokers and agents answer buyer financial questions while selling the business for the most money.

Step 3: Get an Independent Business Valuation

Pens and a notebook on a desk with the word value

Regardless of whether you get a suggested sale price from someone who evaluates businesses, there are several ways of establishing worth you should be familiar with.

Valuations Formulas to Know Before You Sell Your Business

There are multiple ways to value a business for sale which I discuss in the blog How to Buy a Business . The following is a recap of it adjusted for sellers.

When determining how to value a business to sell the following methods can be beneficial to evaluating the value:

  • Asset Valuation

Price to Sales Ratio

  • Discounted Cash Flow

Asset Valuation Model

An asset Valuation Model is used in businesses that are heavily based on assets. When selling a shopping center, this is a great model. It basically adds up all equipment, inventory, and property then subtracts liabilities and debts.

In the example above, the company would be valued at $1,516,020. This process doesn’t take into consideration revenue or market direction so it might not be the most fair way to value the true worth.

Another way of valuing a business is by the price to sales (P/S) ratio. This takes the revenue of a company and decides how much to value it based on industry standards. Check out NYU Stern’s site for an idea of what multiple to use.

Using this method the P/S ratio ranges from .21 for grocery stores to 14.85 for software companies, with a total market average of 2.64-2.66.

If you compare this process to the asset valuation model, you’ll find that the revenue would only have to be around $570, 000 to justify the same sale price.

Price to Earnings Ratio

To use the price to earnings (P/E) ratio, you use the net income and industry norms. NYU Stern has a similar table for P/E Ratios.

Let’s assume that your company is a retailer, based on the NYU Stern charts, the net income would only have to be between $58,000-67,000 to be worth the same as the previous models.

Discounted Cashflow Method

Man showing cashflow result

This one allows you to include a variety of factors that other methods might not. Investopedia wrote an article that will help you get a deeper understanding of this step. You can read it here.

Factors taken into consideration in this method include:

  • Sales and growth
  • Cost of capital (inflation assumption of 3% plus the interest rate on a loan)
  • Income taxes
  • Changes in inventory, accounts payable and accounts receivable
  • Investment income
  • Depreciation

Zions Bank offers a useful calculator for the discounted cash flow method.

It will help you test a variety of different market conditions and is a really good option to help you find how to value a small business.

Make sure to do your due diligence by documenting each scenario you test. This will help you negotiate when selling your business to potential buyers.

Check out our blog about How to Value a Business for more information on valuation methods.

Step 4: Increase Business Value Before Sale

Businesses are valued differently by different people based on what they consider important. There are several things you can do to increase the potential sale price  before approaching potential buyers, including:

  • Documenting plan going forward like you aren’t selling
  • Improve financial positions and profit margin.
  • Pay attention to the market

how to sell a business plan

Let’s dig deeper into why each of these is important.

In the normal process of the workday, it’s common for everyone to have more work than time. If you make the time to get the space where every person who walks in can tell what and where everything is it will take them less time to make a more favorable impression of the business.

It will get you prepared to give buyers the best idea of how to keep the store organized. It will be worth it because you’ll know where everything is and be more prepared to answer questions about any of the topics related to the operations.

Documenting Plan Going Forward Like You Aren’t Selling

This step shows that you have thought about the long-term success of the business and shows that even though you are considering selling, you want to help the buyers succeed.

Given you have the best knowledge about how well the business is doing, what opportunities you haven’t capitalized on, and what you just haven’t gotten around to, it will give both you and the potential buyer a map of what step should be focused on next.

A documented plan may increase the valuation from buyers if they believe it is a good plan. It will also help you with finding ways to improve the valuation to get the best offers from buyers.

Improve Financial Positions and Profit Margins

If you find that the financial position of the company can be viewed in vastly different ways, you may want to investigate how to make the different market valuations more in line with each other.

For instance, if the Price-Sales ratio shows the value is $1.5 million, but the Price-Earnings Ratio shows a valuation of $800,000, buyers are going to consider the best sale price $800,ooo leaving a lot of money on the table.

If you find a way to bring the PE ratio more in-line with the $1.5 million valuation, the sale could be worth an extra $700K.

This would require looking at aspects like unnecessary expenses, reducing (or increasing size of) orders based on what will save more money, paying down debt, having a sale on poor-selling inventory, or any other number of methodologies.

Check out our video on how to improve business efficiency to get ideas.

Pay Attention to the Market

Market conditions can dramatically impact whether buyers are willing to offer you the best deal.

During recessions, buyers will want to take advantage of the opportunity, while during expansionary times, businesses will often see premium valuations to increase the chance of making a deal.

Step 5: Market to Potential Buyers

A note and pad on a desk with the word identity prospects

  • Business brokers
  • Online business marketplaces, like UpFlip’s marketplace
  • Sell to a top employee
  • Sell to a competitor
  • Newspaper / online ads
  • Ask your social network
  • Commercial realtors
  • Trade associations
  • You’re franchisor if you are a franchise.
  • Add “Small business for sale near me” in the metadata of posts and images online to trigger results during searches.

The goal here is to make people aware that you are selling your business. The suggestions above basically fall into three categories:

  • Sell to someone you know.
  • Have a third party help you.
  • Use digital platforms to sell the business

Sell to Someone you Know

This is typically the least complicated way as you already have a relationship and can discuss the terms without really having to do any marketing.

The major pitfall with this solution is you might agree to a lower price or even agree to let them pay you off over time. If this is not handled strictly professionally, it could create issues in the relationship.

Have a Third-Party Help You

Third parties will typically have more experience with selling businesses and may be able to create better results faster despite the additional costs that come with hiring a third party.

Business Brokers are ready to help and normally charge a percentage of revenue.  They have more resources to find business owners like existing relationships that may be interested.

Franchisors might also have a list of people looking to purchase franchises that will make finding the new owner easier. If you own a franchise make sure to reach out to them.

Use Digital Platforms

Different social media platforms shown on a tablet

If you are already proficient in using digital platforms for ads, you may find that they can be highly beneficial.

If you haven’t used ads before, then they can be a steep costly learning curve, but most of them have amazing tutorials that will help you figure them out.

Step 6: Negotiate Terms and Sale of Business

To prepare for this stage, I would recommend checking out our blog about 41 questions to ask when buying a business . It will help you be prepared for questions buyers have.

During negotiations with the buyer make sure to discuss the following topics:

  • Liabilities
  • Period of Time You’ll Stay During transition

We’ve already discussed most of these in previous sections, but the employees and transition period should be discussed more.

The employees of the company can be both an asset and a liability. Depending on your plans for the current employees, you may need to negotiate an agreement on how to handle them.

If you plan on eliminating positions, you may want to have an agreement on how to handle layoffs or severance packages. The balance blog offers a good read on severance packages .

Period of Time to Stay on after Transition

Many business ownership transfers require a period of time where the current owner is still active in the business. This transitional period helps secure the success of the business once the new owner takes over.

Whether it is required by a lender or the purchaser certain aspects should be included:

  • Period of time you’ll stay on
  • Roles during transition
  • Pay during transition

The Period of time you’ll stay on could be as little as a few weeks or multiple years depending on the complexity of the business. It should be specified in writing how long the transitional period will be.

During the transition, there should be a plan for the roles to gradually be performed by the new owner.

When my dad was hired as the CEO of a company, he explained to me that for the first 3 months he was just observing and learning how they do things. Then he gradually started implementing new processes.

I think that is a pretty good philosophy to take during a transition.

The American Institute of Architects gives some good advice on mistakes to avoid during transition planning. I’d take a read through it real quick to help minimize transition issues.

Pay during the transition should also be discussed and documented. This should be based on the time and amount of work done. It will typically be comparable to management or employee pay.

Make sure to negotiate the pay at a level where the new owner can still make a profit otherwise it could jeopardize the health of the business.

If the buyer is using financing to buy the business, they may want to include this in the purchase price so they can secure financing for it.

Once you and the buyer are in agreement on the terms, it’s time to contact a lawyer to draft the agreement before the sale is completed.

Once the contract is drafted and signed, the buyer is now the new owner and you have more money to pursue other passions.

There may be one more step that is required. Which we’ll discuss next.

Step 7: Transition Period

A clock and four cubes with the letters TIME

Some loans require this to help protect the investment. If it’s part of the terms required, make the best of the time. It might even be fun.

As discussed above, you’ll probably be working like normal for a period of around three months, then gradually reduce your responsibilities and time working. Typically this transition will be less than a year.

Now you know how to sell your company. We covered the following steps:

I personally find Shark Tank and The Profit really beneficial to better understand how investors evaluate businesses. If you don’t already watch them,

I’d recommend them to gain more business awareness.

I hope this article helps you sell your business for the most value. If you need some help, reach out to UpFlip and we’ll help you sell it.

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Brandon Boushy

Brandon Boushy lives to improve people’s lives by helping them become successful entrepreneurs. His journey started nearly 30 years ago. He consistently excelled at everything he did, but preferred to make the rules rather than follow him. His exploration of self and knowledge has helped him to get an engineering degree, MBA, and countless certifications. When freelancing and rideshare came onto the scene, he recognized the opportunity to play by his own rules. Since 2017, he has helped businesses across all industries achieve more with his research, writing, and marketing strategies. Since 2021, he has been the Lead Writer for UpFlip where he has published over 170 articles on small business success.

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Thank you for this article! I’ve opened up a small online business last year to help with expenses. Unfortunately, I have to close it down as I underestimate the time and effort required to build one while keeping up with my day job. Anyway, hopefully, you can also make an article on how to negotiate to be a co-owner/investor when selling your business. Thanks again 🙂

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Thank you for the comment. I’ll add that to the list of ideas

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Table of Contents

how to sell a business plan

Small Business Trends

How to sell a business.

how to sell a business

If you buy something through our links, we may earn money from our affiliate partners. Learn more .

Wondering how to sell a business? You have specific steps to take if you’re ready to sell your business. Even if you’re just thinking about selling your business, you should start taking those steps now.

