The Essential Steps to Selling Your Business - BusinessTown

We make starting a business simple

Find your idea. Write your plan. Start your business.

The Essential Steps to Selling Your Business

The first step to selling your business is to realistically assess if the business is likely or even possibly saleable. If you aren’t sure, try having a candid discussion with someone in your industry, or consult a business broker.

But as a rule of thumb, if you’ve been in business for at least a year or more, and have shown some profit, or at least have very clear path to profit soon, your business should be saleable to someone.

Second, you need to decide if you want to sell all or just part of the business. Large corporations are constantly selling part of their business and buying other businesses, in an attempt to acquire businesses that fit together and have synergy, that are growing quickly, or for many other reasons.

Third, you need to decide upon the minimum price for which you’d sell the business after seeking out the best bids possible.

Fourth, you need to decide if you would consider offers other than those that are strictly cash. For example, would you allow the seller to pay you over time? And if so, how would you structure it? If you were to decide to allow the seller to pay over time, I would be inclined to recommend that you actually have the owner buy the entire business, that is, all the equity in the business, at one time. Then I would have them sign a promissory note, or a written promise to you for the balance. This would give you better protection if the buyer can’t or won’t make all of the loan payments.

Fifth, you and the buyer should think about the tax implications of the sale. For example, buyers will often demand that you sell them just the assets of the business, not the business itself. In other words, they are buying the assets but not assuming the liabilities. Buyers tend to do this because it helps shield them from potential liabilities that may stem from the time you operated the business. They may also receive tax benefits because they then can write down the value of the assets or, in other words, take a non-cash charge on their tax returns.

Finally, you need to decide what your ideal role would be after you sell the business. For example, you might decide that your ideal situation would be to sell your business and then to depart on your new boat and sail around the world the next day. Or you may decide you would be willing to stay on and help manage or consult on the business full time for six months and or part time for one year after you sell it.

As a seller, however, you should strive to sell the whole business: assets and liabilities and not just liabilities. This decreases, but by no means eliminates, your risk of liabilities from the time you ran the business. However the buyer may have you sign a statement that certifies that you assume all liabilities from when you were running the business, or that you have disclosed all liabilities, which means you could potentially get stuck with them anyway.

Furthermore, if your business is a traditional C Corporation in the U.S., you would have to pay corporate taxes on the entire asset sale. You would also have to pay personal income taxes once you distribute the proceeds from the assets to yourself. While this may be hard to believe, it is a financial reality you should be keep in mind,

Also, in some states in the U.S., such as Massachusetts, where I live and where most people and especially most politicians hate businesses and business people with a passion, this double taxation even applies to S Corporations.

Of course these rules and laws can change from time to time and place to place. There can be many offsetting intricacies, especially if you have a complex business. Don’t hesitate to consult your accounting firm and carefully learn the (gory) details.

While this situation may sound messy, I can assure you that it probably was not as messy as mine. I had a business that I started as a sole proprietorship, converted to an S Corp, then converted to a C Corp, later converted back to an S Corp, and then converted once again to a C Corp inside a Massachusett’s business trust (an obscure entity which tax hungry politicians ended). The real problem came when the highest bidder insisted on an asset sale So I had to have extensive historic valuations performed on the business to be able to verify the assets.

You must next decide if are going to sell the business on your own, or with the help of a business broker or investment bank. If you are not highly experienced in selling a business I would suggest you use an intermediary. Choose a good investment bank if your business is large enough and you can find one willing to take you on, otherwise select a business broker for a smaller deal.

Then, working with your team, prepare your financials for presentation to potential buyers. You want to exclude expenses that a new buyer might not incur (such as your private airplane or country club dues) but add in items that they might incur but you did not (such as when you skipped giving yourself a salary for three months because you ran out of cash). You also want to prepare a projection for sales for the next few years, showing your key assumptions, while cautioning that there is no guarantee.

Next, prepare what is called “the book.” This is basically the offering of the business and the story about the business: why it is great, why it is different, the products and services offered, and why it would make a great purchase.

Afterwards, decide on what forms potential buyers need to sign, such as a non-disclosure agreements, and set a deadline for offers.

