Selling a Business Checklist: 32 Tips to Sell For Top Dollar 

If you’re considering selling your business, we’re going to walk through a checklist of things you should take into account before moving forward in the process. This 32 step “selling a business checklist” will help ensure that you get the best possible price for your company and that the transition is as smooth as possible. 

In this post, we’ll cover everything from getting your business documents in order to management succession planning, and everything in between. While each business has unique idiosyncrasies, fortunately the fundamentals of selling a business are the same across the board, regardless of industry.

By the time you’re done reading this, you’ll have a much better understanding of what it takes to successfully sell a business. Many business owners don’t take the time to get ready, but I don’t want you to be one of them.

As a bonus, I’m going to include three ideas for you to increase your company valuation so you can maximize your purchase price.

Let’s dive in.

Selling a Business Checklist

1. Your Timeline: Is Now the Right Time to Sell?

The first and most important question to ask yourself is whether or not now is the right time to sell your business. There are a number of factors to consider in making this decision, including:

• How stable is your business? If you’re experiencing rapid growth or significant changes, it may not be the best time to sell. Buyers will want to see consistent financials and a well-established customer base before considering a purchase.

• What are the current market conditions? Is the economy in recession or a bull market? If you’re selling in a buyer’s market, you may have to accept a lower price than you would in a seller’s market. With that said, waiting for the perfect time to sell can also be costly – both in terms of lost revenue and opportunity.

• What is your personal motivation for selling? If you’re simply ready for a change or looking to retire, then it may be time to sell. However, if you’re selling due to financial distress or other pressing issues, it’s important to think about this carefully before moving forward.

2. Should I Sell My Business?

The decision to sell should be driven by your goals, not just by market conditions.

Consider if you want to: Retire? Pass the business on to family members? Sell and stay on as an employee or consultant? Or do you simply want to cash out?

You may get more money if you wait, but you also may not be able to sell at all if you wait too long. While there is no perfect answer, its important to find the right balance between getting the best possible price and ensuring a successful sale.

3. Get Clear on Your Reasons for Selling

You need to be clear about your reasons for selling so you can communicate them effectively to potential buyers. This will be one of the first questions that comes up in any preliminary conversation.

Are you selling because:

• You’re at retirement age?
• The business has become too big and unmanageable?
• You’re pursuing other opportunities?
• The business is in decline and you want to get out while you still can?
• You’re burned out and need a change?

Remember, your reasons for selling will help determine the type of buyer that’s right for your business. For example, if you’re selling because you’re retiring, then you may want to sell to a strategic buyer who will keep the business running as is.

4. Your Business Value

One of the things you’ll need to do early on is determine the value of your business. This will help you get a clear understanding of its value and set your expectations at a reasonable level. Assessing the value of your business will not only help you set a realistic asking price, but it will also give a starting point when negotiating with potential buyers. Here are a handful of typical valuation methods used when pricing out a company: DCF analysis, comparative company analysis, and data around previous transactions.

There are a number of factors that go into determining the value of a business, including but not limited to: brand equity, customer base, cash flow, intellectual property, and physical assets.

Here’s a video that goes deeper:

5. Financial Records & Track Record of Profitability

Of course, buyers are going to want to see that the business is profitable. A proven track record of profitability over a number of years is always going to be more attractive to buyers than a business that is just breaking even or barely making any money. Be prepared to show buyers financial statements and tax documents going back several years.

You’ll want to be sure to have three years of profit-and-loss (P&L) statements, as well as your balance sheet. Having this information readily available for financial due diligence will help speed up the process when you find a buyer.

If you have audited (or reviewed) financial statements, this can be a big selling point because it gives buyers more confidence in the accuracy of the underlying financials.

6. Determine Sale Price

Once you have an idea of the value of your business, you can start thinking about how much you want to try selling it for. It’s important to strike a balance here; if you price your business too high, you may have trouble finding a buyer. But if you price it too low, you could end up leaving money on the table.

7. Get a Business Appraisal

In order to determine your sales price and the fair market value of your business, you’ll want to consider getting a professional business valuation. This will help you price your business correctly and avoid leaving money on the table. It will also give you a good starting point for negotiating with potential buyers.