That’s because you’ll need concrete and detailed records to prove the value – the price – you put on your business.

You will also have decisions to make about how to sell your business. Use a business broker? Sell on your own? Choose a lawyer? You can start your investigation into those decisions now. Even if your plan to sell is a year or two away.

For more on this topic download BizBuySell’s Guide to Selling your Small Business as a training tool. To sell your small business go to Sell a Small Business on BizBuySell. If you’re interested in buying a business instead, you can also download their Guide to Buying a Small Business.

Why Sell a Business?

Let’s say you have a daycare business for sale . Your reasons for selling your business are important to you. The reasons may also be important to your potential business owner. The reasons must make sense, and not discourage, prospective buyers.

Here are some future business owners would easily understand:

  • Partnership didn’t endure
  • Illness or death

Other reasons for selling your business may be harder to convey in a positive manner. Is the business doing so well that you as company owner feel constantly overworked? Have you burned out as a result? If those facts are presented in the proper context, a buyer may become even more eager to buy!

What about the timing of business sales? When is the best time to sell?

During years of profitability and performance – Why sell when your company is making money? The short answer is that the company is much more attractive compared to a company that is losing money. Did you get a really nice contract? A contract that would convey to a buyer? Might make it a perfect time to sell.

Selling a Small Business

The size of your company is a factor in selling. That’s because a buyer is typically seeking a certain size business to purchase.

But other than that, here’s a case where size doesn’t matter when you’re selling a small business. The steps are the same or similar.

11 Key Steps to Sell Your Business

Selling your business is a complex process, whatever the business size, and there are lots of steps to take before a business can be sold. Here are 11 of the most important steps in that process to get you started.

how to sell a business plan

1. Sort Out All Accounting Records

Your accounting records should mirror accounting standards. That way, your profits can be easily compared to similar businesses. That’s because the same process has been used to maintain and compile the accounting records. As long as your accounting records have followed standards, your financial data can be compared to industry benchmarks.

With that said, though, you may want to additionally separate some “expense” that affect your bottom line. These would be expenses that a buyer may not incur. That’s because a buyer may opt to run things a little differently:

Those types of expenses can be termed “discretionary expenses.” Such as:

  • Travel costs – Maybe as you established your company you attended national conventions or sales venues.
  • Entertainment costs – Similarly, as you worked to get established to feted potential clients.
  • Bonuses – Which you paid to top performers.
  • Business vehicles – Perhaps you leased or purchased a vehicle or vehicles for company use.
  • Medical insurance – Did you pay for medical insurance for yourself and/or family members, set up through the business?

2. Hire a Valuation Expert and Find Out Your Business Worth

When you sell a house, you use a real estate appraisal to prove the price you set. That process is fairly straight-forward. The real estate agent can compare similar sales, and put a value on your house that may include appliances, age of roof, size and grounds.

To sell your business, you need a specific business valuation expert. That’s because there can be many factors that affect the price. Here are examples of information the business valuation expert may use to help you set a price:

  • Your business tax records for the last four years.
  • The value of your inventory
  • The value of any business equipment.
  • Proof of your customer base.
  • Proof of any long-term contracts to purchase your goods and/or services.

3. Work Out an Exit Strategy

how to sell a business

How are you going to handle the profit from your business sale? You’ll most likely need a financial manager or specialized CPA for this part of the plan.

Typically, you’ll hear the words no one likes to hear – Capital Gains. How to handle capital gains must be part of your exit strategy.

Many business sales are considered asset sales. An asset sale is usually taxed at the long-term capital gains rate, which is 15%.

Determining the value of assets can be part of the negotiations as you sell your business and make an exit plan for the money. Assets are grouped by type, such as capital assets, depreciable property, and inventory or stock.

The dollar value that you and the buyer agree upon for these assets can affect the amount of capital gains you pay. This can be part of the sale negotiation process and this why shouldn’t sell your business with no exit strategy .

4. Market Your Business

Are you going to sell on your own? Are you going to hire a business broker? Either way, you can contribute to the process and it’s important that you do.

Create an executive summary. This is where business sellers can be proactive and answer any questions future owners may have. Think of it as a business diary. An executive summary is an account of the life of the business, from start to present. To cover all the topics, describe any products and define the supply chain, with an eye to answering potential questions.

You don’t need official numbers in the executive summary. In fact, financial information about the business should only be given to a buyer that is pre-qualified to buy.

The executive summary is the spot for detailing information and answering questions about your reasons for selling.

Who’s going to market the business, you or a business broker? Either way, a marketing plan should be developed. If you’re going with a business broker, you can offer your ideas while respecting the broker’s expertise.

5. Put Your Business on the Market

Before you list your business, share your plans with family members or employees. You may even share information with trusted customers, if you think one would be interested in the purchase.

However, letting people know your plans to sell your business can be dicey. Could you cause a mass exodus of employees? Or worse, customers? Business owners should be careful letting the cat out of the proverbial bag.

One of the easiest ways to list a business on the marketplace is via Sell Business on BizBuySell . However before you take that step, you should think carefully about developing an explanatory letter for customers, as well as informing employees. Because all of those people are going to find out about the sale.

What about the price? Just as with a home sale, too high or too low is a mistake. Too high, and the property is one the market too long. Potential business owners could look at the date of the listing and start to wonder what’s wrong with the business.

Too low, and it looks like a fire sale. However, you can justify a low price if there’s a reason to sell a business fast – such as unexpected illness or death. This is information to convey to a broker, if you’re using a broker.

You should know that the time frame for sale of businesses is typically from six months to two years. Most sales of businesses are closer to the two-year mark. So, don’t let the passing months without a sale prod you. Stay firm on the price.

6. Sift Through Prospective Buyers: Find the Perfect Business Owner

how to sell a business

Financial screening is of utmost importance. Those tire-kickers can be more than annoyances if you don’t prequalify each prospective buyer.

Do you really want tire kickers to get inside financial information about your business? And do you want to waste time providing that information, and having showings of the company?

Talk this over with your broker. You can put this stipulation in your Agreement to Sell that you have with the broker.

The broker can also advise you on if and when to accept an offer. The art of a deal includes negotiation. Few buyers would expect you to take the first deal that’s inked. A broker may pressure you, but the decision is yours.

Keep in mind, though, if someone offers the asking price and your decision is not to take the money, you’ll owe the broker fee.

7. Respect The Due Diligence Process

The buyer is going to wants lots of information and the topics covered mostly deal with financials. Don’t lose patience. The buyer wants the same information you’d want if you were buying a company.

Due Diligence paperwork may include financial information, as well as info about licenses, property or equipment leases, and any pending/ongoing litigation.

  • Financial Records: Buyers will thoroughly examine your business’s financial statements, tax returns, and related documents for the past several years to assess profitability and stability. Ensure all your records are comprehensive, transparent, and well-organized to expedite this process.
  • Legal and Contractual Documents: This includes a review of all contracts, agreements, leases, and legal paperwork your business holds. Buyers check these documents for any obligations, liabilities, potential legal issues, or terms that might affect the business’s value or operations.
  • Operational Overview: Potential buyers will delve into your company’s operational processes, supplier relationships, inventory management, and customer base analysis. They’re looking to understand how your business functions daily and what potential operational risks may exist.
  • Market Position and Competition Analysis: Buyers are interested in understanding the market position of your business, including a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats), competitive landscape, and any market risks or advantages your business might have.
  • Employee and Management Information: Expect buyers to request details about employee roles, salaries, benefits, and overall company structure. They will assess the strengths of the management team and employee relationships, looking for any potential human resource issues that could affect business continuity.

8. Negotiate an Agreement and Close the Deal

In price negotiations, you may negotiate the price of pieces of the business. This can include inventory and equipment. It can also include depreciable property.

9. Hire a Lawyer and Finalize the Contract

how to sell a business

Even if you list and market the business on your own, you’ll need a lawyer to close the sales process. And not just any lawyer. You’ll need a lawyer or a law firm that specializes in business sales.

10. Receive Payment Upfront

The percentage of the down payment requirement may vary, depending on the bank. Upfront payment is a non-negotiable element of the sale. Potential buyers who don’t have upfront money are just that – potential buyers. Potential buyers may not yet be ready to become actual buyers!

11. Enjoy Your Achievements!

You’ve done it. A business sale can be extremely stressful. Take time to decompress.

How to Sell Your Business Summary

6 mistakes to avoid when selling your business.

Of course, people make lots of mistakes when selling a business too. So we’ve put together the most common mistakes to help you avoid them.

1. Not Planning Ahead

Don’t forget to plan your exit strategy.

2. Waiting too Long to Sell

Making a profit? Sell while you’re on a roll.

3. Misrepresenting Your Business

Don’t mess with financials especially tax returns. Unless you enjoy spending time in litigation.

4. Not Keeping Business Confidentiality

Nearly all sales of businesses include a nondisclosure or confidentiality agreement. This is not paperwork that is done when the business sells. It must be done before you provide any financial information about your business.

5. Finding the Wrong Buyer

Sellers must guard against that business buyer that might even look good on paper. Thoroughly investigate the financials of a prospective buyer. The deal has to work both ways.

6. Trying to Sell Your Business Alone

This is a tough row to hoe. The myriad of paperwork that’s required is daunting for the average business sale. This is where brokers are worth every penny. Brokers that have completed many deals will streamline the process. Brokers have contacts, including lenders.

How to Sell a Business Quickly

how to sell a business

If your main goal is a fast sale, keep in mind you may not get the highest price tag.

But here’s how to get it done:

  • Have all your financials in order.
  • Create a packet which includes financials and the executive summary.
  • Prescreen buyers before sending information about financials and/or the packet.
  • Sell for a lower price to an employee or family member.
  • Keep interest high with aggressive marketing.

Selling a Business with a Commercial Lease

An owner may have a commercial lease which complicates selling a small business. The owner may be able to transfer “interest” in the lease to buyers. But the lease can only be transferred to buyers if that’s allowed in the original lease agreement.