When it is time to announce the sale, create a list of possible buyers such as industry competitors, or advertise if you are trying to sell it to individuals. From this list, create another list of qualified, interested buyers, send them a book, answer their questions, and, if their interest continues, give a presentation.

Weigh the offers that you receive and make a decision on the best one for your business.

From that point, the buyer does their due diligence. Frequently the buyer finds something in the due diligence that moves them to re-adjust their offer and you must decide to agree to the new offer, to renegotiate, or to go back to other buyers.

Finally the deal closes. But quite often, you are not done. Sometimes the buyer comes back and files a lawsuit saying you misrepresented something, or the projections were an intentional fabrication, or you didn’t disclose something material. I am happy to say this has never happened to me. I firmly believe I sold good businesses that represented good value for fair prices and that I sold them to good, honorable, and savvy business people. Just as importantly, I sold them to “good” buyers.

There is a several ways to reduce your chances of getting sued after selling a business. First, make sure what you’re offering and presenting is not exaggerated. Have your attorneys make sure you have all the proper disclosures.

But an important lesson comes from a friend of mine, Steve Karol, founder of the private equity firm the Watermill Group: You always leave some money on the table. In other words, you don’t try to wring every single last penny out of the deal.

Remember: you can choose the buyer. I would try to find out if the acquiring firm has a record of suing firms from which they have bought businesses. I would try to determine if the buyer has the potential to run the businesses successfully. Unsuccessful or highly disappointing deals tend to end up in lawsuits.

Selling a business successfully can be a long road, but it is a highly worthwhile one toward maximizing the value of your business and making for a good, clean sale.

More Details on the Business Sale Process

Now that I’ve finished outlining the basic steps in the business sale process, I’ll go into a little more depth on some key points.

Business brokers

A business broker acts as an agent for an owner looking to sell a business. Some real estate agents broker businesses but most business brokers are, themselves, small local businesses representing area small businesses or larger businesses in a particular industry. They can be found through telephone listings or advertisements in local newspapers or trade magazines. They typically charge the owner 10 percent of the final sales price, which is payable at closing.

There are several advantages to using a business broker. The broker will allow you to maintain confidentiality if you don’t want your intent to sell to become public knowledge. It saves you the time of talking to potential buyers, thus allowing you to focus on running your business. Some prospects may be more comfortable, at least initially, talking to an intermediary about a business rather than talking directly to the owner.

A broker who specializes in a particular industry may have excellent contacts at larger corporations that might be interested in buying out your company at a higher price than an individual buyer might.

Nonetheless, a broker’s fee is substantial and you will want to weigh the expense before you decide to list your business through a broker.

Partial sale

You may decide to sell part of the business, rather than all of it. If one segment of your operation is growing much more quickly than another, you may want to consider placing the less successful portion on the market. If you are able to sell it, you will have more money and time to invest in the remainder of your company.

In order to make a partial sale, you will have to break out the financial information and prepare a two-year profit and loss statement for the separate business segment you are selling. This may be tricky, and you might want to consider having an independent accountant perform the work or at least check over your work.

Financial statements

The basic financial information needed to sell most small businesses are profit and loss statements and balance sheets from the last five years of operation. For medium or larger businesses, cash flow statements will also be expected. If you are three or four months into a new fiscal year, you should also provide an interim financial statement.

One of the first things a prospective buyer may want to know is who prepared your financial statements. Even if you have prepared your own financial statements in the past, you should consider having an outside firm prepare or review them for the sale. This will increase the value of the business in the eyes of potential buyers and increase the likelihood of making the sale.

If you decide against using an outside accounting firm to prepare your financial statements, offer to show copies of your corporate or, in the case of a sole proprietorship or partnership, personal tax returns to serious potential buyers. This will help to substantiate your businesses profitability.

Management agreements

Often the prospective buyer will express an interest in having the current owner continue to run the business after the sale takes place. If you are interested in doing this, be sure to get any such agreement in writing. Working relationships between new owners and ex-owners are often highly subject to friction.

Will anyone buy my business?

The only way to find out for sure is to place your firm on the market. Generally, a small business that is relatively new, unprofitable, or has a sharply declining sales history will be difficult to sell. Reviewing the simple valuation guidelines will give you some indication of how marketable your business may be.

