Selling a business is a significant decision. For many business owners, the business represents years of work, investment and personal commitment, so understanding the sale process before entering the market can make a considerable difference to both the experience and the eventual outcome.
The process typically involves preparing the business for sale, understanding its value, finding suitable buyers, managing negotiations and due diligence, and agreeing the final transaction.
This guide explains the key stages of selling a business and what owners should consider at each step.
How do you sell a business?
While every transaction is different, selling a business will usually involve the following stages:
- Decide what you want from a sale
- Prepare the business for sale
- Understand what the business may be worth
- Prepare the information buyers will need
- Decide how to approach the market
- Identify and qualify potential buyers
- Manage initial conversations and offers
- Agree Heads of Terms
- Complete due diligence
- Negotiate the legal documentation
- Complete the sale and transition the business
Preparation is important. A well-prepared business is generally easier for a buyer to understand and can reduce delays or unexpected issues later in the transaction.
1. Decide what you want from the sale
Before thinking about buyers or valuation, consider what a successful transaction looks like for you.
Business owners sell for many different reasons. You may be retiring, looking to realise some of the value you have created, wanting to pursue another opportunity or simply feel that the business would benefit from a new owner.
Your objectives can influence the type of transaction you pursue.
Questions to consider include:
- Do you want to sell the entire business or retain a shareholding?
- Are you willing to remain involved after the transaction?
- Is achieving the highest possible price your main priority?
- How important is the future of your employees or brand?
- Do you have a particular timeframe in mind?
- Would you consider deferred consideration or an earn-out?
Understanding these priorities early makes it easier to assess potential buyers and offers later.
2. Prepare your business for sale
Ideally, preparation should begin well before a business is formally marketed.
A potential buyer will want to understand how the company performs; how dependent it is on its current owners and whether its earnings are likely to continue after a transaction.
Areas worth reviewing include:
- financial reporting and management accounts
- customer concentration
- recurring or contracted revenue
- key employees and management
- supplier relationships
- contracts and documentation
- intellectual property
- outstanding legal or regulatory matters
- working capital requirements
- reliance on the owner
Try to look at the business from a buyer’s perspective.
If important information is difficult to produce or much of the company’s knowledge and relationships sit solely with the owner, addressing these areas before entering a sale process can make the business easier for potential buyers to assess.
3. Understand what your business is worth
One of the first questions most owners ask is:
How much is my business worth?
There is rarely one definitive answer.
The value of a business depends on factors including its sector, size, profitability, growth prospects, recurring revenue, customer concentration, management team and the level of buyer interest.
For established profitable businesses, buyers will often consider a measure of maintainable earnings such as EBITDA and apply an appropriate valuation multiple.
For example:
Enterprise Value = Maintainable EBITDA × Valuation Multiple
However, the appropriate multiple can vary significantly between businesses.
A company with predictable recurring revenue, strong growth and a capable management team may attract a different valuation from a business of a similar size that is highly dependent on its owner or a small number of customers.
It is therefore important to look beyond a simple multiple when considering valuation.
4. Prepare the information buyers will need
Potential buyers need enough information to understand the opportunity before deciding whether to progress.
The information shared will usually become more detailed as the transaction progresses.
Early information may include:
- an overview of the business
- products and services
- financial performance
- customer profile
- employees and management
- market position
- growth opportunities
- reason for sale
Sensitive information does not need to be provided immediately.
Confidentiality agreements can be used before more detailed information is shared, and highly sensitive commercial information can often be reserved until later in the process.
As discussions progress, documents are typically organised within a secure data room for due diligence.
5. Decide how to approach the market
There are several ways to find a buyer for a business.
A seller may:
- list the business on a business marketplace
- appoint a business broker or corporate finance adviser
- approach potential strategic buyers
- speak with investors or private equity firms
- consider a management buyout
- run a confidential targeted sale process
The most appropriate approach will depend on the size and nature of the business and how widely you want the opportunity marketed.
Some owners prefer broad exposure, while others require a highly confidential process involving a carefully selected group of potential buyers.
The Brokerage allows business owners to present opportunities to buyers and investors while controlling the information they choose to disclose.
6. Identify and qualify potential buyers
Finding an interested party is only part of the process.
Understanding whether that party is genuinely capable of completing a transaction is equally important.