Either way, notify your landlord.

How much does it cost to sell your business?

The average cost of selling a business, if you use a broker, is the broker’s 15% commission which is based on the sale price.

There will also be legal fees.

How do I legally sell my business?

Here’s a sample of legal documents that make up a sale, in addition to the actual purchase and sale agreement:

  • Bill of Sale – Needed to transfer assets such as inventory or equipment to the buyer.
  • Non-compete agreement – if necessary.
  • Non-disclosure/confidentiality agreement – to be inked before sending financial information and business info (customer list, contracts, etc.).
  • All Rights Reserved – All rights reserved is a copyright formality indicating that the copyright holder reserves all the rights provided by copyright law.

How long does it take to sell your business?

Some businesses sell within six months, especially a sole proprietorship. Most of the time the sale of a business takes closer to two years.

Expect your sale to take two years, and remain firm on the price tag.

How do you sell a struggling business?

Yikes. You’re struggling and you want to sell a business fast. But what if it’s not currently a success? Here are some tips:

  • As previously stated, have financial paperwork in order.
  • Keep the doors open. Nothing says “Make a low offer” like a “closed” sign.
  • Seek professional advice. You can start with SCORE, Service Corps of Retired Executives website, where the advice is free.
  • Make other plans. How should the business take shape if you can’t sell it? Is there anything you can do to make it a success?
  • Use a broker, especially one who understands the metrics of your business type.

What is the best way to sell your business?

  • Follow accounting standards and have key data organized.
  • Work to develop an executive summary of the business.
  • Have an exit plan.
  • Decide whether to go it alone or use a broker.
  • Have a marketing plan that creates interest.
  • Use a  business valuation calculator .

Image: Depositphotos

how to sell a business plan

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How to Write a Business Plan: Step-by-Step Guide + Examples

Determined female African-American entrepreneur scaling a mountain while wearing a large backpack. Represents the journey to starting and growing a business and needing to write a business plan to get there.

Noah Parsons

24 min. read

Updated April 10, 2024

Writing a business plan doesn’t have to be complicated. 

In this step-by-step guide, you’ll learn how to write a business plan that’s detailed enough to impress bankers and potential investors, while giving you the tools to start, run, and grow a successful business.

  • The basics of business planning

If you’re reading this guide, then you already know why you need a business plan . 

You understand that planning helps you: 

  • Raise money
  • Grow strategically
  • Keep your business on the right track 

As you start to write your plan, it’s useful to zoom out and remember what a business plan is .

At its core, a business plan is an overview of the products and services you sell, and the customers that you sell to. It explains your business strategy: how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

Most business plans also include financial forecasts for the future. These set sales goals, budget for expenses, and predict profits and cash flow. 

A good business plan is much more than just a document that you write once and forget about. It’s also a guide that helps you outline and achieve your goals. 

After completing your plan, you can use it as a management tool to track your progress toward your goals. Updating and adjusting your forecasts and budgets as you go is one of the most important steps you can take to run a healthier, smarter business. 

We’ll dive into how to use your plan later in this article.

There are many different types of plans , but we’ll go over the most common type here, which includes everything you need for an investor-ready plan. However, if you’re just starting out and are looking for something simpler—I recommend starting with a one-page business plan . It’s faster and easier to create. 

It’s also the perfect place to start if you’re just figuring out your idea, or need a simple strategic plan to use inside your business.

Dig deeper : How to write a one-page business plan

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  • What to include in your business plan

Executive summary

The executive summary is an overview of your business and your plans. It comes first in your plan and is ideally just one to two pages. Most people write it last because it’s a summary of the complete business plan.

Ideally, the executive summary can act as a stand-alone document that covers the highlights of your detailed plan. 

In fact, it’s common for investors to ask only for the executive summary when evaluating your business. If they like what they see in the executive summary, they’ll often follow up with a request for a complete plan, a pitch presentation , or more in-depth financial forecasts .

Your executive summary should include:

  • A summary of the problem you are solving
  • A description of your product or service
  • An overview of your target market
  • A brief description of your team
  • A summary of your financials
  • Your funding requirements (if you are raising money)

Dig Deeper: How to write an effective executive summary

Products and services description

This is where you describe exactly what you’re selling, and how it solves a problem for your target market. The best way to organize this part of your plan is to start by describing the problem that exists for your customers. After that, you can describe how you plan to solve that problem with your product or service. 

This is usually called a problem and solution statement .

To truly showcase the value of your products and services, you need to craft a compelling narrative around your offerings. How will your product or service transform your customers’ lives or jobs? A strong narrative will draw in your readers.

This is also the part of the business plan to discuss any competitive advantages you may have, like specific intellectual property or patents that protect your product. If you have any initial sales, contracts, or other evidence that your product or service is likely to sell, include that information as well. It will show that your idea has traction , which can help convince readers that your plan has a high chance of success.

Market analysis

Your target market is a description of the type of people that you plan to sell to. You might even have multiple target markets, depending on your business. 

A market analysis is the part of your plan where you bring together all of the information you know about your target market. Basically, it’s a thorough description of who your customers are and why they need what you’re selling. You’ll also include information about the growth of your market and your industry .

Try to be as specific as possible when you describe your market. 

Include information such as age, income level, and location—these are what’s called “demographics.” If you can, also describe your market’s interests and habits as they relate to your business—these are “psychographics.” 

Related: Target market examples

Essentially, you want to include any knowledge you have about your customers that is relevant to how your product or service is right for them. With a solid target market, it will be easier to create a sales and marketing plan that will reach your customers. That’s because you know who they are, what they like to do, and the best ways to reach them.

Next, provide any additional information you have about your market. 

What is the size of your market ? Is the market growing or shrinking? Ideally, you’ll want to demonstrate that your market is growing over time, and also explain how your business is positioned to take advantage of any expected changes in your industry.

Dig Deeper: Learn how to write a market analysis

Competitive analysis

Part of defining your business opportunity is determining what your competitive advantage is. To do this effectively, you need to know as much about your competitors as your target customers. 

Every business has some form of competition. If you don’t think you have competitors, then explore what alternatives there are in the market for your product or service. 

For example: In the early years of cars, their main competition was horses. For social media, the early competition was reading books, watching TV, and talking on the phone.

A good competitive analysis fully lays out the competitive landscape and then explains how your business is different. Maybe your products are better made, or cheaper, or your customer service is superior. Maybe your competitive advantage is your location – a wide variety of factors can ultimately give you an advantage.

Dig Deeper: How to write a competitive analysis for your business plan

Marketing and sales plan

The marketing and sales plan covers how you will position your product or service in the market, the marketing channels and messaging you will use, and your sales tactics. 

The best place to start with a marketing plan is with a positioning statement . 

This explains how your business fits into the overall market, and how you will explain the advantages of your product or service to customers. You’ll use the information from your competitive analysis to help you with your positioning. 

For example: You might position your company as the premium, most expensive but the highest quality option in the market. Or your positioning might focus on being locally owned and that shoppers support the local economy by buying your products.

Once you understand your positioning, you’ll bring this together with the information about your target market to create your marketing strategy . 

This is how you plan to communicate your message to potential customers. Depending on who your customers are and how they purchase products like yours, you might use many different strategies, from social media advertising to creating a podcast. Your marketing plan is all about how your customers discover who you are and why they should consider your products and services. 

While your marketing plan is about reaching your customers—your sales plan will describe the actual sales process once a customer has decided that they’re interested in what you have to offer. 

If your business requires salespeople and a long sales process, describe that in this section. If your customers can “self-serve” and just make purchases quickly on your website, describe that process. 

A good sales plan picks up where your marketing plan leaves off. The marketing plan brings customers in the door and the sales plan is how you close the deal.

Together, these specific plans paint a picture of how you will connect with your target audience, and how you will turn them into paying customers.

Dig deeper: What to include in your sales and marketing plan

Business operations

The operations section describes the necessary requirements for your business to run smoothly. It’s where you talk about how your business works and what day-to-day operations look like. 

Depending on how your business is structured, your operations plan may include elements of the business like:

  • Supply chain management
  • Manufacturing processes
  • Equipment and technology
  • Distribution

Some businesses distribute their products and reach their customers through large retailers like Amazon.com, Walmart, Target, and grocery store chains. 

These businesses should review how this part of their business works. The plan should discuss the logistics and costs of getting products onto store shelves and any potential hurdles the business may have to overcome.

If your business is much simpler than this, that’s OK. This section of your business plan can be either extremely short or more detailed, depending on the type of business you are building.

For businesses selling services, such as physical therapy or online software, you can use this section to describe the technology you’ll leverage, what goes into your service, and who you will partner with to deliver your services.

Dig Deeper: Learn how to write the operations chapter of your plan

Key milestones and metrics

Although it’s not required to complete your business plan, mapping out key business milestones and the metrics can be incredibly useful for measuring your success.

Good milestones clearly lay out the parameters of the task and set expectations for their execution. You’ll want to include:

  • A description of each task
  • The proposed due date
  • Who is responsible for each task

If you have a budget, you can include projected costs to hit each milestone. You don’t need extensive project planning in this section—just list key milestones you want to hit and when you plan to hit them. This is your overall business roadmap. 

Possible milestones might be:

  • Website launch date
  • Store or office opening date
  • First significant sales
  • Break even date
  • Business licenses and approvals

You should also discuss the key numbers you will track to determine your success. Some common metrics worth tracking include:

  • Conversion rates
  • Customer acquisition costs
  • Profit per customer
  • Repeat purchases

It’s perfectly fine to start with just a few metrics and grow the number you are tracking over time. You also may find that some metrics simply aren’t relevant to your business and can narrow down what you’re tracking.

Dig Deeper: How to use milestones in your business plan

Organization and management team

Investors don’t just look for great ideas—they want to find great teams. Use this chapter to describe your current team and who you need to hire . You should also provide a quick overview of your location and history if you’re already up and running.

Briefly highlight the relevant experiences of each key team member in the company. It’s important to make the case for why yours is the right team to turn an idea into a reality. 

