Top 7 business sale considerations
- Profit is king – Buyers pay for earnings, not revenue.
- Size matters – Larger, more profitable businesses fetch higher multiples.
- Diversify your revenue – Significant customer concentration is a risk factor.
- Keep good books – The quality of your accounting can make or break a deal.
- Consistency matters – Profitability must be demonstrated over time.
- Not every business is sellable – Your business must be viable without you in the equation.
- Timing is crucial – Start preparing 18-36 months in advance and sell at your peak.
Crucial questions to answer
- Begin with the end in mind – What is your desired outcome?
- Confront the brutal facts – How much is this business worth to a potential buyer?
- If you fail to plan, you are planning to fail – What is your exit strategy?
- You get what you negotiate – On which elements of the deal can you be flexible?
- Plan your execution, execute your plan – Will there ever be a perfect time?
Exit strategies to consider
| Transaction Type | Key Requirement |
|---|---|
| Sale to family members | Family is interested and ready to take over |
| Sale to employees (ESOP) | Successor management must be in place & ready |
| Sale to partners | Partners must be in place and ready |
| Sale to third party | Third party must be identified |
| Recapitalization transaction | Management capable of running business |
| Orderly liquidation | Market for specific assets must exist |
| Qualified Plan / Cash Balance | Profitability, compensation/age disparity, and time |
Let’s talk about options for your business legacy
It might be your first time to sell a business, but it’s not ours.