888-983-1617 [email protected]

How to Sell a Business in 5 Simple Steps: A Guide for SMBs

In all honesty, there’s nothing simple about selling a business, whether it’s a family company, an SME, startup, or big enterprise. The road to a successful sale is often rocky, with plenty of detours and wrong turns along the way. There might be a missing bridge or two. But every journey begins with a first step — and with that in mind, here are five steps on how to sell a business:

woman entrepreneur learning how to sell a business in 5 simple steps with oaklyn consulting

1. Figure out who you’re going to sell your business to.

If you’ve ever watched your friends immediately tune out when you try to explain what you do for a living, you may have accepted the fact that your business is not for everyone. And that’s okay. Across the entire business world, there may only be a handful of potential buyers for your particular business. It’s just a matter of finding them.

Think about the landscape where your business operates and understand where someone else in your industry could benefit from combining their operations and yours. Then, learn who has a track record of buying companies like yours. This list is your starting point.

2. Figure out what your business earns in the eyes of a buyer

For small to midsized businesses, sometimes one year’s financial results aren’t necessarily like all the others. Maybe you were trying to minimize taxes rather than maximize profit. Maybe your business just happened to purchase a fancy new car this year that you’re currently the sole driver of. Or maybe you’re making financial decisions for your business that aren’t profit driven, but reflect other values, such as employee relations or social impact.

Buyers understand that life is usually not steady from one year to the next. All they’re trying to find is the steadiest possible view of your business’s financials, minus all the noise and weird stuff. Buyers will look at your run rate earnings, assuming that you’re maximizing profits and are using generally accepted accounting principles (GAAP).

3. Qualify potential buyers’ interest

Think of this step as the business-world equivalent of a “Do you like me? Check yes or no” note passed to a grade-school crush. You’re never going to know unless you ask, but because you don’t want the world to know your business is for sale, you have to be discreet about it.

There are two relatively easy ways to ask:

 

    • Reaching out directly, one business owner to another. Say something general and noncommittal, like “I’d like to talk to you about how we might do business together.”

However this step is handled, it’s usually a quick conversation. Most people aren’t interested, at least not right away. But a small percentage might be willing to talk further.

4. Negotiate a deal with the best buyer

After you have a short list of serious prospective buyers, you’ll begin a parallel negotiation process with all of them, which can be a recipe for confusion if you don’t have your head on straight. That’s because as you answer the individual buyers’ questions, you may be sharing important information with some but not others, which can affect how high their offer is.

If you don’t give people enough information to formulate a meaningful offer, or keep track of what information you’ve shared with whom, you’re going to end up with bids that are more in the realm of fantasy than reality. And any fantasy on the buyer’s part will ultimately fall apart when it’s time to sign the legal documents.

5. Implement the deal through legal contracts

Once you’ve settled on your deal terms, you’ll need a lawyer to help put them into effect legally. The lawyer’s job isn’t to tell the client what the business terms should be or whether they’re fair or not. Their job is to write up a contract that will transfer the ownership of your business in a legally valid way, with money moving from one bank account to another and a binding set of processes for any disputes that arise.

To put it another way, lawyers are responsible for building a sturdy box, and businesspeople are responsible for what goes in that box. So take that responsibility seriously.

How to sell a business (and not a dream)

If both buyer and seller been responsible throughout the process, your deal probably will make it across the finish line. But if one of you has been less than candid, or sloppy in some way, your deal has a good chance of falling apart.

As you begin the process of selling a business, consider these five steps as a basic roadmap. But every journey needs a good navigator—and that’s our basic role at Oaklyn Consulting. If you’re wondering how to sell a business, we can be your guide through the process. It may not be exactly simple, but we can at least make it simpler.

How to Increase Business Value Before a Sale

Learn how to increas your business’ value to maximize sale profits and attract better buyers and/or partners.

Oaklyn Consulting Congratulates Medecipher on Acquisition by SnapCare

Oaklyn Consulting congratulates Denver-based cloud-based software developer Medecipher Inc. on its acquisition by SnapCare, a leading healthcare workforce solutions provider. Oaklyn Consulting assisted Medecipher in negotiating the business terms of the transaction....

Is Now The Right Time To Sell My Business?

Ask Us Anything Dear Oaklyn Consulting, For the last five years, I’ve been making 65% to 75% gross profit. I know in the next few years, gross profit is going to shrink because of new competition coming into the market. What advice do you have for me to consider...

How to Navigate Business Debt and Equity Options

When closely held businesses need capital, they generally have two options — getting a bank loan or seeking out private investors. While a loan isn’t going to be a viable solution for every liquidity need a business has, it can be significantly less expensive in the...

Help Me With a Conflict in My Family Business

Ask Us Anything Dear Oaklyn Consulting, Three members of our family business (a father and two sons) are not getting along. The father isn't retiring and wants to control the business, while the sons would like to sell the business. What advice do you have for the...

Help Me With a Succession Plan

Ask Us Anything Dear Oaklyn Consulting, It’s been a really hard year. I own a business that I’ve been successfully running for the last 15 years. I’ve had some health troubles that have pushed me to a position where my doctors are suggesting that I need to retire...

Can a Nonprofit be Acquired by a Corporation? 

Can nonprofits be acquired by corporations? Is it a good idea for for-profit businesses to acquire nonprofits? Learn everything you need to know.

Venturing into Capital: Understanding Small Business Private Equity  

Explore small business private equity and all of its alternatives to reach new heights for capital in your company.

Help Me With Acquiring a Business

Ask Us Anything Dear Oaklyn Consulting, I am a business owner who has a substantial local presence. I’m considering acquiring a competitor that has a larger presence outside my current market. This move would expand our footprint immediately and give us the...

How to Merge Nonprofits: Acquisition, Stakeholders, Post-merger Integration, and More

Merging nonprofits is not as hard as it sounds. Just make sure goals are aligned, assets are well assessed, and that you have the right advisors by your side.