Selling the business you’ve built is complex, emotional, and often a once-in-a-lifetime event. Missteps during negotiations, due diligence, or deal structuring can cost you hundreds of thousands — or derail the sale. On average, it takes nine months to sell a business — sales faster than this are rare, but those taking longer are common. Thorough preparation before the process begins is critical to getting the best fair market value you can achieve.
The following checklist for selling your business outlines six essential steps to help your M&A team attract qualified buyers and close a successful deal for you.
Phase 1: Preparation
Successfully selling your small business starts long before your M&A advisor approaches the first buyer. This preparation phase lays the foundation for achieving fair market value and avoiding costly mistakes during negotiations.
Step 1: Clarify Your Goals and Assemble Your Expert Team
Before you hire an M&A advisor to sell your business, clarify for yourself why you are selling. Defining your goals can help guide the decisions ahead. Retirement, new ventures, feeling that a new owner is needed to take the business to the next level, or wanting to take some chips off the table, all are valid reasons to move forward. Once your future goals are clear, assemble your team to get the job done.
A mergers and acquisitions (M&A) advisor who knows your industry and has done many deals in your sector is essential. So is an attorney who has done M&A transactions before — don’t just use your college friend who does trusts and estates.
It’s crucial that your M&A advisor and your attorney are used to doing deals in your industry. Next, you will need a certified public accountant (CPA). Ideally, your M&A advisor will quarterback these advisors, all of whom bring specialized expertise. Sellers who invest in a professional M&A team get higher valuations, can feel secure that they are getting offers in the market, and will almost always end up with better deal terms.
There are simply too many nuances to these transactions not to use specialized advisors who have been there and done that before.
If you’re uncertain about timing, the right time to sell is, paradoxically, when the business is doing great, and you are having a great time. The worst time to sell is when the business is doing poorly, and you are miserable dealing with many problems. This is known as “the owner’s conundrum.” No one wants to step into someone else’s problem. Sell when the business is on an upswing, and the future looks bright.
Step 2: Organize Your Financial, Legal, and Operational Documents
Buyers will scrutinize every aspect of your business during due diligence. Disorganized documentation is a common reason that deals fall apart during this critical phase. That’s why properly preparing your business for sale starts with having a “clean house.”
Not only should you gather these essential documents before going to market, but your M&A advisor should review everything carefully. A clean set of records can prevent headaches later. Here’s what you’ll need, and why:
Financial statements: Three to five years of profit and loss statements, balance sheets, and cash flow statements
Tax returns: Complete federal and state filings for the same period
Corporate documents: Formation documents, operating agreements, bylaws, and shareholder records
Contracts: Customer agreements, vendor contracts, leases, and supplier relationships
Employee information: Organizational charts, compensation structures, and key personnel agreements
Standard operating procedures: Documentation of processes that keep your business running smoothly
When you go to market, having organized documentation builds buyer confidence, speeds up due diligence, and positions you as a credible seller who runs a tight ship and takes the selling process seriously.
Step 3: Get a Professional Valuation to Set a Realistic Price
Your business is more than a collection of assets — it represents years of hard work, relationships, and sacrifice. That emotional attachment, however, can cloud your judgment when thinking about what you are willing to sell for. One solution is a formal business valuation, but one grounded in market realities. What you want is an objective, market-based assessment of your company’s worth.
Professional valuations typically use one of several approaches. For most businesses, valuation methods include:
EBITDA multiples: Earnings before interest, taxes, depreciation, and amortization, multiplied by industry-standard factors
SDE multiples: Seller’s discretionary earnings, common for smaller owner-operated businesses
Asset-based approaches: Valuing tangible and intangible assets
Market comparables: Recent sales of similar businesses in your industry
As the SBA’s guidance on business valuation instructs, a professional assessment will ground your expectations in reality. But even if you do not have a formal valuation done, a competent M&A advisor who has worked in your industry should be able to give you a sensible, market-based assessment of what buyers will likely be willing to pay. Having that knowledge will move you past emotional pricing and give you a fair market number when buyers come calling.
Phase 2: Execution
With your preparation complete and your M&A team of professionals aligned with your goals, you’re ready. Your M&A advisor will take your business to market and should keep you informed throughout the deal process. A good M&A advisor will
- Understand your business, including its strengths and weaknesses.