8. Get Professional Help

You may want to consider hiring a business broker as well as an accountant or attorney who specializes in business sales. These M&A advisors and professional advisors will be able provide valuable guidance, serve as a trusted sounding board, and ensure that everything is handled correctly throughout the process. 

9. Potential Buyers

Another important consideration is who your potential buyers might be. Are you planning to focus on strategic buyers or financial buyers?

Are there any industry-specific buyers who would be interested in acquiring your business? Are there any private equity firms or venture capitalists who might be interested? Answering these questions will help you form a strategy for marketing your business to potential buyers. You want to find a buyer who shares your vision for the future of the business and who is prepared to pay what your business is worth.

This can take some time (and usually comes with some unexpected surprises), so start looking for buyers well in advance of when you hope to close the deal. 

10. Tax Implications

When you sell a business, there are a number of different tax implications to be aware of. These can include capital gains taxes as well as state and local taxes. Once you have an understanding of the taxes you’ll be responsible for, you can begin factoring that into the price you’re willing to accept for your business. 

You’ll need to work with a tax advisor to determine how much tax you’ll owe (and critical tax documents) on the sale of your business and to develop a strategy for minimizing those taxes.

11. Legal Considerations

As you’d expect, there are a number of legal considerations involved in selling a business. For instance, if you have any contracts with employees or suppliers that will need to be transferred to the new owner, you’ll need to ensure that those contracts are ironclad and protect your interests.

You’ll also need to create an asset purchase agreement that outlines the terms and conditions of the sale and protects both parties involved.

12. Ensure Compliance

If you’re selling a brick-and-mortar business, there are a number of compliance-related issues that must be addressed. For example, does your business have the required licenses and permits? Are your employees properly trained and certified? Are your products or services up to code? Addressing these issues early on will help avoid any potential roadblocks during the selling process.

13. Comprehensive Record Keeping

One of the most important things you can do when selling your business is to keep thorough records. This includes keeping track of your customers, inventory, income, expenses, intellectual property documentation, and anything else related to your business. Having complete and accurate business documents will make it much easier to determine your business value and to negotiate a fair price.

14. Create List of Inventory and Equipment

Along similar lines as record keeping, it is important to have a complete and accurate inventory of all business equipment, furnishings, vehicles, product and materials. This will give potential buyers a clear understanding of what they are getting if they purchase your business. It is also important to include any maintenance records or manuals you have for major pieces of equipment.

15. Review Business Contracts, Licenses, and Agreements

As part of the due diligence process, buyers will want to review all of your business’s licenses, legal documents, employment contracts, and agreements. This is to ensure that everything is in order and that there are no potential problems that could cause issues down the road. If you don’t have all of the required documentation, it could delay the sale or even kill the deal entirely.

16. Strong Documentation: Policies & Procedures and Standard Operating Procedures

If you don’t have strong documentation of your internal processes, it will be very difficult to transfer ownership of your business. Buyers will want to see that there are well-defined procedures in place for how things are done, so that they can hit the ground running after the purchase is complete.

This shows that you have a system in place for running the business, and it can make the transition to new ownership much smoother.

17. Clear Growth Strategy and Competitive Analysis

A clear growth strategy within a written business plan shows buyers that you have a vision for the future of your business and that you know how to get there. It will also give them a sense of comfort that the business will continue to be successful even after they’re no longer intimately involved.

Buyers are always looking for businesses with growth potential. They want to see that there are opportunities for the business to expand its customer base, enter new markets, or develop new products and services. If you can show that there is potential for the business to grow, it will be much more attractive to buyers.

Similarly, a solid competitive analysis will show buyers that you understand the landscape in which your business operates and that you have a plan for how to differentiate your product or service.

18. Look for Opportunities to Increase Revenue and Profitability

One of the best things you can do to make your business more attractive to buyers is to increase its revenue and profitability in advance of the sale. The sales multiple of your business will be largely driven by this, so do all you can to boost sales and profits.

