How to Prepare a Business for Sale
Selling your business is a major decision you’ve put your time, money, and energy into building it, and it may well represent your life’s work. If you’ve decided now is the right time, the steps to sell a business well go far beyond putting up a “for sale” sign.
Working with a professional business broker is often the difference between just getting rid of a business and selling it for the best possible price and terms. Below are the questions and topics we hear most from sellers if something isn’t covered here, reach out.
Two Questions to Answer First
Is now a good time to sell?
Do you really want to sell?
Steps to Sell a Business: Start With Your Information
- Three years of profit and loss statements
- A list of fixtures and equipment
- A list of loans, amounts, and payment schedules
- A copy of the franchise agreement, if applicable
- Federal income tax returns for the business
- The lease and any lease-related documents
- Copies of any equipment leases
- An approximate inventory value, if applicable
Most owners have to track some of this down and update it that’s normal. Put it together in a clean, organized format, as if you were handing it to a buyer today, because eventually you will be. Make sure your financials are current: last year’s figures, this year’s tax return, and year-to-date numbers, all presentable.
Worth Knowing
How your business is legally structured corporation, partnership, sole proprietorship, C-corp or S-corp affects how much of the sale price you actually keep after taxes. Talk to a tax advisor about the implications before you're mid-negotiation with a serious buyer and discover the number you'll net is not what you expected.
Present Your Numbers the Way Buyers Read Them
Small businesses are typically priced on cash flow, not just the bottom line. Once owner salary, benefits, depreciation, and other non-cash items are factored back in, the picture is often better than the raw profit number suggests.
Understanding Who's Actually Buying
Today’s buyers come from a wide range of backgrounds. Individual entrepreneurs remain active, while private equity firms, family offices, and strategic buyers are increasingly pursuing established, profitable businesses. Many are looking for companies with strong cash flow, experienced employees, recurring customers, and opportunities for continued growth.
The right buyer depends on the size of your business, industry, financial performance, and your goals for the sale.
What Buyers Will Want to Know
- How much is the inventory worth?
- Will you train the new owner and stay on for a while?
- What makes the business different or unique?
- What's the profit picture in good years and bad?
- What could a new owner do to add value?
- What's the annual increase in sales?
Buyers Want Cash Flow, Not Just Profit
Work with your accountant to get your financials organized around cash flow specifically owner compensation, one time expenses like a remodel or new equipment, depreciation, amortization, and interest all factor into what a business can really support. This is exactly what a broker accounts for when advising on price.
Worth knowing: If a website is relevant to your business, having one and keeping it current is a real plus for buyers evaluating the business today.
How to Prepare a Business for Sale: What You Can Do Now
Appearances count
Fix the sign, freshen up the space before you list, not after.
Everything has value
Customer lists, proprietary processes, well-maintained equipment, and good employees all matter to a buyer evaluating the business.
Eliminate surprises early
Review every part of the business legal, accounting, environmental and resolve issues well before you go to market.
Consider an Operations Manual
Even a simple one covering the basics makes a business look organized and easier to hand over, which helps it sell faster. Include anything a new owner would find useful just leave out anything proprietary, like customer lists or supplier details.
A Few Practical Habits to Maintain
- Keep normal operating hours
- Repair signs and lighting
- Keep inventory at a healthy level
- Remove anything not included in the sale
- Fix or remove non-operating equipment
- Keep the premises tidy inside and out
Try viewing the business the way a buyer would first impressions matter, and if the physical impression falls flat, the rest of the pitch may never get a fair hearing.