How to Sell Your Business: A Practical Guide for Owners

Before you sell your business: why and when

Before anything else, be clear about why you are selling and what you want afterwards. Retirement, a new venture, burnout, a partner's exit or an unsolicited offer each point to different priorities: maximum price, speed, certainty, a role after the sale, or the future of your employees.

Timing matters too. Businesses are usually easiest to sell when results are steady or improving and the owner is not under pressure to exit. If you can, start preparing well before you intend to sell.

Step 1: Make the business transferable

Buyers pay for cash flow they believe will continue after you leave. The more the business depends on you personally, the harder it is to sell and the lower the price is likely to be. Before going to market:

• Document key processes so someone else can follow them
• Move customer relationships from you to your team
• Train a second person for every critical task you perform
• Put important customer and supplier arrangements in writing
• Make sure leases, licences and contracts can be transferred, or know what consent is needed

Step 2: Get the financials in order

Clean financials build trust and shorten diligence. Aim for:

• Accurate monthly accounts that reconcile to bank statements and tax returns
• Personal and non-business expenses removed, or clearly identified
• A schedule of add-backs with an explanation and evidence for each one
• Revenue broken down by customer, product and channel
• A clear picture of normal working capital

Consider having an accountant review the numbers before buyers do. Surprises in diligence cost sellers money and momentum.

Step 3: Understand the likely value

Estimate a realistic range before you talk to buyers. The business valuation calculator gives an indicative range from earnings, and the business valuation guide explains the methods buyers use. For an outside view of quality, score the business honestly with the acquisition quality score; buyers will be looking at the same factors.

Remember that the value you receive depends on structure as well as headline price. Cash at closing, seller financing and earnouts each carry different risk for you.

Step 4: Decide how to sell

There are three common routes:

1. Through a business broker or M&A advisor. They prepare marketing materials, find and screen buyers, and manage the process in exchange for a fee. See the guide to business brokers.
2. To someone you already know. A manager, employee, family member, competitor, supplier or customer. This can be quicker and more private, but still needs proper valuation and legal advice.
3. Directly to outside buyers. Possible, especially for online businesses, but you take on marketing, screening and negotiation yourself.

Whichever route you choose, protect confidentiality. Ask buyers to sign a non-disclosure agreement before sharing details, and plan when and how you will tell employees.

Step 5: Screen buyers

Not every interested party can close. Ask buyers about their experience, how they will fund the purchase and their plans for the business. Ask for evidence of funds or lender conversations before sharing sensitive information. A credible buyer with a clear, financeable plan is often worth more than a higher but uncertain offer.

Step 6: Negotiate the letter of intent

The letter of intent sets out the price, structure, exclusivity period, diligence scope and transition terms. Read the letter of intent guide to understand what buyers will propose. Pay particular attention to:

• How much is paid at closing versus later
• The size and terms of any seller note, and whether it is subordinated to a bank loan
• Earnout targets, how they are measured and who controls the business while they run
• The length of exclusivity
• Your role and compensation after closing

Seller financing: should you carry a note?

Many small business sales include some seller financing. It can widen the pool of buyers, support a higher price and signal confidence in the business. It also means part of your proceeds depends on the buyer's success. Model the payments, any balloon and the total interest with the seller financing calculator, and read the seller financing guide for the clauses that protect you.

Step 7: Get through due diligence

Diligence is where many deals slow down or fall apart. Prepare a data room in advance with financial statements, tax returns, contracts, leases, employee information and key policies. Respond promptly and honestly. If there is a known issue, disclose it early with context rather than letting the buyer discover it. The buyer-side due diligence checklist shows what to expect.

Step 8: Closing and the purchase agreement

The purchase agreement turns the letter of intent into binding terms: representations and warranties, indemnities, working capital adjustments, non-compete obligations and conditions to closing. Use a lawyer experienced in business sales. Your accountant should advise on the tax consequences of the structure, especially asset versus share sale.

Step 9: The transition

Most buyers want the seller to stay involved for a period to introduce customers, train staff and transfer knowledge. Agree the scope, duration and pay in advance. A smooth transition protects the business and, if you have a seller note or earnout, protects your remaining proceeds.

Common seller mistakes

• Starting to prepare only when ready to leave
• Anchoring on an asking price without evidence
• Letting the business slip while focused on the sale
• Sharing confidential information too early
• Overlooking the risk in seller notes and earnouts
• Not planning for life after the sale