The higher the suggested multiple of earnings for your business, the more chances you have of finding a buyer.

Valuation

The selling prices of similar businesses in your area will provide an indication of what you can expect to receive for your business. Do note that we are talking selling price, not asking price. Typically, small businesses sell for significantly less than the asking price. Sophisticated buyers might evaluate your business on the basis of projected cash flow for the next few years. They will then discount the value of that cash flow to reflect the amount of risk inherent in the business and the importance of their personal efforts in maintaining the success of the business. They will also consider what their money could be earning in a “risk free” investment such as a U.S. government Treasury Bill.

Selling to larger corporations

Sometimes it is possible to sell your business to a larger corporation for more than it is worth to an individual buyer.

A larger corporation that is active in the same business area as you may be able to improve on your profit margins by folding your business into one of their business units. It might also be able to eliminate or reduce back-office expenses, such as accounting or warehousing, and sales expenses, such as paying independent commission representatives, by using their own staff and facilities.

Also, a larger corporation that is trying to grow quickly in a new strategic area may be willing to pay a fat premium to quickly acquire market share.

Any corporation with which you are currently engaged in any type of cooperative effort should be targeted as a potential buyer.

Attorneys

There are two areas where it is strongly suggested that you consult with an attorney when selling a business. The first instance is when you prepare a circular or prospectus summarizing your business for potential buyers, and the second is when you prepare a purchase and sales agreement.

While you may have operated your business successfully year after year, a new buyer without your particular skills, expertise, or personality may easily run into problems. If the business turns out to be less successful or more difficult to run than the buyer anticipated, he or she may assume that the business was fraudulently represented.

One way to reduce the risk of litigation in this transaction is to have an attorney review your circular or prospectus. The attorney will undoubtedly advise you to avoid projecting future sales or profits, or at least be extremely careful when doing so.

Even if you are selling a very small business, you should have your attorney review, if not actually prepare, the purchase and sales agreement. Buying and selling businesses is often much more complex than, for example, making real estate transactions. There are more variables and much less standardization in the wording of business sales agreements.

Employees

Make sure that employees hear about a potential sale of the business from you and not a third party – rumors breed nervousness. Some of your staff may decide to seek employment elsewhere and leave immediately.

If you decide to advertise the sale of your business openly, tell your employees before the advertisements run. Explain that the sale could take a long time to happen and, unless you plan to close down if no sale occurs, may not happen at all. If you expect to find a buyer who will keep all or most of your employees on the payroll, tell this to your staff. Remain truthful, but emphasize the positive.

If you decide to advertise the business confidentially, make a concerted effort to avoid any leaks to employees. Consider using a business broker and have any interested buyers sign a nondisclosure agreement. Potential buyers should also visit your operation during off hours.

You may decide that one or more of your employees is the best potential buyer for your business. Employees know the business better than outsiders and may be able to persuade investors or lending institutions to help them finance a leveraged buyout

Qualifying buyers

During the course of selling a business you will get a lot of tire kickers. They won’t really be interested in buying and can waste a lot of your time. You need to be able to quickly judge the seriousness of a prospect so that the energy you put into discussing the business isn’t entirely fruitless. After all, you still need to concentrate on running your business.

Sometimes the otherwise best prospect for buying your business is not able to obtain third party financing. Hence, it is very common for businesses to be sold with seller financing.

If you do decide to provide financing, have the buyer sign a loan agreement with you and be sure to get an attorney to write up the documentation. Don’t assume that just because you ran the business profitably the new owner will do so as well. Try to get as much solid collateral as you can in order to protect your loan.

If your business includes real estate, motor vehicles, machinery, or other hard assets, you may want to consider selling them separately or even leasing them to the new owner. This could increase the pool of qualified prospects, increase your chances of completing a sale, increase your downside protection, and decrease the need for seller financing.


Bob Adams

Bob Adams is the founder of BusinessTown the go-to learning platform for people starting and running their own businesses. Bob has started dozens of successful businesses, including one he launched with $1500 and sold for $40 million. He also has an MBA from Harvard Business School.