Do they have the right industry experience and background? Have members of the team had entrepreneurial successes before? 

If you still need to hire key team members, that’s OK. Just note those gaps in this section.

Your company overview should also include a summary of your company’s current business structure . The most common business structures include:

  • Sole proprietor
  • Partnership

Be sure to provide an overview of how the business is owned as well. Does each business partner own an equal portion of the business? How is ownership divided? 

Potential lenders and investors will want to know the structure of the business before they will consider a loan or investment.

Dig Deeper: How to write about your company structure and team

Financial plan

Last, but certainly not least, is your financial plan chapter. 

Entrepreneurs often find this section the most daunting. But, business financials for most startups are less complicated than you think, and a business degree is certainly not required to build a solid financial forecast. 

A typical financial forecast in a business plan includes the following:

  • Sales forecast : An estimate of the sales expected over a given period. You’ll break down your forecast into the key revenue streams that you expect to have.
  • Expense budget : Your planned spending such as personnel costs , marketing expenses, and taxes.
  • Profit & Loss : Brings together your sales and expenses and helps you calculate planned profits.
  • Cash Flow : Shows how cash moves into and out of your business. It can predict how much cash you’ll have on hand at any given point in the future.
  • Balance Sheet : A list of the assets, liabilities, and equity in your company. In short, it provides an overview of the financial health of your business. 

A strong business plan will include a description of assumptions about the future, and potential risks that could impact the financial plan. Including those will be especially important if you’re writing a business plan to pursue a loan or other investment.

Dig Deeper: How to create financial forecasts and budgets

This is the place for additional data, charts, or other information that supports your plan.

Including an appendix can significantly enhance the credibility of your plan by showing readers that you’ve thoroughly considered the details of your business idea, and are backing your ideas up with solid data.

Just remember that the information in the appendix is meant to be supplementary. Your business plan should stand on its own, even if the reader skips this section.

Dig Deeper : What to include in your business plan appendix

Optional: Business plan cover page

Adding a business plan cover page can make your plan, and by extension your business, seem more professional in the eyes of potential investors, lenders, and partners. It serves as the introduction to your document and provides necessary contact information for stakeholders to reference.

Your cover page should be simple and include:

  • Company logo
  • Business name
  • Value proposition (optional)
  • Business plan title
  • Completion and/or update date
  • Address and contact information
  • Confidentiality statement

Just remember, the cover page is optional. If you decide to include it, keep it very simple and only spend a short amount of time putting it together.

Dig Deeper: How to create a business plan cover page

How to use AI to help write your business plan

Generative AI tools such as ChatGPT can speed up the business plan writing process and help you think through concepts like market segmentation and competition. These tools are especially useful for taking ideas that you provide and converting them into polished text for your business plan.

The best way to use AI for your business plan is to leverage it as a collaborator , not a replacement for human creative thinking and ingenuity. 

AI can come up with lots of ideas and act as a brainstorming partner. It’s up to you to filter through those ideas and figure out which ones are realistic enough to resonate with your customers. 

There are pros and cons of using AI to help with your business plan . So, spend some time understanding how it can be most helpful before just outsourcing the job to AI.

Learn more: 10 AI prompts you need to write a business plan

  • Writing tips and strategies

To help streamline the business plan writing process, here are a few tips and key questions to answer to make sure you get the most out of your plan and avoid common mistakes .  

Determine why you are writing a business plan

Knowing why you are writing a business plan will determine your approach to your planning project. 

For example: If you are writing a business plan for yourself, or just to use inside your own business , you can probably skip the section about your team and organizational structure. 

If you’re raising money, you’ll want to spend more time explaining why you’re looking to raise the funds and exactly how you will use them.

Regardless of how you intend to use your business plan , think about why you are writing and what you’re trying to get out of the process before you begin.

Keep things concise

Probably the most important tip is to keep your business plan short and simple. There are no prizes for long business plans . The longer your plan is, the less likely people are to read it. 

So focus on trimming things down to the essentials your readers need to know. Skip the extended, wordy descriptions and instead focus on creating a plan that is easy to read —using bullets and short sentences whenever possible.

Have someone review your business plan

Writing a business plan in a vacuum is never a good idea. Sometimes it’s helpful to zoom out and check if your plan makes sense to someone else. You also want to make sure that it’s easy to read and understand.

Don’t wait until your plan is “done” to get a second look. Start sharing your plan early, and find out from readers what questions your plan leaves unanswered. This early review cycle will help you spot shortcomings in your plan and address them quickly, rather than finding out about them right before you present your plan to a lender or investor.

If you need a more detailed review, you may want to explore hiring a professional plan writer to thoroughly examine it.

Use a free business plan template and business plan examples to get started

Knowing what information to include in a business plan is sometimes not quite enough. If you’re struggling to get started or need additional guidance, it may be worth using a business plan template. 

There are plenty of great options available (we’ve rounded up our 8 favorites to streamline your search).

But, if you’re looking for a free downloadable business plan template , you can get one right now; download the template used by more than 1 million businesses. 

Or, if you just want to see what a completed business plan looks like, check out our library of over 550 free business plan examples . 

We even have a growing list of industry business planning guides with tips for what to focus on depending on your business type.

Common pitfalls and how to avoid them

It’s easy to make mistakes when you’re writing your business plan. Some entrepreneurs get sucked into the writing and research process, and don’t focus enough on actually getting their business started. 

Here are a few common mistakes and how to avoid them:

Not talking to your customers : This is one of the most common mistakes. It’s easy to assume that your product or service is something that people want. Before you invest too much in your business and too much in the planning process, make sure you talk to your prospective customers and have a good understanding of their needs.

  • Overly optimistic sales and profit forecasts: By nature, entrepreneurs are optimistic about the future. But it’s good to temper that optimism a little when you’re planning, and make sure your forecasts are grounded in reality. 
  • Spending too much time planning: Yes, planning is crucial. But you also need to get out and talk to customers, build prototypes of your product and figure out if there’s a market for your idea. Make sure to balance planning with building.
  • Not revising the plan: Planning is useful, but nothing ever goes exactly as planned. As you learn more about what’s working and what’s not—revise your plan, your budgets, and your revenue forecast. Doing so will provide a more realistic picture of where your business is going, and what your financial needs will be moving forward.
  • Not using the plan to manage your business: A good business plan is a management tool. Don’t just write it and put it on the shelf to collect dust – use it to track your progress and help you reach your goals.
  • Presenting your business plan

The planning process forces you to think through every aspect of your business and answer questions that you may not have thought of. That’s the real benefit of writing a business plan – the knowledge you gain about your business that you may not have been able to discover otherwise.

With all of this knowledge, you’re well prepared to convert your business plan into a pitch presentation to present your ideas. 

A pitch presentation is a summary of your plan, just hitting the highlights and key points. It’s the best way to present your business plan to investors and team members.

Dig Deeper: Learn what key slides should be included in your pitch deck

Use your business plan to manage your business

One of the biggest benefits of planning is that it gives you a tool to manage your business better. With a revenue forecast, expense budget, and projected cash flow, you know your targets and where you are headed.

And yet, nothing ever goes exactly as planned – it’s the nature of business.

That’s where using your plan as a management tool comes in. The key to leveraging it for your business is to review it periodically and compare your forecasts and projections to your actual results.

Start by setting up a regular time to review the plan – a monthly review is a good starting point. During this review, answer questions like:

  • Did you meet your sales goals?
  • Is spending following your budget?
  • Has anything gone differently than what you expected?

Now that you see whether you’re meeting your goals or are off track, you can make adjustments and set new targets. 

Maybe you’re exceeding your sales goals and should set new, more aggressive goals. In that case, maybe you should also explore more spending or hiring more employees. 

Or maybe expenses are rising faster than you projected. If that’s the case, you would need to look at where you can cut costs.

A plan, and a method for comparing your plan to your actual results , is the tool you need to steer your business toward success.

Learn More: How to run a regular plan review

Free business plan templates and examples

Kickstart your business plan writing with one of our free business plan templates or recommended tools.

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How to write a business plan FAQ

What is a business plan?

A document that describes your business , the products and services you sell, and the customers that you sell to. It explains your business strategy, how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

What are the benefits of a business plan?

A business plan helps you understand where you want to go with your business and what it will take to get there. It reduces your overall risk, helps you uncover your business’s potential, attracts investors, and identifies areas for growth.

Having a business plan ultimately makes you more confident as a business owner and more likely to succeed for a longer period of time.

What are the 7 steps of a business plan?

The seven steps to writing a business plan include:

  • Write a brief executive summary
  • Describe your products and services.
  • Conduct market research and compile data into a cohesive market analysis.
  • Describe your marketing and sales strategy.
  • Outline your organizational structure and management team.
  • Develop financial projections for sales, revenue, and cash flow.
  • Add any additional documents to your appendix.

What are the 5 most common business plan mistakes?

There are plenty of mistakes that can be made when writing a business plan. However, these are the 5 most common that you should do your best to avoid:

  • 1. Not taking the planning process seriously.
  • Having unrealistic financial projections or incomplete financial information.
  • Inconsistent information or simple mistakes.
  • Failing to establish a sound business model.
  • Not having a defined purpose for your business plan.

What questions should be answered in a business plan?

Writing a business plan is all about asking yourself questions about your business and being able to answer them through the planning process. You’ll likely be asking dozens and dozens of questions for each section of your plan.

However, these are the key questions you should ask and answer with your business plan:

  • How will your business make money?
  • Is there a need for your product or service?
  • Who are your customers?
  • How are you different from the competition?
  • How will you reach your customers?
  • How will you measure success?

How long should a business plan be?

The length of your business plan fully depends on what you intend to do with it. From the SBA and traditional lender point of view, a business plan needs to be whatever length necessary to fully explain your business. This means that you prove the viability of your business, show that you understand the market, and have a detailed strategy in place.

If you intend to use your business plan for internal management purposes, you don’t necessarily need a full 25-50 page business plan. Instead, you can start with a one-page plan to get all of the necessary information in place.

