Guide To Running A Business

14. How to Sell a Small Business

Next Read: How to Transfer Business Ownership

Running A Business

How to Sell a Small Business

May 06, 2023 • 5 min read
Closeup of employee and employer handshake
Table of Contents

      Selling a small business is a complex process that requires careful planning and preparation. That’s why it shouldn’t be a sudden decision made on the fly. When you decide that it’s time to exit your small business, you will want to take several steps to ensure the selling process goes well.

      Enlist a team to help.

      You may need to seek the help of professionals to help you prepare your small business for sale. You can use the help of a broker, accountant, attorney, and others to consult throughout the process. They can also help you determine when to sell your small business, as the timing should be right. 

      A business broker specifically helps with the purchase and sale of businesses, helping you acquire a favorable price and submit paperwork correctly. Your accountant will help ensure that you have your finances in order. An attorney will help you comply with any necessary legal details of the sale, including contract negotiations

      Determine your reason for sale.

      While the ultimate reason for selling your business may be related to profit, there is likely another purpose. Whether you want to retire, overcome partnership disputes, or reduce your own work hours, you need to have a goal in mind. This will keep you focused as you go through the small business selling process. 

      Most likely, buyers will want to know why you are selling your business also. As you relate this to them, be sure that your reasoning makes the situation sound attractive to them. Saying that you feel overworked, for example, will not likely make them want to jump into your shoes. Consider presenting a better picture with a well-thought-out reason for selling your small business. 

      Prepare your business for your exit.

      While you may be ready to jump ship, your business—including any staff and records—needs to be in order. Gather financial statements, tax returns, and other records that date back several years and have them reviewed by an accountant. You may want to present a report to potential buyers, if the picture is positive. 

      If you have leases or ongoing contracts, you should also gather those for the business buyer. They will need these documents when moving forward with operations. It would also be helpful to provide an up-to-date operations manual for the people who will take over your position at the head of the company. 

      Set a price.

      It can be difficult to set a price on something like a small business. You’ve likely invested a lot of your own money and sweat equity into the organization. However, you will need to work with an accountant to determine the company’s future worth. Business valuation to determine business worth can be a complex undertaking, so it’s best to bring in a professional to help with this step. Once you determine a value, be firm on the price, but leave some room to negotiate in a reasonable manner. 

      Find a buyer.

      Small businesses can take anywhere between six months and two years to sell, according to the U.S. Small Business Administration. It can be difficult to find the right buyer for your business. You may need to invest in advertising to attract more potential buyers. You should try to line up multiple potential buyers, in case the initial deal falls through. It’s not uncommon for small business buyers to reconsider or have trouble obtaining financing. 

      Negotiate the terms of the sale.

      The sales process of a small business will involve several agreements that will likely require multiple rounds of negotiation. You may opt to use your own negotiation skills or enlist the help of a business lawyer who can help you achieve the best outcome possible for yourself and your business. Throughout negotiations, be mindful of maintaining that delicate balance between pursuing your own goals and incentivizing buyers to purchase your small business. 

      Close the deal.

      Once you’ve reached an agreement with the buyer, you’ll need to finalize the details. That includes signing a purchase agreement, officially transferring ownership of the business, and completing all other necessary paperwork. This is where a broker and attorney can help you meet the requirements necessary for a legal transaction in which both parties are fully covered. 

      Taking successful steps to sell a small business.

      Selling a small business can be both exciting and bittersweet. Most small business owners are extremely connected to their investments. The sale of the company can be welcome and present challenges. However, if you take the steps to sell a business that have been mentioned above, you will be more likely to achieve a successful outcome. For information about applying for a small business loan, contact Lendio.

      About the author
      Brandy Abalos

      Brandy Abalos is a licensed attorney, content strategist, and marketing consultant for small businesses. She uses SEO tools to develop strong digital content for audiences who are learning how to navigate complex topics in law and business. When she is not writing, she seeks adventures with her three children, partner, and two corgis in Ohio.

      Share Article:
      Table of Contents

          Running a business guide

          Get a copy of the guide in your email.

          Business insights right to your inbox

          Subscribe to our weekly newsletter for industry news and business strategies and tips

          Subscribe to the newsletter

          Subscribe to our weekly newsletter for industry news and business strategies and tips.