BUSINESSTOWN’S #1 BEST SELLING COURSE

Start-a-Business 101

Learn how to start your own business.

Start-a-Business 101 is a complete program for starting your own business.

  Find a great business idea. You’ll get my 6-step method for finding a great business idea. Plus you’ll get my insight on hundreds of proven, money-making businesses that you can start.

 Turn your idea into a profitable business. I’ll take you through every step of starting a business from finding your idea, to turning it into a solid business model, to making your first sales.

 Attract customers without spending a lot of money. You’ll get a ton of my free and low cost ways to land customers. From simple “guerilla” marketing tactics to the latest in digital marketing, I will show you every way imaginable to pull in customers on a shoestring budget. 

 Start small and grow as fast as you want. I’ll show you how you can start small, even part-time if you prefer, and build a highly successful business. You don’t need a lot of time or resources – but you do need to make the right decisions on key issues – and I’ll show you how to do it.

 Get proven strategies and insider advice. You’ll get the exact same methods I used to build one business after the next. I’ll tell you how to avoid problems. And I’ll show what to do at each step of the way, to start your business right.

 Try it risk-free for 60 days. You can try the whole course and then decide if it’s right for you. If you don’t love it, I’ll give you a 100% refund.

 You so inspired me that I started a business and have started receiving orders. Your videos about how to pick a business to start really got me going after I followed your steps to a tee. Thanks so much!

Bill Bennett – Business Owner

Start a business you love, earn more money and live the life you want. With Start-a-Business 101 you can…

Be your own boss. Enjoy true independence and be the star of your own show. Work when and where you want.

Start a business you love. You’ve got one life to live – so why not start the business of your dreams? I’ll show you exactly how to do it.

Make more money. Use my proven strategies to earn the highest profits possible and make a lot more money than you could at a 9-to-5 job.

Start-a-Business 101 is perfect for you…

If you don’t have an idea yet.

Start-a-Business 101 includes the proven 6-step method for finding a great idea. Plus you’ll get hundreds of proven, money-making ideas.

If you have an idea but are not sure where to start or what to do.

In Start-a-Business 101, you will learn exactly how to start your own business from start to finish. You will have access to dozens of videos, worksheets and templates that will walk you along the way.

If you want to make sure that you are doing things right.

Start-a-business 101 covers all the common mistakes that entrepreneurs make when getting started. No room for errors, you will learn how to start your business right.

If you want to get guidance and know exactly what to do at any given time.

Follow my step-by-step process that will get you on your way to business success. It will be like having a business coach by your side at all times.

If you want to start any size business or any type of business.

Start-a-Business 101 will help you start any size of business from a one person home-based business to a larger business. And it will work for any type of business including all service businesses, product businesses and Internet businesses.

If you want to become a knowledgeable entrepreneur.

By watching just one video lesson a day, you will quickly become a knowledgeable entrepreneur. You will be ready to start your own business now or at any time in the future.

Hi there, I’m Bob Adams.

I’m a serial entrepreneur and self-made multimillionaire.

I’ve started dozens of successful businesses of all types and sizes including … bike rentals, house painting, employment service, retail business, multimedia company, book publishing, tourist maps, job fairs, Internet businesses, software business, employment advertiser, and used boat sales. 

Most of these businesses I started in my home on a very small budget. 

My biggest success is my book publishing company that I started in my basement apartment with just $1500 and later sold for $40 million. 

I’ve learned what really matters in business. I’ve discovered the concepts that make or break businesses. And I’ve used them to build one successful company after the next. 

Now, my mission is to share what I learned with you – so that you can succeed in your own business. 

That’s why I created Start-a-Business 101.

Success = recipe + ingredients

In Start-a-Business 101, you will get my exact recipe and ingredients for success. I will show you what to do at every step in starting a business. 

You’re not going to go through years of trial and error. 

You won’t have to make mistakes or learn anything the hard way. 

Because the recipe for business success is waiting for you in my course, Start-a-Business 101

In this course you will get the same proven strategies and tactics that I used to create my successful businesses.

My books and courses have been featured in…

Start-a-Business 101 will show you exactly what to do at each step of starting your business.

You will get proven strategies, real-life examples, ready-to-go templates, checklists and worksheets to help guide you along and save you time. 