What are the different types of business plans?

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. Here are a few common business plan types worth considering.

Traditional business plan: The tried-and-true traditional business plan is a formal document meant to be used when applying for funding or pitching to investors. This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix.

Business model canvas: The business model canvas is a one-page template designed to demystify the business planning process. It removes the need for a traditional, copy-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea.

One-page business plan: This format is a simplified version of the traditional plan that focuses on the core aspects of your business. You’ll typically stick with bullet points and single sentences. It’s most useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Lean Plan: The Lean Plan is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance. It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

What’s the difference between a business plan and a strategic plan?

A business plan covers the “who” and “what” of your business. It explains what your business is doing right now and how it functions. The strategic plan explores long-term goals and explains “how” the business will get there. It encourages you to look more intently toward the future and how you will achieve your vision.

However, when approached correctly, your business plan can actually function as a strategic plan as well. If kept lean, you can define your business, outline strategic steps, and track ongoing operations all with a single plan.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Content Author: Noah Parsons

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Grow 30% faster with the right business plan. Create your plan with LivePlan.

Table of Contents

  • Use AI to help write your plan
  • Common planning mistakes
  • Manage with your business plan
  • Templates and examples

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Can You Sell A Business Plan?

Can you sell a business plan?

A business plan outlines managerial objectives and promotes businesses at any given time. When you draft a business plan, you must clarify each step and position the business in all directions, thereby preparing for growth and possible expansion.

There is, however, an argument that has arisen on whether it is possible to sell a business plan. While many think it's unnecessary to sell off a plan that could be considered intellectual property, we must view this topic from the entrepreneur's angle.

Business plans differ, so it's necessary to know the different types of plans because not all business plans can be relevant when sold. Types of business plans include:

Startup business plan

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Startup business plans are written for new startups. They include detailed and structured operations for the smooth running of the business. They also describe products and services, financial implications, management team and market evaluation.

Startup business plans are the target of every investor, and whenever they find one of interest, they may offer a fortune for it because ideas rule the world.

These business plans are the most sold because most investors would rather put their money into getting assets than funding liabilities. They always want the ideas fresh, and a start-up plan should suit this purpose.

Strategic business plan

Strategic business plans describe in detail the enterprise's mission and vision statements, the company's short- and long-term goals, objectives, and strategies to be used to achieve them, and the overall success of the venture.

Certain investors do not have the time or energy to run analysis and research on new strategies. They may be willing to pay for such services; this has made it possible to sell strategic business plans. You can package good business strategies on a manuscript and get paid for your hard work.

Internal business plan

An internal business plan provides information for departments. It describes their functions to achieve a certain goal. Though it may not be of high demand because circumstances existing between two businesses are not the same, it can still boost administration.

Effective communication is a skill that some business administrators may not possess, but with plans like these, they understand how to pass information to their workers. Every business challenge has a peculiar solution, so there is little potential or guarantee for a particular company's internal plan to work for another company.

Operations business plan

Operations business plans outline employees' responsibility for the long run and calculate the company's deadlines on assignments.

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Entrepreneurs may not quickly sell these plans because they specifically solve internal issues in the organization. Still, on a closer look, managerial skills in organizations are always the same, so investors are willing to exchange money to learn proper operations and office management.

If you understand office operations, you can sell an idea to a particular organization, and if the managers carry out these functions, it'll indeed affect their business model.

Feasibility business plan

Feasibility business plans describe the need for the product or service, the price they may be willing to pay, and the enterprise's profitability. They can also contain recommendations and solutions to any challenge that may arise from the product or service.

Feasibility plans are in high demand by potential investors who may have experienced hitches in different aspects of their business and crave a way out. Entrepreneurs who are business savvy can generate income by drafting possible feasibility studies after researching the organization and selling the outcome.

Growth business plan

Growth business plans are also known as the pension plan. It gives a detailed description of financial implications, investment plans and a complete description of the new company. Investors who would like to pay for such plans would be more satisfied when their company's description is well detailed.

Since growth is universal, it becomes imperative for a single formula to work for various organizations. Investors may choose to apply specific purchased plans to grow their organization, too. This is another plan that entrepreneurs can sell to potential investors in real time.

Final thoughts

Since there are different types of business plans addressing various aspects of a business, it can be conventional for prospective entrepreneurs to trade a business plan for money and thereby venture into another business of their choice. It poses as a trade of its own, where the current proposed business is capital intensive.

To answer the big question, entrepreneurs can sell business plans depending on the type of plan, the current state of the prospective entrepreneur, and their future desires for their business.

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How to Sell a Business

Up to 90% of the business owner's net worth is tied up in the business

For lack of planning approximately 75% of businesses never sell

There are 66 potential obstacles to the successful sale of a business.

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  • Encourages you to be proactive in educating yourself about the obstacles business owners face when selling a business. Read our White Paper for further explanation.

Amazingly Poor Business Sale Statistics 

  • Selling a business is never easy.
  • Only 20-25% of small businesses ever sell. See detailed sale statistics for small businesses .
  • 58% of owners have no exit plan! More shocking business exit planning numbers .

Exit Planning Steps

  • Learn how to prepare to sell your business through improving profitability, strengthening accounting procedures, and other steps!
  • From learning how to value a business to sell to understanding tax considerations when selling a business, here are 20 steps of the exit planning process .
  • You can begin the exit planning process today at no cost !

Steps to Selling a Business

  • Unrealistic price expectations and waiting too long to sell are among the 66 obstacles that can be encountered in a business sale.
  • Some of the steps to selling a business include meeting with advisors to develop an exit plan, marketing your business confidentially, meeting with prospective buyers, negotiating an agreement, cooperating through due diligence, and closing the sale!

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When to Sell a Business

  • It is essential to be mentally and personally prepared to sell a business .
  • The perfect time to sell is when you are mentally prepared and have had 3 straight strong years.

Should You Sell a Business Yourself?

  • The quick answer is no.
  • Reasons include the general trend for owners to have difficulty in maintaining confidentiality , overprice their businesses, and more.
  • Choosing a business broker is an incredibly important decision. Here are tips to selecting a qualified business broker .

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If an owner recognizes the need to plan for their business sale and executes a plan to identify and address the obstacles to a sale, the 3:1 odds against a successful business sale can be reversed to 3:1 in favor of a successful business sale.

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What Is a Business Plan?

Understanding business plans, how to write a business plan, common elements of a business plan, how often should a business plan be updated, the bottom line, business plan: what it is, what's included, and how to write one.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

how to sell a business plan

A business plan is a document that details a company's goals and how it intends to achieve them. Business plans can be of benefit to both startups and well-established companies. For startups, a business plan can be essential for winning over potential lenders and investors. Established businesses can find one useful for staying on track and not losing sight of their goals. This article explains what an effective business plan needs to include and how to write one.

Key Takeaways

  • A business plan is a document describing a company's business activities and how it plans to achieve its goals.
  • Startup companies use business plans to get off the ground and attract outside investors.
  • For established companies, a business plan can help keep the executive team focused on and working toward the company's short- and long-term objectives.
  • There is no single format that a business plan must follow, but there are certain key elements that most companies will want to include.

Investopedia / Ryan Oakley

Any new business should have a business plan in place prior to beginning operations. In fact, banks and venture capital firms often want to see a business plan before they'll consider making a loan or providing capital to new businesses.

Even if a business isn't looking to raise additional money, a business plan can help it focus on its goals. A 2017 Harvard Business Review article reported that, "Entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical nonplanning entrepreneurs."

Ideally, a business plan should be reviewed and updated periodically to reflect any goals that have been achieved or that may have changed. An established business that has decided to move in a new direction might create an entirely new business plan for itself.

There are numerous benefits to creating (and sticking to) a well-conceived business plan. These include being able to think through ideas before investing too much money in them and highlighting any potential obstacles to success. A company might also share its business plan with trusted outsiders to get their objective feedback. In addition, a business plan can help keep a company's executive team on the same page about strategic action items and priorities.

Business plans, even among competitors in the same industry, are rarely identical. However, they often have some of the same basic elements, as we describe below.

While it's a good idea to provide as much detail as necessary, it's also important that a business plan be concise enough to hold a reader's attention to the end.

While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.

Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.

The length of a business plan can vary greatly from business to business. Regardless, it's best to fit the basic information into a 15- to 25-page document. Other crucial elements that take up a lot of space—such as applications for patents—can be referenced in the main document and attached as appendices.

These are some of the most common elements in many business plans:

  • Executive summary: This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
  • Products and services: Here, the company should describe the products and services it offers or plans to introduce. That might include details on pricing, product lifespan, and unique benefits to the consumer. Other factors that could go into this section include production and manufacturing processes, any relevant patents the company may have, as well as proprietary technology . Information about research and development (R&D) can also be included here.
  • Market analysis: A company needs to have a good handle on the current state of its industry and the existing competition. This section should explain where the company fits in, what types of customers it plans to target, and how easy or difficult it may be to take market share from incumbents.
  • Marketing strategy: This section can describe how the company plans to attract and keep customers, including any anticipated advertising and marketing campaigns. It should also describe the distribution channel or channels it will use to get its products or services to consumers.
  • Financial plans and projections: Established businesses can include financial statements, balance sheets, and other relevant financial information. New businesses can provide financial targets and estimates for the first few years. Your plan might also include any funding requests you're making.

The best business plans aren't generic ones created from easily accessed templates. A company should aim to entice readers with a plan that demonstrates its uniqueness and potential for success.

2 Types of Business Plans

Business plans can take many forms, but they are sometimes divided into two basic categories: traditional and lean startup. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.

  • Traditional business plans : These plans tend to be much longer than lean startup plans and contain considerably more detail. As a result they require more work on the part of the business, but they can also be more persuasive (and reassuring) to potential investors.
  • Lean startup business plans : These use an abbreviated structure that highlights key elements. These business plans are short—as short as one page—and provide only the most basic detail. If a company wants to use this kind of plan, it should be prepared to provide more detail if an investor or a lender requests it.

