How to sell your business: A completed guide for owners
Nuno Francisco, Market Executive | Business Banking
Key takeaways
- Make a business buyer-friendly. Buyers want clean financials, an independent leadership team, strong operations, and stable revenue, among other attributes. Knowing what builds value is key.
- Understand the process. The more a seller knows going in, the more informed decisions are made along the way. Understanding the process isn't just preparation, it's leverage.
- Consider price and terms. The price a business achieves is only one part of a successful sale. How a deal is structured, how and when payments are made, and how financing is arranged all shape what a seller gains when a sale is complete.
What it takes to sell a business successfully is a lot like what it takes to build one. The business owners who achieve the strongest results are the ones who understand what buyers want, know the process, and engage the right advisors.
Citizens research reflects how many owners are thinking about this. Among businesses with $5M+ in annual revenue, 30% of owners want to sell their business.1
The more an owner knows going into a sale, the better positioned they are to make confident decisions that protect and maximize the value of what they have built. These six questions come up most often when business owners begin planning a sale.
Understanding the 3 fundamentals of a business sale
Understanding what buyers want, the role of timing in a sale and the profile of likely buyers may help you prepare to sell a business.
1. Some key drivers of business value
Every buyer has their own priorities, but most are evaluating a business against the same core set of drivers.
- Earnings. Buyers measure the value of a business in part by using EBITDA (earnings before interest, taxes, depreciation and amortization) to view profitability. Buyers apply multiples against EBITDA to arrive at a purchase price.
- Revenue quality. Recurring income, a diversified customer base, and multiple product income streams contribute to revenue stability and may support a higher multiple.
- Owner dependency. Buyers want to see capable leadership and management in place to prove that a company can operate without the owner.
- Proprietary products or technology. Competitive advantages that are difficult to replicate provide strategic value.
- Operational strength. A business with current technology, well-maintained facilities and documented processes reassures buyers that a business can operate smoothly through a transition.
2. How timing impacts a sale
When a business goes to market can be just as consequential as how it goes to market. A few key forces tend to determine whether conditions favor sellers or buyers.
- Industry conditions. Competition in a growing sector may drive up business valuations. Slow or volatile industries may have the opposite impact, even if a business is prospering.
- Business financial health. Timing a sale for when a business shows consistently strong EBITDA may increase what buyers are willing to pay.
- External forces. Interest rates, available capital and current or pending regulatory or tax policy changes may impact a business sale.
3. Who buys businesses
What one buyer values, another may not. Understanding these distinctions prepares a seller to find the right match.
| Buyer type | Who they are | What they want |
|---|---|---|
| Strategic buyers | Companies in the same or adjacent industries | Customer base, new markets, technology, or intellectual property |
| Private equity | Investment firms managing outside capital | Strong EBITDA, reliable cash flow, and a platform for growth |
| Family offices | Private firms managing wealth for a single family | Stable, profitable businesses they can hold long term |
| Internal buyers | Partners, managers, or key employees | Continuity and the opportunity to own what they helped build |
Selling a business outright is one of several paths available to owners. Exit strategy planning and succession planning are other options.
Preparing for a business sale
Buyers are evaluating where a business is today and its chances of continuing to perform after they take over. That is why the work that drives a strong sale price often needs to start 18 to 36 months before a business ever goes to market.
Make financials sale-ready
- Assemble three years of financial statements that are accurate and well documented.
- Commission a quality of earnings report before a buyer asks for one. This independent third-party analysis signals to buyers that the business is well managed, and it gives an owner the chance to surface and address issues.
- Shift gears if taxable income has been managed downward. Buyers value a business on EBITDA, and suppressed earnings may reduce an offer.
Retool and shore up team
- Move operational and strategic responsibilities to staff, since buyers look for companies that can succeed without current leadership.
- Document processes and systems so a business is not dependent on any single individual.
- Incentivize key employees, since the loss of critical talent during a sale may discourage buyers.
Resolve operational gaps before buyers find them
- Address deferred maintenance that a buyer's inspection may flag and document efforts underway to fix operational bottlenecks.
- Keep technology, software and equipment current and at parity with competitors. Citizens research shows that 73% of midsize businesses use instant payment.1
The research also suggests that many businesses already recognize the importance of optimization in key areas.
Business technology investments for efficiency2
Shore up customer and revenue profile
- Diversify customer base, geographies and product or service lines to reduce reliance on any single customer, contract or product/service.
- Build recurring revenue through contracts, retainers or subscriptions. Recurring income may command higher multiples than project-based revenue.