You won’t have to guess what you should do next or if you are doing things right.

 You will be following the best advice available today. 

You will be getting the same techniques and strategies that I used to build one successful business after the next including the one I started with $1,500 and sold for $40 million. 

You will put your startup on the fastest and most proven path to success.

Here’s the course for your new business journey. Beginning entrepreneurs will hugely benefit from Start-a-Business 101. The videos clearly explain each element of building a new business. The advice is savvy and on point throughout. I highly recommend it for anyone involved in any kind of startup.

Rick Williams – Managing Director, Williams Advisory Partners LLC

Learn at your own pace and on any device

All devices

You can access Start-a-Business 101 on all your devices, including your computer, your tablet and your smartphone.

Instant access

Get instant access to the entire course, including all the video lessons, all the tools and the discussion board.

Learn at your own pace

Watch just one video lesson per day and you will complete the whole program in about 10 weeks. Or you could even binge watch the entire course in one weekend. It’s up to you!

Full lifetime access

You can access the entire course as long as you want and as many times as you want. For example, you could go through the entire course to quickly build your entrepreneurial knowledge. Then you could go back to specific lessons as you are working on various aspects of your business.

Watch the overview video

 I found great value in the BusinessTown courses. The program is comprehensive, covering everything…It’s like having a team of experienced advisors available 24 x 7.

Dan Sterling –  Founder, Water Hero

Start-a-Business 101 gives you everything you need to start your business.

Rock-solid advice

You will learn my proven strategies and tactics for starting your own successful business.

Easy to follow videos

You will be guided step by step through the whole process by 76 short and easy to follow videos. 

 Business tools

You’ll also get 46 downloadable templates, worksheets and samples to guide you along.

  Start-a-Business 101 Course Content

1.  How to get started with your business

2.  Discover hundreds of great business ideas

3.  How to choose the best business idea for you

4.  How to validate your business idea

5.  Find the perfect name for your business

6.  How to choose the best legal entity for your business

7.  How to create a powerful competitive advantage

8.  How to create your business plan

9.  How to do your accounting and financial statements

10.  How to get the money you need to start your business

11.  How to create your marketing and attract customers

12.  How to build your online marketing presence

13.  How to make sales and land your first customers

14.  The Small Business Toolkit

15.  The Discussion Board

Every step of the course is filled with videos and companion tools to show you exactly how to start your business.

Start-a-Business 101 includes 46 templates, worksheets, checklists and samples

These tools will save you a lot of time, keep you organized and further guide you along the way to launching a successful business as soon as possible.

Fill-in the blank templates make it easy to plan your business.

Watch sample videos

Looking for a business idea? Discover the critical questions that you must ask to find the very best idea for you.

Learn how to create a one page business plan – the most important document for starting your business.

Learn how to find the best customers for your business.

Discover how to create a unique sales message for your business.

   Having run across your videos was a godsend to me. Your method provides me the structure I need to be successful. I am willing to put in the work to go through your complete course which so far has been incredibly helpful.

Phyllis Marks – Starting an Online Business

Will Start-a-Business 101 work for me?

This course is made for you:

  • If you want to generate a new income stream.
  • If you don’t have a business idea yet but want to be your own boss.
  • If you have an idea but are not sure how to get started or what to do first.
  • If you are ready to get started but want to make sure you are doing things right.
  • If you want guidance from someone who has done it before – multiple times.

Start-a-Business 101 will work for all types of businesses. And it will work for all sizes of businesses from one-person home-based businesses to larger enterprises.

Don’t have an idea yet? No problem. I will give you my 6-step process for quickly finding a great business idea. Plus I’ll show you hundreds of my best, money making business ideas, along with my insight on each one.

Wondering how to turn your idea into a profitable business? I will show you how to do it – every single step of the way.

You will learn how to plan your business, how to get the money to get started, how to do marketing, how to do accounting, how to make sales, how to set up your website and much more. You will have access to all my tools – including worksheets, case studies, checklists and templates – that will save you time and money.

I can promise you that you will get the very best strategies and ideas available today. You will get the exact techniques that I used to build my businesses, including the one I sold for $40 million.