Why Do Business Plans Fail?

A business plan is not a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections to begin with. Markets and the overall economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All of this calls for building some flexibility into your plan, so you can pivot to a new course if needed.

How frequently a business plan needs to be revised will depend on the nature of the business. A well-established business might want to review its plan once a year and make changes if necessary. A new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is an option when a company prefers to give a quick explanation of its business. For example, a brand-new company may feel that it doesn't have a lot of information to provide yet.

Sections can include: a value proposition ; the company's major activities and advantages; resources such as staff, intellectual property, and capital; a list of partnerships; customer segments; and revenue sources.

A business plan can be useful to companies of all kinds. But as a company grows and the world around it changes, so too should its business plan. So don't think of your business plan as carved in granite but as a living document designed to evolve with your business.

Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."

U.S. Small Business Administration. " Write Your Business Plan ."

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how to sell a business plan

What Does it Mean to Sell a Business?

Selling a business involves transferring ownership and control of a company in exchange for a negotiated price.

When considering selling a business, it is crucial to undergo a detailed valuation process to determine its worth accurately. Valuation methods such as discounted cash flow, market multiples, and asset-based approaches play a pivotal role in assessing the true value of a company.

Understanding the intrinsic worth  of the business is essential to attract potential buyers and secure a fair deal. Negotiation strategies come into play during the discussion of terms and conditions with interested parties, aiming to achieve a mutually beneficial agreement.

Legal aspects, including contracts and agreements, need to be carefully reviewed to ensure a smooth transition of ownership without any discrepancies.

Why Do People Sell Their Businesses?

People  choose to sell their businesses for various reasons, including:

  • Pursuing new entrepreneurial ventures:  Exploring entrepreneurial opportunities through the sale of a current business can be an exciting prospect. It allows individuals to channel their innovative spirit into new ventures, bringing fresh ideas to life and expanding their professional horizons.
  • Realizing profits:  Financial gains play a crucial role in the decision to sell a business. Such sales can provide a substantial influx of capital, enabling entrepreneurs to fund other projects or secure their financial future.
  • Planning for retirement:  Exit strategies come into play as individuals plan their long-term goals. Selling a business strategically can serve as a pathway to retirement or a shift in career focus.
  • Mitigating risks:  Risk management is another key factor. Selling a business can help in reducing exposure to market volatilities, industry changes, or other potential risks.

What Are the Steps to Selling a Business?

The process of selling a business typically involves several key steps, starting with preparation  and ending with closing the deal after negotiations.

Step 1: Preparation

One of the key factors  during the preparation phase is to ensure that all financial records are updated and accurate, providing potential buyers with a clear picture of the company’s financial health. This includes profit and loss statements, balance sheets, cash flow statements, and any other relevant financial documentation.

Gathering tax documentation is also critical, as it shows compliance with tax laws and can impact the valuation of the business.

In addition, having legal agreements readily available, such as contracts with suppliers and clients, leases, and any pending litigation details, helps build confidence in the business’s stability and legal standing.

Step 2: Valuation

Valuation is a critical step in determining the worth of a business, considering factors such as assets, income, market value, and industry benchmarks.

There are various methods employed to evaluate a business, including the Asset-Based Approach, which focuses on assessing the company’s tangible and intangible assets.

The Income Approach calculates the business value based on projected future earnings, while the Market Approach compares the business to similar entities that have been sold recently.

Influential factors like economic conditions, industry trends, competition, and the company’s growth potential play a significant role in shaping the value of a business. A thorough assessment of assets, liabilities, intellectual property, and goodwill is vital for an accurate valuation.

Step 3: Finding a Buyer

Identifying a suitable buyer involves evaluating potential candidates based on their financial capability, strategic alignment, existing customer base, and willingness to acquire the business.

One crucial aspect of finding a buyer when selling a business is assessing the customer base . Understanding the type of customers that are currently engaged with the business can be a valuable asset during negotiations. Highlighting the potential growth opportunities stemming from this customer base can be a key selling point.

Presenting the assets  of the business in a compelling way is essential. This includes showcasing not only tangible assets but also intangible assets like brand reputation, intellectual property, and market positioning.

Step 4: Negotiation

Negotiation plays a key role in finalizing the terms of the business sale, including price agreements, ownership transitions, contractual obligations, and deal structuring.

Effective negotiation during a business sale can be likened to an intricate dance between the involved parties, where each move influences the overall outcome. It involves carefully navigating through the financial  aspects, legal intricacies, and operational considerations to reach a mutually satisfactory agreement.

Price discussions are often the focal point, where sellers aim for a fair valuation while buyers seek a deal that aligns with their budget and expectations. Ownership transfer specifics, such as timelines and responsibilities, must be clearly defined to avoid misunderstandings post-sale.

Contract terms play a crucial role, dictating the rights and obligations of each party after the transfer of ownership. The nuances of deal structuring, including payment terms, earnouts, and warranties, can significantly impact the overall success of the transaction.

Step 5: Closing the Deal

The final step in selling a business involves closing the deal, which includes signing contracts, transferring ownership, completing financial transactions, and ensuring a smooth transition for all parties involved.

During the contract finalization phase, both parties meticulously review and agree upon the terms, conditions, and additional clauses to protect the interests of each side. This crucial stage ensures that both the buyer and the seller are on the same page regarding the deal specifics.

Once the contracts are signed, the ownership transfer procedures commence, involving the legal transfer of assets, licenses, and permits from the seller to the buyer. This transfer process is carefully executed to ensure compliance with legal requirements and to safeguard the business’s continuity.

What Are the Different Ways to Sell a Business?

Business owners  have various options to sell their businesses, including selling to family members or employees, competitors, private equity firms, or through the services of a business broker.

Each selling approach comes with its own set of advantages and considerations.

Selling to a Family Member or Employee

Selling a business to a family member or employee can ensure continuity, smooth ownership transfer, and alignment with the company’s legacy and values.

By selling the business to a family member or a trusted employee, you are not just passing on the company itself, but also its longstanding values and culture. This can help maintain the unique identity that you have worked hard to build over the years.

Succession planning becomes more personalized, knowing that the business will stay within the family or among those who have a deep understanding of its operations.

Selling to a Competitor

Creating a strategic alliance through selling your business to a direct competitor allows for leveraging complementary strengths and resources, potentially leading to enhanced operational efficiency and cost savings. This move can also facilitate market consolidation, enabling the combined entities to capture a larger market share and expand their customer base.

Competitive advantages  such as access to new distribution channels, enhanced product offerings, and increased bargaining power with suppliers can be gained through the acquisition.

Although, despite these benefits, there are risk considerations  to evaluate, including potential loss of intellectual property, cultural clashes, and regulatory challenges that may arise from the merger.

Selling to a Private Equity Firm

Private equity firms offer a unique avenue for entrepreneurs to realize substantial returns on their business ventures. By partnering with a private equity entity , owners can unlock growth opportunities that may not have been achievable independently.

One of the key attractions of this transaction is the significant influx of capital that can fuel expansion plans, product development, or market penetration strategies.

The due diligence process conducted by private equity investors ensures a thorough examination of the business’s financial health, operations, and outlook.

This scrutiny not only provides reassurance to the investor but also paves the way for a strategic direction that aligns with both parties’ objectives.

Selling Through a Broker

Business brokers play a pivotal role in the complex process of selling a business. These professionals bring in their extensive knowledge and experience to attract potential buyers through strategic advertising campaigns. They utilize a vast network of potential purchasers, carefully vetting them to ensure a smooth transaction.

Business brokers also excel in negotiation tactics, striving to secure the best deal for their clients while navigating through intricate terms and conditions.

Lastly,  one of the key benefits of working with a business broker is their expertise in structuring fee arrangements that align with the success of the sale. This ensures that the broker is incentivized to achieve optimal results, ultimately benefiting both the seller and the broker themselves.

What Documents Are Needed to Sell a Business?

Several essential documents are required when selling a business, including financial statements, tax returns, legal agreements, and a comprehensive business plan.

These documents play a crucial role in providing potential buyers with a comprehensive overview of the company’s financial health and operational structure.

Financial Statements

Financial statements provide a comprehensive overview of a business’s financial performance, including income, expenses, assets, liabilities, and overall financial health.

Among the key financial documents that contribute to this holistic view are the income statement, balance sheet, and cash flow statement.

  • Income statement:  Also known as the profit and loss statement, this document tracks the revenue generated and expenses incurred over a specific period, reflecting the company’s profitability.
  • Balance sheet:  This document showcases the company’s assets, such as cash, inventory, and property, alongside its liabilities, like debts and obligations, offering insights into the organization’s financial position.
  • Cash flow statement:  This  details the cash inflows and outflows, providing crucial information on how money moves in and out of the business.

Tax Returns

Tax returns  play a vital role in showcasing a business’s tax compliance, income sources, financial data accuracy, and transparency in financial reporting.

When selling a business, potential buyers often request tax returns to assess the company’s financial health, understand its income-generating activities, and verify compliance with tax laws. These documents provide crucial insights into the business’s profitability, tax liabilities, deductions claimed, and financial standing.

Ensuring the accuracy of the data presented in the tax returns is essential for building trust with potential buyers and demonstrating the company’s financial stability. Thorough and transparent tax return documentation reflects positively on the business owners’ reliability and credibility, enhancing the overall appeal of the business to prospective buyers.

Legal Documents

These essential legal documents play a vital role in safeguarding both parties involved in the sale:

  • Contracts  outline the terms of the transaction, specifying details on price, payment schedules, and any contingencies that need to be met before the deal is finalized.
  • Ownership agreements  clarify the transfer of ownership rights, protecting both the buyer and the seller from any potential disputes post-sale.
  • Due diligence reports  are instrumental in providing a comprehensive assessment of the business’s financial health, operational efficiency, and potential risks. This process helps potential buyers make informed decisions and ensures transparency in the transaction.
  • Business licenses  are another crucial aspect that must be considered in a business sale, as they ensure that the new owner complies with all regulatory requirements and legal obligations that come with taking over the business.

