How to sell my business.

Step 1: Get an independent valuation

Before anything else, get a valuation from someone who is not selling you a brokerage engagement.

An independent valuation gives you a reference point. Without one, you are at the mercy of whatever number your broker or buyer proposes. With one, you can evaluate every offer against an objective baseline. See our complete valuation guide for methodology.

Step 2: Prepare the business

Owners who prepare 6-12 months ahead consistently net more. This is where the deal is actually made.

Preparation focuses on four areas:

• Financial cleanup. Three years of clean, accrual-basis P&L. Reconciled to bank statements and tax returns. Add-back schedule documented with evidence.
• Operational documentation. Standard operating procedures, key contracts identified and reviewed for assignability, customer concentration analysis.
• Management depth. A buyer needs to believe the business can run without you. Even a designated number-two reduces perceived risk.
• Legal cleanup. Outstanding litigation resolved, IP assignments documented, employment agreements in place.

Step 3: Choose representation

Three options: business broker, M&A advisor, or sell direct. The choice depends on deal size, confidentiality needs, and the buyer pool.

For $1M-$5M businesses, an M&A advisor is typically the right fit. Confidential process, structured outreach to qualified buyers, deal structuring expertise. Fees are typically 6-10 percent with a retainer component. See our broker vs advisor comparison.

Step 4: Market confidentially

The marketing phase is where buyer competition gets created. Run it well and you create the leverage that drives final terms.

A confidential, advisor-led process involves: a blind teaser document, NDA-gated access to the confidential information memorandum (CIM), management meetings with serious buyers, and a managed timeline. The goal is multiple competing offers, even when only one buyer eventually closes.

Step 5: Negotiate the LOI

The LOI is mostly non-binding, but operationally it locks the deal in. Negotiate carefully.

Key LOI terms: price, deal structure (asset vs stock), working capital target, exclusivity period, earnout (if any), seller financing, and reps and warranties framework. See our complete LOI guide.

Step 6: Survive due diligence

Diligence is where deals die. 30-40 percent of LOIs at this size do not close. Almost always for issues that should have been addressed in preparation.

Due diligence is 60-90 days of intensive document review by the buyer team. Quality of earnings, legal, operational, tax, and (where applicable) environmental. The seller job is to respond promptly, accurately, and completely. Speed kills momentum — slow responses signal that the seller has something to hide.

Step 7: Close

Closing is the final negotiation and execution of the definitive agreement and related documents.

At closing, you sign the asset or stock purchase agreement plus ancillary documents: escrow agreement, seller note (if any), non-compete, transition services agreement, employment agreement for key staff. Funds wire on closing day, with escrow holdbacks for indemnification.

Common owner mistakes

1. Selling reactively. Health, partner conflict, or fatigue-driven sales fetch lower multiples because buyers can see them.
2. Listing without preparation. The financial cleanup and operational documentation done before listing is the highest-ROI work in the entire process.
3. Focusing only on price. Deal structure, working capital, seller financing, and tax structure can move net proceeds by hundreds of thousands.
4. Telling employees too early. Most owners share with key managers around LOI stage and broader employees at or shortly before closing.
5. Skipping tax planning. Tax planning with your CPA can move what you actually net by seven figures on a $5M deal.

Frequently asked questions