How to Sell Your Business

Most privately held business sales follow a recognizable sequence. The order rarely changes, even though the duration and difficulty of each stage vary considerably from one company to the next.

1. 01

   Understand Value

2. 02

   Prepare

3. 03

   Go to Market

4. 04

   Market Confidentially

5. 05

   Qualify Buyers

6. 06

   Negotiate

7. 07

   Letter of Intent

8. 08

   Due Diligence

9. 09

   Close

The sections below work through each stage in turn. Where a subject has its own dedicated resource on this site, the discussion here stays at the level an owner needs in order to see how the pieces fit together.

A reasonable view of value shapes almost everything that follows: pricing, marketing, the type of buyer the business attracts and how negotiations are likely to unfold. Owners who go to market without it often discover the problem months later, when interest has already cooled.

Value discussions generally revolve around a handful of factors:

• Normalized earnings. What the business truly produces once discretionary and one time items are treated properly.
• SDE or EBITDA. SDE for owner operated companies, EBITDA where a paid management team runs the business.
• Valuation multiples. Applied according to the characteristics of the business rather than an industry rule of thumb.
• Risk and transferability. Customer concentration, owner involvement, management depth and the reliability of the records.

A fuller treatment of what the numbers mean for a seller sits in our article on how much you could sell your business for. Owners who want a documented, business specific opinion rather than a preliminary estimate can review professional business valuation.

Preparation is the work of making the business easy to understand and easy to verify. A buyer who can follow the numbers and see how the company operates without the owner in the room is generally a more confident buyer.

Work that needs doing before a process begins belongs to preparing to sell your business, where the readiness stage is covered in depth.

Some owners run a sale themselves. Others engage representation. The decision usually comes down to how much of the process an owner wants to carry personally while continuing to operate the company.

The practical workload includes:

• Setting and defending a price position
• Preparing marketing material that does not identify the business
• Screening inquiries and managing buyer communication
• Controlling when sensitive information is released
• Negotiating price and terms
• Coordinating the transaction to closing

Owners unfamiliar with the role can read what a business broker does. Nothing about representation guarantees a particular price or outcome. What it changes is who carries the process.

Most privately held sales are run with controlled disclosure. The business is presented in a way that describes the opportunity without identifying the company, so that employees, customers, suppliers and competitors are not drawn into the process prematurely.

Controlled disclosure typically works in layers:

1. Anonymous profile

   A description of the opportunity that does not identify the business.

2. Nondisclosure agreement

   Signed before any detailed information changes hands.

3. Staged release

   Financial and operational detail released as interest and capability are demonstrated.

4. Direct discussion

   Owner level conversations and site visits arranged deliberately, not on request.

When and how employees, customers or suppliers are told varies by transaction. Some deals depend on early involvement of key staff, others do not. That communication plan is best decided deliberately with the buyer rather than by default.

Interest and capability are different things. A process that treats every inquiry as a prospect consumes an owner's time and exposes information to people who were never in a position to complete a purchase.

Qualification usually considers:

• Available capital and how the purchase would be funded
• Whether a financing path is realistic for this business
• Acquisition criteria and whether the company genuinely fits them
• Relevant operating or industry experience where the business requires it
• Seriousness, timing and responsiveness
• Ability to satisfy transaction specific requirements such as licensing or landlord approval

Information should be released deliberately at this stage. Once operating detail is disclosed, it cannot be withdrawn.

An offer is more than the headline number. Two proposals at the same purchase price can leave a seller in very different positions depending on how the money is paid, what is conditional and what obligations continue after closing.

Cash at closing removes future collection risk but may narrow the field of buyers or the achievable price. Seller financing or an earn out can support a stronger headline number while leaving part of the outcome dependent on future performance. Neither structure is better in the abstract. What matters is which allocation of risk an owner is willing to accept, and how the tax and legal consequences apply to their own situation, which is a conversation for qualified professionals.

When the parties reach broad agreement, the terms are usually documented in a letter of intent. It is generally not the final contract, but it sets the framework that definitive documents follow, which makes it more consequential than its length suggests.

An LOI commonly addresses:

• Proposed purchase price and payment structure
• Due diligence scope and duration
• Exclusivity, and what the seller agrees not to do during it
• Closing conditions and required approvals
• Expected timing
• Which provisions are binding and which are not

This is the point at which sellers should be working with a qualified attorney, and with an accountant or tax professional on the consequences of the structure being proposed.

Due diligence is the buyer verifying that the business is what it was represented to be. From the seller's side, the work is largely about producing accurate information promptly and explaining anything that looks unusual before the buyer forms their own conclusion about it.

Requests commonly cover financial statements and tax returns, contracts and the lease, employee and customer information, vendor relationships, assets and liabilities, licenses or permits, and general operating detail.

Delays and surprises are what damage transactions at this stage far more often than imperfections. Our article on due diligence when buying a business covers the seller's side of this stage in more detail.

Closings differ. An asset purchase of a small operating business and a stock purchase of a larger company involve different documents, different approvals and sometimes different parties at the table.

Matters commonly resolved at or before closing include:

• Definitive purchase documents
• Remaining closing conditions
• Required approvals or third party consents
• Lease assignment where applicable
• Transfer of funds
• Transfer of assets or ownership interests
• Licenses and permits where applicable
• Agreed transition or training arrangements

Attorneys, accountants, lenders, escrow agents and licensing authorities may all be involved depending on the transaction. Most sales also include a transition period, and a seller who supports it well generally makes the handover smoother for everyone, including any part of the price that remains tied to future performance.

There is no single answer, and any figure presented as universal is worth treating with caution. Timing is driven by the specifics of the business and the transaction.

• Asking price and value expectations
• Quality and currency of financial records
• Profitability and earnings stability
• Industry and business complexity
• Buyer demand for this type of company
• Financing and lender requirements
• Landlord or third party approvals
• Due diligence findings
• Negotiations and deal structure
• Seller readiness and responsiveness

Owners who are particularly concerned about timing can also review our guide to selling a business quickly, including the factors that help reduce avoidable delays.

A broker is not required. What a broker generally does is carry the parts of the process that compete with running the company: pricing discussions, confidential marketing, buyer screening, day to day communication, negotiation support and coordination through closing.

No broker can guarantee a price, a timeline, confidentiality or a closing. Those depend on the business, the buyer and the market. Owners evaluating representation will find the practical criteria in what a business broker does, and compensation is covered separately in what business brokers charge.

Owners looking specifically for representation rather than background reading can review our selling a business service.

The fundamentals do not change locally. Value still rests on earnings and transferability, confidentiality still has to be managed and buyers still conduct due diligence.

What can differ is the practical detail around the transaction. Lease assignment and landlord approval are frequently a gating item for businesses operating from leased premises. Licenses or permits may need to be transferred or reissued, and many businesses operating in the county must meet applicable local permit, occupancy and licensing requirements. Buyer financing has its own requirements, including U.S. Small Business Administration guidance on acquiring an existing business. Industry specific rules apply to some businesses regardless of where they operate.

Owners in San Antonio and the wider Bexar County area are welcome to discuss these specifics confidentially with Supreme Capital Business Brokers San Antonio.

If you are evaluating a potential sale, Supreme Capital Business Brokers San Antonio can help you understand the process, assess your options and prepare for a confidential transaction. You can also reach us through our contact page.

Confidential inquiry. No obligation.