Business Plan

A comprehensive business plan outlines the company’s strategic direction, marketing initiatives, investment requirements, and growth opportunities to attract potential buyers and investors.

When a business takes the time to craft a well-thought-out plan, it not only provides a roadmap for success but also instills confidence in stakeholders. By clearly defining strategic goals and detailing marketing strategies, a business plan can effectively communicate the vision and mission of the company.

Financial projections help in demonstrating the viability of the business model, while expansion plans showcase scalability and future growth potential. This comprehensive document serves as a foundational tool in steering the business towards sustainable growth and long-term success.

What Are the Costs Involved in Selling a Business?

When considering the financial aspects of selling a business, it’s crucial to take into account the breakdown of costs involved in the process.

Broker Fees

Broker fees  are the compensation paid to business brokers for their services in facilitating the sale of a business, typically calculated as a percentage of the final sale price.

Commission rates for these fees usually range from 8% to 12% of the sale price, although this can vary based on the complexity of the deal and the broker’s expertise. Some brokers may also opt for alternative structures such as a retainer fee combined with a success fee.

Brokers may employ sales-based compensation models where they earn a higher percentage for exceeding certain sales targets or achieving a quick sale. This incentivizes them to work diligently and strategically to secure favorable deals for their clients.

Legal and Accounting Fees

When selling a business, it’s crucial to consider the significant expenses tied to legal and accounting services. These charges play a vital role in ensuring that the transaction progresses smoothly and adheres to all regulatory frameworks.

When looking into due diligence, experts meticulously examine the company’s records, contracts, and liabilities, which necessitates a thorough financial review to assess the business’s true value.

Contract negotiations require legal expertise to draft agreements that safeguard the interests of both parties involved. Compliance checks are imperative to ensure that the business operates within the legal boundaries and meets all regulatory requirements, enhancing its attractiveness to potential buyers.

Advertising and Marketing Costs

Advertising and marketing costs  involve promotional expenses to attract potential buyers, showcase the business’s value proposition, and reach a broader customer base during the sales process.

These expenses encompass various elements such as designing creative marketing campaigns, running targeted advertisements, conducting market research for understanding consumer behavior, and engaging in customer outreach initiatives to build strong relationships.

Effective branding efforts are also crucial in establishing a distinctive identity for the business and creating brand loyalty among customers, contributing to long-term success and sustained revenue generation.

How Long Does it Take to Sell a Business?

Several factors can influence the timeframe to sell a business, including the complexity of negotiations, accurate valuation assessments, market demand fluctuations, and buyer engagement levels.

When negotiations  become intricate, requiring multiple rounds and detailed terms, it can significantly prolong the selling process. On the other hand, precise valuation  assessments play a crucial role in setting the right price, attracting serious buyers, and expediting the sale.

The unpredictable nature of market demand fluctuations  can either speed up or delay a business sale, depending on the prevailing economic conditions and industry trends.

Understanding buyer engagement levels  is also one key, as motivated buyers with a clear vision can streamline the selling process efficiently.

What Happens to Employees and Customers During a Business Sale?

During a business sale, employees and customers undergo a period of transition where confidentiality , retention strategies, and customer base management are crucial for a smooth handover.

  • Confidentiality plays a key role in ensuring that sensitive information about the sale does not cause unnecessary stress among employees and customers. It is important to have strict measures in place to protect data and prevent any leaks that may disrupt the process.
  • Retention programs are vital to retain key employees who play a critical role in the company’s success. By offering incentives and clear communication about their future within the new structure, it helps maintain stability and expertise during the transition.
  • Effective customer relationship management  is essential to reassure clients and maintain their trust throughout the sale. Ensuring continuity of service, transparent communication, and personalized interactions can help mitigate any concerns and retain loyalty.
  • Employee communication strategies  play a crucial role in keeping the workforce informed and engaged during the sale process. Transparent updates, listening sessions, and providing opportunities for feedback create a sense of inclusion and reduce uncertainty among employees.

1. What is the best way to find potential buyers?

There are several ways to find potential buyers for your business. You can reach out to business brokers, use online marketplaces, network with other business owners, or advertise on social media platforms.

2. What should I include in the business sales agreement?

The sales agreement should include details such as the purchase price, payment terms, transfer of ownership, and any conditions or clauses related to the sale. It is essential to have a lawyer review the agreement before finalizing the sale.

3. Do I need to continue running my business during the sale process?

Yes, it is crucial to continue running your business during the sale process. It will help maintain its value and ensure a smooth transition for the new owner. It is also essential to keep your employees, customers, and suppliers informed throughout the process.

The news and editorial staff of the Santa Cruz Sentinel had no role in this post’s preparation. This is a paid advertisement and does not necessarily reflect the official policy or position of the Santa Cruz Sentinel, its employees, or subsidiaries.

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Business | Retirement planning for business owners: Make an exit plan now

how to sell a business plan

Did you know that only one in four business owners has a retirement plan, and they face other challenges prohibiting them from saving?

Planning typically is much easier for retirees when they knew the amount of income they’ll receive every month and then can budget accordingly. It’s pretty common for seniors to say they live on a “fixed income” because they received a guaranteed monthly pension and Social Security every month.

Certain workers also know they have a retirement plan to look forward to, thanks to benefits provided by their employer. However, only one in 10 private sector employees now participate in a traditional pension plan, also called a defined benefit plan, which guarantees a fixed monthly income when they retire.

About half of the rest of us participate in a defined contribution plan, like a 401k, which builds savings to draw from after retirement. Unlike a pension, it is not guaranteed and does not pay out every month for life. Instead, we are responsible for how much we invest and withdraw from the plan.

You may have seen articles debating the amount you need to save to have a comfortable retirement without running out of funds. Estimates range from 8-12 times your annual salary. However, according to the US government, the median amount saved by those aged 55-64 in 2022 was only $185,000. It will not be enough.

However, there is hope with some smart planning, so here are some tips to adequately fund your retirement if you own a business.

Know your tax rates

Many of us have heard over the years that business owners should pay themselves first. Many eager entrepreneurs rush to start a 401k plan without thinking it through because they believe it is the right thing to do.

If your tax rate is low, I suggest holding off on setting up a SEP IRA or 401k for your business because the taxes saved for contributing can be insignificant, and if you need to access the funds later, which can be expected if you are self-employed, the taxes and penalties for tapping your retirement plan savings could be excessive.

A good idea is to ask your accountant what “effective” and “marginal” tax rates you are paying, and if contributing to a plan will reduce your taxes.

Of course, setting aside savings for yourself and the business is still essential, but I recommend building up your emergency savings first with post-tax dollars if your tax rate is low.

Most financial advisers suggest that an emergency fund cover at least six months of operating expenses. Once you have the emergency funds set up for you and the business, check back in with your financial planner to see if it is time to set up a plan.

Learn about exit planning

One of the reasons that most business owners choose not to save is that they plan to sell their business as a primary source of retirement income.

After all, they put all of their resources into the company, but this can be risky. According to the business sale database BizBuySell, the median price for a small business is only $329,000, and only a third of owners with a company valued at $2.5 million or more can find a buyer.

You need additional planning to beat those odds and utilize your business as your primary retirement asset. Exit planning helps you prepare your business for sale and to maximize the sales price. You should start exit planning on day one if you own a business.

No matter how long you have been self-employed, I suggest creating a five-year exit strategy now. For several reasons, five years is the optimal number of years to execute the plan, and there are many books on how to increase sales and make your business run without your day-to-day involvement. Start working ON instead of IN your business.

There is no rule that you need to operate your current business until retirement age, and I have served as a consultant on several sales of companies valued in the tens of millions of dollars for sellers who were only in their forties.

Most of us struggle to let go of our creation. Our identity is tied to the success of our business. So, read this a couple of times: If you sell in five years and pocket the proceeds, your life is not over, you are not old, and you can still work. You can start another business, maybe in a new and fun location, or turn your focus to an idea that has been on your mind for some time.

On the other hand, there is no harm or foul if you decide in five years not to sell, except your business will have increased in value for eventual sale. Just start over with another five-year plan.

Calculate your EBITDA

The first step of your plan is to know the current value of your business. Most businesses sell using an agreed-upon multiple-times indicator of profitability, sometimes gross sales or cash flow, but usually, it is EBITDA (Earnings Before Income Taxes, Depreciation and Amortization).

The good news is that, according to the Value Price Index, median EBITDA sales multiples reached a high in the last quarter at 4.3. For example, if a business had an EBITDA of $100,000 and sold at a multiple of 4.3, the sale price would be $430,000. However, if a company sold at the same multiple, and its EBITDA was $500,000, the sale price would be $2,150,000!

Ask your accountant to help calculate your EBITDA. One of the goals of your five-year exit plan is to increase your sales and your EBITDA.

Of course, the multiple is just an estimate and starting point. Many other factors will determine the listing price for your business. Generally, a business broker will not charge for an initial consultation to discuss the possible asking price for your business.

If you own a business but do not want to rely entirely on the sale of the company to fund your retirement, there are several other solutions. Here are just a couple.

Buy your building

Purchasing the building(s) and land where your business is located can be a good investment. The SBA (Small Business Administration) helps with loans to buy commercial real estate. I have seen some owners sell their real property for more than their company. I have also seen owners sell the business but continue to rent the property for additional retirement income.

Set up your own pension

If you want the security of a fixed monthly pension, you can set up a defined benefit plan. We generally implement this type of plan when the business owner is over age 50, has reliable profits, and intends to keep the business until retirement age.

There are so many other tax savings and wealth-building opportunities for you to explore as a business owner. I hope this is a good start.

Michelle C. Herting is a CPA, an Accredited Business Valuator, and an Accredited Estate Planner. She specializes in succession planning, business valuations, and settling trusts.