There are a number of ways to do this, such as expanding your customer base (or winning back lost customers), increasing your prices, maximizing customer lifetime value, improving your margins, or adding an ascension model. If you can show that you’re taking steps to grow the business, it will be much more appealing to buyers and you’ll be able to sell your business from a position of strength.

19. Supplier Diversification

Buyers will want to see that your business is not overly dependent on any one supplier. If you are, it creates a risk that the business could be disrupted if that supplier were to suddenly go out of business or raise prices significantly. By diversifying your suppliers, you mitigate that risk and make your business more attractive to potential buyers.

20. Strong Management Succession

A strong management succession plan is important because it shows that you have a plan in place for who will take over the business when you’re no longer involved. This is crucial for any business, but especially important for businesses with multiple locations or complex operations. Without a succession plan, buyers may be hesitant to take on the responsibility of running the business. Having a strong management team in place is always going to make a business more attractive.

21. Strong and Increasing Rate of New Customer Acquisition

This is important because it will determine the future potential profitability of your business. If you don’t have a strong and increasing rate of new customer acquisition, then it’s likely that your business will eventually stagnate and decline. This is something that potential buyers will be looking at closely, so it’s important to make sure that your business has a healthy rate of new customers coming through the doors.

22. High Customer Satisfaction and Retention Rates

Customer satisfaction and retention are important because they indicate that your customers are happy with your product or service and are likely to stick around for the long haul. This is the kind of loyal customer base that any buyer would love to inherit.

Customer reviews are always a good thing to have because they show that your customers are satisfied with your product or service. Having positive customer reviews can be a big selling point for businesses because it shows that the business is doing something right.

23. A Well Defined Target Market

It’s important to have a well-defined target market because it makes it easier to market and sell your product or service. If you’re trying to appeal to everyone, it’s likely that you’ll end up appealing to no one. But if you know who your target market is (and can articulate that to potential buyers), you can focus your marketing efforts and better connect with those potential customers.

24. Strong Brand with Protected Intellectual Property

If you have a strong brand that is well-known and respected, it will be much easier to sell your business. Buyers are always looking for businesses with solid reputations and a strong brand identity. Additionally, if you have intellectual property (such as patents or copyrighted materials) that is essential to the business, it’s important to have this properly documented and protected so that the new owner can continue to use it.

25. Strong (Ideally Increasing) Operating Margins

If your business is generating healthy profits, it will be much more attractive to potential buyers. Similarly, if your margins are declining, it could be a warning sign that now is not the best time to sell.

26. Diversified Customer Base

Having a diversified customer base is important for two reasons:

1. It reduces the risk that your business will be affected if any one customer decides to leave
2. It makes your business more attractive to potential buyers

If your customer base is too reliant on any one customer, it can be a major red flag. Potential buyers will see this as a big risk to the ongoing viability of the business.

27. Sustainable Competitive Advantage

A sustainable competitive advantage is something that sets your business apart from the competition and makes it more likely that customers will continue to do business with you. This can be a big selling point for businesses because it shows that the business has a bright future.

This could be anything from strong technology capabilities, to an exceptional team of employees, to a loyal customer base. Whatever it is, make sure you highlight this in your marketing materials and during meetings with potential buyers.

28. Retention Based Compensation Plans for Employees

This type of compensation plan ensures that your employees will stay with the business after the sale, and it can give buyers peace of mind knowing that they won’t have to worry about losing key personnel.

29. Non-Compete Agreements for Key Employees

If you have a non-compete agreement in place, it will limit the ability of your key employees to start a competing business, which can be reassuring to sellers. This gives them the assurance that they won’t have to worry about competition from your former employees.

30. Prepare Confidentiality Agreements

If you’re going to be sharing sensitive information with potential buyers, it’s important to have a confidentiality agreement in place so that they can’t take this information and use it for their own purposes. You want to keep any critical information under wraps so there are no unexpected surprises you need to handle.

These legal documents are standard practice in the business world, and it will help to protect your interests during the sales process.