- Know what kinds of buyers will see value in it.
- Develop effective and strategic marketing.
- Be skillful when it’s time for negotiations.
- Carefully manage buyer expectations.
Step 4: M&A Marketing Materials and Finding the Right Buyers
There are two primary marketing documents that protect your confidentiality while at the same time alerting potential buyers about this opportunity. These materials will be developed by your M&A advisor, and you should review and approve them before they go public.
The first is an anonymous “Teaser” — a one-page overview that highlights your business’s strengths without revealing any identifying details. If someone can put the teaser into a search engine or AI and figure out what business is being advertised, it is not a good teaser. This confidential document is intended to generate initial interest from potential buyers.
The second marketing document is the “Confidential Information Memorandum” (CIM) — what used to be called “The Book.” The CIM is often a PowerPoint, but it is a detailed document shared only after a buyer signs a confidentiality agreement. The CIM includes all the important metrics — financial performance, market position, customer relationships, and growth opportunities.
Identifying the right buyers is just as important as creating compelling materials. That is part of the reason it’s important to have an M&A advisor who really knows your industry, knows who is buying and why. There are several kinds of buyers:
- Strategic buyers — companies in your industry or adjacent markets — might see immediate synergies with your business.
- Financial buyers, like private equity firms, evaluate acquisition opportunities based on return potential.
- Finally, there is a group called “The Searchers.” These are individuals looking to buy an existing small business and grow it.
Your M&A advisor should have relationships with all of these buyer types and should be able to vet potential buyers to make sure they are serious and qualified.
Step 5: Negotiations and Due Diligence
When a buyer expresses serious interest, they’ll present a Letter of Intent (LOI). This non-binding document outlines key terms, including purchase price, deal structure, earn-out provisions, transition expectations, and the timeline. When your M&A advisor negotiates the LOI, they must balance your goals with those of the buyer — this is where your M&A advisor’s experience becomes invaluable. Some deal points will be very important to you. Other deal points will be very important to the buyer.
Making the right trades on these deal points can result in a win-win, and win-win deals are more likely to close.
After you have agreed to the terms of the LOI, you can no longer engage in discussions with other buyers, and the one buyer you have chosen will start to spend real money on due diligence. This intensive audit phase allows the buyer to verify every claim you’ve made about your business. They’ll examine financials, contracts, customer relationships, legal compliance, operational processes, and even probe your motivations. They will ask again and again, “Why are you selling?”
Buyers use this stage to find reasons to lower their offer price, so if what they end up doing is “confirmatory due diligence” – if everything you said about your business turns out to be true – it will be harder for the buyer to change the transaction price or deal terms.
Step 6: Finalizing the Purchase Agreement and Planning the Transition
Drafting and executing the Definitive Purchase Agreement is a key milestone. Your M&A advisor will be invaluable in ensuring the terms are fair and that items like cash at close are reasonable. Remember, this is a legally binding contract that specifies every detail — the final purchase price, cash at close, payment structure, representations and warranties, indemnification provisions, and post-closing obligations.
Because the sale of a business involves multiple components, each part has tax implications. Your CPA and attorney should work with your M&A advisor to align the deal structure with your financial goals while minimizing tax liability.
Beyond the agreement itself, plan for a smooth transition. Buyers want continuity as they acquire customer relationships, employee expertise, and operational knowledge. Well-documented transition plans might include training periods, introductions to key clients, and process documentation. Your willingness to support the new owner during this handover period can make or break the deal’s long-term success.
Prepare Your Business for Sale With sbLiftOff
You now have the essential roadmap: clarify your goals, organize your documents, put together a strong M&A team, get a valuation, or lean on your M&A advisor to give you insight into a reasonable transaction goal, approve the necessary marketing materials, survive the rigors of due diligence, finalize and sign the purchase agreement. Each step is necessary for a successful transition.
While this must-follow checklist provides the framework, the journey’s conclusion really rests with getting professional help. Knowing the right buyer for your business, negotiating deal terms, structuring the deal, and protecting your value — that requires an M&A advisor who is not only experienced but knows your industry well.
We believe the right M&A advisor pays for themselves many times over. Ready to take the next step? Contact sbLiftOff today for a confidential consultation.