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  • Costco is now selling the weight loss drug Ozempic through a partnership with health startup Sesame.
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Silver bullion and sushi aren't the only new additions to Costco's product selection this year. Now, you can get a prescription for the weight loss drug Ozempic through the retailer, too.

Costco has started offering the prescriptions through a partnership with healthcare startup Sesame, CNN reported on Tuesday. For $179, members can get a prescription for the GLP-1 weight loss drug plus a meeting with a doctor or specialist. Members who get the drug are also able to message a doctor with questions or issues as they continue to use Ozempic.

One thing the program — which lasts three months and is renewable — does not include is the actual cost of Ozempic, which can run up to $1,600 a month without insurance, CNN reported. Getting insurance to cover the drugs is still tough for non-diabetic users, and some employers are worried that the costs could strain their finances.

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Costco did not immediately respond to requests for comment from Business Insider. Sesame Chief Marketing Officer Michael DiLorenzo told BI that the company has seen the number of participants in the startup's weight loss service increase by 50 times since it unveiled the option with Costco on Tuesday.

DiLorenzo said that Sesame is "focused on making sure that the products we have in-market now with Costco — weight loss, primary care, and mental health — are delivering the exceptional experience and results that Costco Members expect of everything they get from Costco."

Ozempic, Wegovy, and other GLP-1 drugs have gained popularity among people trying to lose weight over the last few years. First intended as a treatment for type 2 diabetes, the drug uses semaglutide, an ingredient that can moderate blood sugar. It can also reduce appetite, which is why it has gained traction for non-diabetic patients trying to shed pounds.

Sales of the drugs have been so great that they likely helped Denmark avoid a recession since the country is home to Ozempic- and Wegovy-maker Novo Nordisk.

Costco started working with Sesame last fall to offer basic health services, such as virtual check-ups. GLP-1 drugs weren't initially part of the partnership, according to Sesame cofounder and president Michael Botta.

But approximately one in five requests that Sesame got through the Costco program was about weight loss, so Sesame developed the offering to cater to those customers.

"We realized pretty quickly, just by looking at what people were curious about, that there was a clear unmet need here," he told CNN.

Watch: Ozempic explained: how a miracle diabetes drug became the center of a weight loss craze

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  1. Selling Your Business

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  3. How to sell your business for 6 figures

  4. How to write a business plan for your trade business

  5. Basics

  6. HOW TO SELL ON AMAZON IN 2023 (Beginners Guide)

COMMENTS

  1. Steps to Sell Your Small Business

    Buyers will evaluate your business primarily on its financial performance, so make sure your records are clean and accurate - you will need them to justify your asking price. For more on preparing to sell, see Exit Planning for Business Owners: An Overview . Learning Center: Exit Planning. 2. Set an Asking Price.

  2. How To Sell Your Business: What To Do Before, During, And ...

    How to sell your small business: key steps before, during, and after the sale. Selling a business requires a lot of planning. Here's a primer on what to expect when selling a company.

  3. 7 Steps to Selling Your Small Business

    3. Getting 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 finding and hiring a business appraiser to get a ...

  4. 7 Steps to Sell Your Business

    Here are the services a broker should provide: Market analysis: Assess the value of your business in the current market. Marketing: Promote your business to potential buyers through various channels. Screen buyers: Conduct due diligence to ensure potential buyers are serious and financially capable.

  5. How To Sell Your Business and Make a Successful Exit

    3) Get a preliminary business valuation — Turn to experts (e.g., business brokers, merger and acquisition advisers) to understand how much your company is worth, then consider if you're willing to accept that price. 4) Identify who should be your buyer — Find the why when thinking of your ideal fit.

  6. Selling a Business: A Step By Step Guide

    Step 1: Determine your commitments. While preparing to sell a business, it shouldn't suffer. Selling a business takes time and energy. Getting too caught up in the process can get in the way of servicing your customer base. Chart out an exit strategy to prepare for the sales process well in advance.

  7. How to Sell a Business in 6 Steps

    Step 1: Deciding to sell your business. Deciding to sell your business isn't always an easy choice to make. It's typically not a quick one, either. When you've reached this point, it usually means you're in the midst of change, and that's totally okay.

  8. Sell Your Business Idea to Investors or a Company: Step by Step

    These are ongoing payments that are made to the product inventor or business idea generator based on a percentage of the product sales. The average royalty ranges from 2% to 5%. This means that you will be paid 5% of the wholesale price of each unit sold. Note that we said the wholesale price, not the retail price.

  9. 8 Steps to Sell Your Business Effectively

    Step 4: Find a broker. Learning how to sell a business is a skill you can master. We're willing to bet the person who can best market your business is you - and if you're selling to a family member or a current employee, representing yourself can be a good choice. However, there are many situations where using a broker is helpful.

  10. Preparing to Sell Your Business: What You Need to Know

    The idea of selling a business can be daunting. Finding a buyer and managing the time-intensive process while continuing to run the business may cause owners to avoid the subject until they need to sell. There are, however, steps an owner can take to alleviate the stress and uncertainty of selling, and to help achieve the best value for the ...

  11. How to Sell a Business: The Ultimate Guide (2024)

    Step 1: Define the Exit Strategy. The first step in selling your business is defining your exit strategy. There are a variety of exit strategies that a business owner can use to sell a small business. Which strategy is right for you will depend on a variety of factors. The most important considerations are:

  12. How to Prepare a Business Plan for Selling Your Business

    Start with a power-packed Executive Summary that explains what you are selling, details of the deal, how you will finance the acquisition, and anything else you want your audience to know right up-front. Keep it brief and to the point. Try to keep it to one page, and certainly, not more than two. Some sellers will choose to write the ES after ...

  13. How to Sell a Business: A Comprehensive Guide

    Beginning with generating a valuation, selling a business may involve improving recordkeeping, tightening operations, advertising the sale, qualifying buyers, negotiation and closing. Just make sure you set aside adequate time for all of the above. From start to finish, selling a business can take six months to a year or more.

  14. How to Sell a Business

    But other than that, here's a case where size doesn't matter when you're selling a small business. The steps are the same or similar. 11 Key Steps to Sell Your Business. Selling your business is a complex process, whatever the business size, and there are lots of steps to take before a business can be sold.

  15. How to Write a Business Plan: Guide + Examples

    Most business plans also include financial forecasts for the future. These set sales goals, budget for expenses, and predict profits and cash flow. A good business plan is much more than just a document that you write once and forget about. It's also a guide that helps you outline and achieve your goals. After completing your plan, you can ...

  16. How To Write A Business Plan (2024 Guide)

    Describe Your Services or Products. The business plan should have a section that explains the services or products that you're offering. This is the part where you can also describe how they fit ...

  17. Can You Sell A Business Plan?

    It poses as a trade of its own, where the current proposed business is capital intensive. To answer the big question, entrepreneurs can sell business plans depending on the type of plan, the ...

  18. How to Sell a Business

    Steps to Selling a Business. Unrealistic price expectations and waiting too long to sell are among the 66 obstacles that can be encountered in a business sale.; Some of the steps to selling a business include meeting with advisors to develop an exit plan, marketing your business confidentially, meeting with prospective buyers, negotiating an agreement, cooperating through due diligence, and ...

  19. How to Write a Business Plan: A Step-by-Step Guide

    Step 7: Financial Analysis and Projections. It doesn't matter if you include a request for funding in your plan, you will want to include a financial analysis here. You'll want to do two things here: Paint a picture of your business's performance in the past and show it will grow in the future.

  20. Business Plan: What It Is, What's Included, and How to Write One

    Business Plan: A business plan is a written document that describes in detail how a business, usually a new one, is going to achieve its goals. A business plan lays out a written plan from a ...

  21. How To Sell A Business: Steps, Strategies, Documents, and Costs

    Step 2: Valuation. Valuation is a critical step in determining the worth of a business, considering factors such as assets, income, market value, and industry benchmarks. There are various methods ...

  22. How to Successfully Sell Your Small Business

    A buy-sell agreement is a legally binding contract that helps ensure the continuity of the business. Sell the business to an employee: In this case you might sell your business to current or former employees. This could be an opportunity to transition to a group or individual already familiar with your business and its operations. Plan and ...

  23. 15 Critical Mistakes to Avoid When Selling Your Business

    Plan, plan, plan. 2. Selling When Business is Down. The last three years of business performance are critical to a buyer's perception of the business's value. A continuous downslope can be hard to merit a seller's desired value. Naturally, when anything negatively affects the business or the industry the business is in, and then you look ...

  24. Costco begins offering Ozempic prescriptions to some members

    WeightWatchers launched a new membership plan that gives members access to doctors who can prescribe these medications. It also made a $100 million-plus deal to buy Sequence, a telehealth business ...

  25. Retirement planning for business owners: Make an exit plan now

    Business owners plotting an exit strategy should consider that the median price for a small business is only $329,000, and only a third of owners with a company valued at $2.5 million or more can ...

  26. You can now get Ozempic at Costco

    Costco is now selling the weight loss drug Ozempic through a partnership with health startup Sesame. Members can pay $179 for a prescription and appointment as part of a three-month package.

  27. Exclusive: Tesla scraps low-cost car plans amid fierce Chinese EV

    Musk said in 2020 that Tesla aspired by 2030 to sell 20 million vehicles - twice as many as the world's largest automaker, Toyota, sells today. With the death of the Model 2, it's unclear ...

  28. SocGen to Sell Bulk of Morocco Business in €745 Million Deal

    Societe Generale SA is selling the bulk of its Moroccan business to Saham Group in a €745 million ($798 million) deal, accelerating Chief Executive Officer Slawomir Krupa's plan to streamline ...

  29. A look inside Mi Cozumel's newest $2.5 million ...

    The restaurant has been in the works since before the Covid-19 pandemic. The 8,000-square-foot restaurant, which features a 1,500-square-foot patio, cost around $2.5 million to build.

  30. How One Family Lost $900,000 in a Timeshare Scam

    Warning: this episode contains descriptions of violence. A massive scam targeting older Americans who own timeshare properties has resulted in hundreds of millions of dollars sent to Mexico.