How do I prepare to sell my small business?

The guide includes several articles and notes to help individuals sell their existing business.
What are the characteristics of business buyers?
How do you qualify as a business buyer?
Should I use a business broker to sell a business?
What is a business sale agreement?
Create Business Plan

 What are the characteristics of business buyers?

The value assigned to a business by the valuation process offers a useful benchmark to start the negotiation process. It will however not be the final purchase price. The final price may be higher or lower then the valuation

Business buyers are usually of two types:

1. Financial Buyers or Investors.
Investors buy a business to increase their assets. They are looking for investments that will provide them certain return on investment (ROI) over time. These buyers typically don’t want to spend too much time running the business and taking care of operations day to day.

2. Business Owners
Business Owners are motivated to participate in a specific market and operate a business on a day to day basis. Most business owners like to buy businesses because they like the market and are motivated to operate their own businesses. At times a business owner may acquire a competitor to consolidate market share.

Spending some time to understand what motivates your potential buyer can help you position the business for sale correctly.

 How do you qualify as a business buyer?

After promoting a business for sale the business owner can receive several expressions of interest to buy the business. Negotiating with buyers is time consuming and hence the seller must first qualify buyers that she will work with.
After the first few encounters with potential buyers, the business seller must classify buyers as:

  • Newbie, are individuals with neither the resources nor the business management experience. Typically they are looking to learn from the buying experience and may not be interested in actually buying the business.
  • Individuals looking for bargain basement prices or fire sales. These individuals are also known as Sharks and one must be careful when dealing with them.
  • Other businesses, looking to buy a business for strategic reasons such growth, area covered and more. These buyers can be classified as strategic acquisitions.
  • Individuals or groups of individuals (syndicates) interested in acquiring businesses. These buyers or investors will most likely hire professional managers to run the business.
  • Owner operators or individuals who want to buy the business and operate it. Owner operated businesses are common. Typically these are individuals with resources and experience and must be taken seriously.

After qualifying a business, the potential buyer must sign an NDA with the business seller before embarking on the business due-diligence process. The NDA protects the potential buyer from walking away from the deal and disclosing business details to others or even competing with the business. Providing potential buyers with a non confidential agreement is a great way to filter out buyers who are not serious.

 Should I use a business broker to sell a business?

There are several challenges to selling a business. The first challenge is finding qualified buyers for the business. The next step is negotiating the deal and closing it.

A business broker is an intermediary between business buyers and business sellers. He is an agent or middleman who can help you find additional buyers for your business. They are match makers who connect business buyers with business sellers. The right business broker can help you negotiate the maximum value of your business and help you through the closing process. Sites such as can help you find buyers directly or find business brokers to work with.

Before signing up with a business broker, one must complete due-diligence on the broker to determine if he is the right for you. This includes checking references, experience, credentials and price. Further, the business broker must be able to help you value your business and guide you with the best approach to proceed.

Selling a business, at times, may be a highly confidential matter and at such times a business broker can help you pursue looking for buyers and keep things confidential.

The business broker typically gets paid when the deal closes. Therefore an individual selling a business needs to be mindful of any additional pressure a business broker may exert to get the deal closed quickly.

There are several broker directories on the web to help you find a business broker including the Business Directory

 What is a business sale agreement?

After due-diligence and negotiations are complete, the business buyer and seller must put the details of the deal in writing. The agreement must list the value of the deal, all assumptions made by the buyer and the seller and any protections that have been introduced to see the deal through. Typically, the sales agreement is exchanged between the buyer and seller until all aspects of the business transaction have been captured to the buyer and sellers satisfaction.

The business transaction between the business buyer and seller may include either buying assets in a company or buying securities in the company. The sales agreement must include all terms finalized during the negotiation process. The sales agreement is a legal document and as such the terms must be well considered before the buyer and seller sign-of. Typically the sales agreement must be reviewed by an attorney.

The sales agreement defines everything that will be purchased including business assets, securities in the company or both. Some items that must be included in a sales agreement include:

• Business buyer details
• Business seller details
• Assets and securities being sold
• Purchase price
• Payment terms
• List of inventory and other items included with the sale but included as assets or securities
• Warranties provided by the buyer and seller
• Protections and exit clauses accepted by the buyer and seller to see the deal through
• Date of closing

 Create Business Plan

A business plan is a written description that tells what a business plan to do and how it plans to do it. Business plan is a strategic document and must cover the resources and abilities of the business. Business plans include a marketing plan and financial plan that extends 3 to 5 years into the future. Usually business plans are written to raise financing, but business plans are also an invaluable tool to review strategic alternatives, develop a roadmap and grow a business. Business plans force the business owner to think through all elements needed to make a business a success and commit resources legally and financially. Usually a business plan includes SWOT analysis (Strengths, Weakness, Opportunities and Threats) and Porters five force analysis, which forces an entrepreneur to deeply analyze and think through the business domain. Porters five force analysis includes understanding Supplier power, Buyer power, Threat from substitutes, Threat of new entrants, and competition from similar businesses.

Key elements of a business plan include:

1. Executive Summary

The executive summary must be 1-2 pages long and must provide a summary of the entire business plan including the key strategic direction, product and services offered marketing plan, operational plan and financial plan. The executive summary must be written last and typically contains at-least one paragraph for each section listed below.

2. Business Overview
The business overview section includes the business history, mission and objectives. It also lists the team members with their bios and the ownership structure.

3. Products and Services

This section lists the products and services offered by the business including features and benefits and competitive advantages of the products or services offered over the business. The section must cover how the business differentiates itself from the competition.

4. Financial Plan

The financial plan is perhaps the most important part of the business plan one must devote more 2/3rd of time allocated to this section. The financial plan incudes three years’ of financial projections, including income statements, pro-forma balance sheets, and monthly cash flow statements. Additionally, the section should include an easy-to-understand summary of the financials and the must state all the assumptions made in developing the projections. 5. Industry Overview

Disclaimer: provides business for sale classifieds. All business for sale and other business opportunities are not an offering or purchase recommendation by We rely on the accuracy of the content submitted to us by business owners and intermediaries representing business owners. A business buyer must seek the advice of a Business Broker or Business Professional such as a lawyer, financial consultant and accountant before closing the deal. Please review our Disclaimer for more details.

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