Selling a business is one of the most significant financial decisions you'll ever make. For most owners, it's also their first time doing it—which means navigating unfamiliar territory with high stakes.
The good news: the process follows a predictable path. Whether you're selling to retire, pursue new opportunities, or simply ready for a change, understanding these six stages will help you move confidently from consideration to closing.
Realistic Timeline
Total process: 6-12 months is typical. Businesses priced under $500K often move faster. Larger or more complex businesses can take 12-18 months. The preparation phase alone (before you even list) should be 2-3 months minimum.
The Six Stages of Selling a Business
1 Preparation (2-3 months)
Most sellers underestimate this phase—and it's where deals are won or lost. Before listing, you need to get your house in order: clean financials, organized documentation, and a clear picture of what you're selling.
This means gathering 3-4 years of tax returns and financial statements, creating a detailed equipment list, documenting your processes, and fixing any obvious red flags. It also means getting a realistic valuation so you know what range to expect.
Key question: If a serious buyer asked for any document about your business tomorrow, could you provide it within 24 hours?
2 Choosing Your Sale Approach
You have three main options:
- Business broker: Best for most small businesses ($500K-$5M). They handle marketing, screening, negotiation, and paperwork. Typical commission: 8-12%.
- M&A advisor: Better for larger businesses or complex transactions. More strategic approach, often retained rather than commission-only.
- For-Sale-By-Owner: Saves commission but requires significant time and expertise. Higher risk of deal failure or leaving money on the table.
Interview at least 3 brokers before deciding. Ask about their experience in your industry, their current inventory, average time to close, and how they screen buyers.
3 Marketing & Buyer Search (2-4 months)
Your broker (or you, if selling independently) creates a confidential marketing package highlighting your business's strengths. This goes to qualified buyers who've signed NDAs and demonstrated financial capability.
Good brokers maintain databases of active buyers and know how to reach strategic acquirers in your industry. Confidentiality is critical—employees, competitors, and suppliers shouldn't learn about the sale until closing.
What buyers want to see: Consistent revenue, documented processes, reasonable owner involvement, clean books, and a clear path to continued success under new ownership.
4 Negotiation & Letter of Intent (2-4 weeks)
When a buyer is serious, they'll submit a Letter of Intent (LOI)—a non-binding offer outlining price, terms, and conditions. This is where negotiation happens.
Don't focus solely on price. Terms matter enormously: down payment percentage, seller financing, earnouts, non-compete clauses, transition period, and what's included in the sale. A higher price with difficult terms may be worse than a cleaner deal at slightly lower value.
Once you agree on an LOI, the buyer typically gets an exclusivity period (30-90 days) to complete due diligence.
5 Due Diligence (30-60 days)
This is where buyers verify everything you've claimed. They'll examine financial records, tax returns, contracts, leases, employee information, customer data, and operational details. Expect extensive document requests and probing questions.
The preparation you did in Stage 1 pays off here. Organized sellers move through due diligence quickly; unprepared sellers see deals fall apart.
Common deal killers: Undisclosed liabilities, financial discrepancies, key customer concentration, landlord issues, or problems that emerge that weren't mentioned upfront.
6 Closing & Transition (1-3 months)
Final purchase agreements are signed, funds transfer, and ownership changes hands. But the process doesn't end there—most deals include a transition period where you train the new owner and introduce them to key relationships.
Typical transition periods run 2-4 weeks of intensive involvement, then availability for questions over 2-3 months. Some deals include consulting agreements that extend this further.
What Affects Your Sale Price?
Beyond the basic valuation (SDE × industry multiple), several factors can push your price up or down:
Value Increasers
- Consistent revenue growth over 3+ years
- Low owner involvement (business runs without you)
- Diversified customer base (no single customer >15% of revenue)
- Long-term lease with favorable terms
- Documented systems and processes
- Key employees who will stay through transition
- Recurring revenue or long-term contracts
Value Decreasers
- Heavy dependence on the owner
- Customer concentration (one client = most revenue)
- Declining revenue trend
- Short-term or problematic lease
- Key person risk (one employee who knows everything)
- Deferred maintenance or aged equipment
- Undocumented processes ("it's all in my head")
Common Mistake
Many owners wait until they're burned out or the business is struggling to sell. By then, the value has declined and buyers sense desperation. The best time to sell is when things are going well—that's when you have leverage and options.
The Role of Valuation
Everything starts with knowing what your business is worth. Not what you hope it's worth, or what you need it to be worth—what buyers will actually pay based on financial performance and market conditions.
A realistic valuation helps you:
- Set appropriate expectations
- Identify value gaps you might be able to close before selling
- Recognize good offers (and bad ones)
- Plan your post-sale finances
- Decide whether now is even the right time to sell
Getting a professional valuation before listing is one of the smartest investments you can make. It prevents wasted time with unrealistic pricing and gives you confidence in negotiations.
What's Your Business Worth Today?
Our valuation tool walks you through this entire process in under 10 minutes. Enter your financials, expense adjustments and real estate value (if applicable) for your business and we'll calculate your weighted SDE, apply industry-specific multiples, and generate your estimated value range and business readiness score for free.
Optional: Purchase and download your comprehensive report ($149) to see the entire breakdown, any identified red/yellow/green flags with immediate action steps, complete business selling process with deal structure tips and more!
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