Still skeptical? I get it. Sometimes you have to see it to believe it.

I got you covered. You can take this whole course completely risk-free.

You can test drive the entire course for 60 days.

That’s right. You can have full access to the whole course for 60 days. If you decide it’s not for you, or if you don’t love it, I’ll give you a 100% refund. No questions asked.

I can’t promise you that your business will absolutely succeed. No one can.

But I can promise you that I will give you the very best strategies and ideas for every step of starting your business.

And I stand behind that with my 60-day, 100% money-back guarantee.

I want you to start a business. And I want you to start it right.

 I have researched the marketplace for over a month to identify a viable and comprehensive ‘go-to’ guide on how to best launch a small business. This course offering from Bob Adams met more than what I was looking for.

Steve Cox – Experienced Businessman

Get Start-a-Business 101 and get $750 in bonuses – free

I am pleased to tell you that I am adding two limited time bonuses to Start-a-Business 101

These bonuses will make it even easier and quicker to get your own business up and running. 

The Ultimate Checklist to Starting Your Own Business 

This 18 page checklist will show you exactly what to do to start your business.

This extremely comprehensive 18 page document includes all the steps to start a business. Plus I give you my expert advice on every single step. 

This checklist will keep you totally organized and make sure that you are not missing anything important. 

This checklist is the ultimate shortcut in getting your business up and running. It will be your constant companion in starting your business. The checklist has a $500 value but I will give it to you as one of my welcome gifts for joining Start-a-Business 101.

How to Launch a Business Fast and on a Tight Budget Using MVP

Use this video to start your business fast and on a tiny budget.

The second bonus is a game-changing video/lesson. In this video/lesson I will teach you the concept of Minimum Viable Product, or MVP. 

You will learn how to start your business faster and for less money, than any other way possible. 

This important video/lesson has a $250 value but I will give it to you as one of my welcome gifts for joining Start-a-Business 101

So consider joining Start-a-Business 101 now if you want to get these limited-time free bonuses – a $750 value.

 Bob has been a close friend and trusted business adviser of mine for years… guiding me through the challenges we all face as entrepreneurs. Hands down Bob is one of the most talented, and successful entrepreneurs I know. Thanks Bob!

Matt Marshall – Founder, MGM Capital Investments

Frequently Asked Questions

When does the course start and finish?

This online course is completely self-paced – you decide when you start and when you finish.

How long do I have access to the course?

After enrolling, you have unlimited access to this course for as long as you like – across any and all devices you own.

What if I am unhappy with the course?

If you are unsatisfied with the course for any reason, please contact us within 60 days and we will give you a full refund, no questions asked.

What are the course requirements?

This course is for anyone thinking about starting a business. You don’t need to have any previous business experience whatsoever. Even if you have business experience, you will discover a vast amount of powerful new ideas that will help propel your business ahead.

Can I download any of the content?

Of course! All the worksheets, case studies, samples, and templates are downloadable.

Start a business you love, earn more money and live the life you want.

Start-a-Business 101 is the fastest and easiest way to learn how to start a business and become a knowledgeable and successful entrepreneur.

Start-a-Business 101 is a complete proven program that will take you step-by-step through your entire startup journey.

You will get…

  Easy-to-follow videos

  Ready-to-use tools

  Discussion board

  Inside advice

  Proven strategies

  Complete lifetime access

In just a few minutes a day, you will learn how to start your own business.

You can test drive the entire course for 60 days.

That’s right. You can try Start-a-Business 101 risk-free for 60 days. You will have full access to the entire course. If you decide it’s not for you, or if you don’t love it, I’ll give you a 100% refund. No hassles. No questions asked. I want to help you succeed in your own business.

BUSINESSTOWN’S #1 BEST SELLING COURSE

Start-a-Business 101

Learn how to start your own business.

Full Lifetime Access 

60-Day 100% Money-Back Guarantee

Only $19.95

Start-a-Business 101 is only open for a limited time.

Get on board now if you want to make sure you don’t miss out.

Questions? Email bbisson@businesstown.com

Copyright © 2019 BusinessTown LLC. All rights reserved. BusinessTown ® is a registered trademark of BusinessTown LLC.