- Address seasonal revenue concentration where possible and document steps being taken to build more year-round income. Citizens data shows that nonseasonal companies are more optimistic than seasonal ventures overall, and particularly about the potential for revenue to remain steady.
Major steps in the business sales process
No two business sales unfold exactly the same way, but most follow a similar sequence of steps. When a seller understands the process, it's easier for them to make informed decisions along the way.
- Assemble an advisory team. A business banker can make referrals to M&A advisors, transaction attorneys, CPAs, and other specialists in sales that are similar to yours. A banker also may help with business financing during the transition.
- Assess market conditions and timing. Industry conditions, EBITDA strength and broader economic forces all affect what buyers will pay for a business and how many buyers will compete for a business.
- Prepare financial and operational documentation. Clean, well-organized financial statements, tax returns, contracts, employee agreements and operational records indicate to buyers that a business is well run.
- Prepare a confidential information memorandum. Advisors create this detailed document to present financials, growth story and market opportunity.
- Identify buyers, review offers, and negotiate the letter of intent. Once a preferred buyer emerges, both parties sign a letter of intent establishing price, payment structure and timeline.
- Complete due diligence. The buyer conducts a thorough review of financials, contracts, operations and liabilities.
- Negotiate and finalize a purchase agreement. An attorney handles this stage which defines warranties, indemnifications and other details to protect a seller financially.
- Close and manage the transition. Ownership transfers to the new owner, often including a transition period.
FAQs
Owners who are thinking seriously about a sale often have the same questions.
What role do owners play during a sale?
Owners will be expected to participate in meetings with and make presentations to buyers and answer detailed financial and operational questions. Another key part of the process is to maintain normal business performance and potentially keep a pending sale confidential from employees, customers and suppliers. Staying focused on business management can be tricky, but it is essential. A dip in business performance during a sale may imperil a purchase offer or prompt a buyer to try to renegotiate price.
How do deal structure and payment terms affect outcomes?
Payment terms and deal structure determine what a seller receives, when they receive it, and how involved a seller may be once a deal is complete. Some common payment scenarios include:
Cash at closing. Agreed-upon price is paid at closing with no future obligations or contingencies.
Seller financing. A buyer pays the seller a portion of the price over time with interest.
Earnout. A portion of the sale payment is tied to whether the business hits specific performance targets after the sale.
Equity rollover. A seller keeps a portion of proceeds invested in the business post sale. Common in private equity transactions.
Deal structure, meaning how the transaction is structured legally and tax-wise, is equally important. In an asset sale, a buyer purchases specific assets and liabilities of the business. In a stock sale, the buyer purchases the owner’s shares directly. Each has different tax and legal implications, and the distinction should be carefully examined with a CPA and attorney before terms are agreed to.
How do tax, estate, and personal wealth planning factor in selling a business?
Tax, estate, and personal wealth planning are among the most consequential aspects of selling a business, since they may determine how much of the sale proceeds an owner keeps. Whether a deal is structured as an asset sale or stock sale directly affects how proceeds are taxed. How proceeds are held, transferred and protected after a sale involves estate planning decisions that should be made before closing, not after. A CPA with transaction experience, an estate attorney, and a financial advisor experienced with liquidity events should all be part of the advisory team, ideally engaged 12 to 24 months before a sale when the most planning options are still available.
What can delay a business sale?
Issues that arise during a buyer’s due diligence may delay or negatively impact a sale. Buyer due diligence happens after a letter of intent is signed, and if a buyer uncovers financial inconsistencies, customer relationship problems, operational bottlenecks or other issues that have not been disclosed, delays may occur. A decline in business performance after a letter of intent is signed is also potentially problematic. Financing issues on the buyer’s side can also create delays.
What should an owner plan for after a sale closes?
Many sellers will be involved in a transition phase post sale closing. Transactions often require a seller to remain involved for a defined period — sometimes six months, sometimes two years or more — to transfer customer relationships, institutional knowledge and operational leadership to the new owner. The length and terms of this transition are negotiated as part of the deal and should be clearly understood before signing.
Financial planning for sales proceeds should be in place before closing, not after. A financial advisor can lead the way with sellers on this front, bringing in estate and tax experts as needed.
Achieve a successful sale like you built a business
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1 Citizens 2025 Payment Trends
2 Citizens 2026 Q1 Small & Midsize Business Outlook
Disclaimer: The information contained herein is for informational purposes only as a service to the public and is not legal advice or a substitute for legal counsel. You should do your own research and/or contact your own legal or tax advisor for assistance with questions you may have on the information contained herein.