Before providing highly sensitive information, sellers should consider factors such as:
- the buyer’s acquisition criteria
- available funding
- transaction experience
- proposed timetable
- strategic rationale
- whether external finance is required
Different buyers may also value the same company differently.
A competitor, private equity investor, individual entrepreneur and larger corporate acquirer may each have different reasons for acquiring the business.
Creating appropriate competitive tension can therefore be an important part of a sale process.
7. Receive and assess offers
An offer should not be assessed solely on the headline valuation.
The proposed structure of the consideration can be equally important.
An offer could include:
- cash paid on completion
- deferred consideration
- an earn-out
- rollover or retained equity
- vendor finance
- conditions relating to future performance
For example, an offer of £5 million does not necessarily mean the seller receives £5 million on completion.
Understanding how much is payable, when it is payable and what conditions are attached is essential when comparing proposals.
8. Agree Heads of Terms
Once a preferred buyer has been selected, the main commercial terms of the proposed transaction are usually documented in Heads of Terms.
These commonly cover:
- proposed valuation
- transaction structure
- payment terms
- exclusivity
- due diligence
- timetable
- expected seller involvement after completion
Most provisions within Heads of Terms are typically non-binding, although certain provisions, such as confidentiality and exclusivity, may be binding.
Legal advice should be obtained before agreeing them.
9. Complete due diligence
Before completing an acquisition, a buyer will normally undertake due diligence.
The purpose is to verify the information provided and identify potential risks associated with the business.
Due diligence commonly covers:
Financial
Historical performance, quality of earnings, working capital, debt and forecasts.
Commercial
Customers, competitors, market position and growth prospects.
Legal
Contracts, employees, intellectual property, disputes and corporate documentation.
Tax
Historic tax compliance and potential liabilities.
Operational
Systems, processes, suppliers and management.
Preparing properly before due diligence begins can significantly reduce disruption during this stage.
10. Negotiate the legal documentation
If due diligence is satisfactory, the parties move towards final transaction documents.
For a sale of company shares, the principal document is normally a Share Purchase Agreement (SPA).
The SPA sets out the terms of the transaction and may include warranties, indemnities and other protections for the buyer and seller.
The precise documentation required will depend on how the transaction is structured.
Specialist legal and tax advice is particularly important at this stage.
11. Complete the sale
Once the final documents have been agreed and any conditions satisfied, the transaction can complete.
Funds are transferred and ownership passes to the buyer in accordance with the agreed transaction structure.
Completion does not necessarily mean the seller immediately leaves the business.
Depending on the agreement, an owner may remain involved for a transition period, continue as part of the management team or retain an equity interest in the business.
The transition arrangements should therefore be considered alongside the financial terms of the sale.
How long does it take to sell a business?
There is no fixed timetable for selling a business.
The process can take several months and, for more complicated transactions, considerably longer.
Factors affecting the timetable include the readiness of the business, the number and type of potential buyers, financing requirements, the complexity of due diligence and negotiations between the parties.
Preparing information before approaching buyers can help make the process more efficient.
How can you maximise the value of your business before selling?
Value is not determined by profitability alone.
Buyers will often consider the quality and sustainability of those profits.
Factors that may make a business more attractive include:
- predictable or recurring revenue
- diversified customers
- strong margins
- clear growth opportunities
- a capable management team
- limited dependence on the owner
- documented systems and processes
- good-quality financial information
Owners considering a sale in the next few years may therefore benefit from preparing well before they intend to enter the market.
Do you need a broker to sell a business?
Not necessarily.
Some owners manage a sale themselves, particularly where there is already an obvious buyer.
Others use a business broker, M&A adviser or corporate finance adviser to help prepare the business, identify potential buyers and manage the transaction.
The appropriate route will depend on the complexity and value of the business, the owner’s transaction experience and the amount of time they can dedicate to the process.
Selling your business through The Brokerage
The Brokerage connects business owners with buyers, investors and advisers through one professional marketplace.
If you’re considering selling, you can create a business profile and present your opportunity to potential buyers while deciding how much information you want to disclose.
You don’t need to have everything figured out before getting started.
Whether you’re actively preparing for a sale or simply exploring what your options might look like, The Brokerage is designed to make it easier to understand the market and connect with the right people.