31. Sufficient Cash on Hand

When selling your business, it’s important to have enough cash on hand to cover any expenses that may come up during the transaction. This includes taxes, legal fees, and other miscellaneous costs. Having a healthy cash reserve will make the sale of your business much less stressful.

32. Clarity Around Critical Sales and Marketing Metrics

Clear detail around critical metrics will inspire confidence in future buyers. By tracking these numbers and having them readily available, you’ll show predictability in your selling process.

Customer acquisition needs to be systematic – for every $1 spent on advertising, you should have clear line of sight into ROI.

1. Cost per lead
2. Cost of acquisition
3. Lead conversion rate
4. Average purchase amount – initial sale
5. Average repeat/recurring purchase amount (if applicable)
6. Close Rate (phone)
7. Conversion rate – existing client follow-up
8. Lifetime customer value

How to Increase Company Valuation

Beyond just preparing materials for a sale, wouldn’t it be great if you could also go on the offensive and actually increase what your company is worth?

Here are 3 strategies that can help you maximize your company valuation as you prepare for a sale.

Convert to Recurring Revenue Business Model

If you’re looking to sell your business, one important thing to consider is whether or not you can get a recurring revenue model in place (if you don’t already).

A recurring revenue model is one in which customers make regular, ongoing payments for access to your product or service, and can increase your valuation by 8X. This type of revenue model is highly attractive to buyers, as it ensures a consistent stream of income after the sale is complete. If you don’t have a recurring revenue model in place, you may want to consider converting to one before putting your business on the market.

Owner Not Essential to Day to Day Operations

Another thing buyers will be looking for is a business that can run without the owner being involved in the day to day business operations. This is especially important if the owner is planning on retiring or just wants to take a step back after the sale.

Buyers don’t want to feel like they are buying a job, they want to feel like they are buying a business. So, it’s important to have systems and processes in place so that the business can run and continue to scale without the owner being too involved.

Transition to Professional Management

One great way to increase your company’s value is to swap out the current manager or owner for a professional manager. This has multiple advantages, such as helping your valuation and making your company more marketable.

Professional buyers know that owners tend to leave their businesses after they sell them, rather than sticking around and helping. Ideally the owner’s exit from a business is of little or no consequence for its future cash flow and value…but if it cannot continue growing in value without your help, it’s a real turn-off to buyers.

Hiring professional management can help take some of the responsibility off of your shoulders and put it onto someone who is trained to handle such duties. Additionally, this will give the company a more professional appearance, which can attract investors. 

Just by making this one change you’ll see a drastic increase in the EBITDA multiple you’ll be able to sell your business at:

• Owner Operated: 2.5X
• Professional Management: 4.5X

This means the company is worth 2X more (on average, across all industries).

Through transitioning to professional management we can instantly create multiple arbitrage and have more buyers that are willing to pay a higher price.

Exit Strategies for Small Business: Preparing to Exit Company

Identify and Approach Possible Buyers

Once you’ve prepared the materials we covered above, the next step would be to approach buyers who are a good fit for your business. I’ve created a detailed post on this topic which can help guide you through this process.

Here are a list of factors to consider when approaching potential buyers:

– The size of the company

– The location of the company

– Industry and type of company

– Profitability and growth potential

– The management team and employees

– Existing customer base

Qualifying Prospective Buyers

As you approach prospective buyers, you’ll also want to assess them – qualify them and ensure they would be a good fit. Here are some of the things you should be thinking about:

-Are they a strategic buyer?

-What is their industry experience? Are they capable of running the business?

-Do they have the financial resources to complete the acquisition?

-Is the company a good fit with their current business operations?

-Are they likely to be approved for funding by their lender?

-Does the buyer have reasonable timeframe expectations? Are they prepared to purchase immediately or are they looking to make a transaction next year?

Next Steps: Exiting the Business

These are just a few of the things to consider before selling your business. Selling a business is a big decision—one that shouldn’t be taken lightly. You’ve built your business from the ground up. You’ve sacrificed blood, sweat, and tears to make it a success. It’s worth spending some extra time to make sure you get a purchase price you deserve.

As we covered, there are a number of factors involved in successfully selling a business, from determining its value to finding the right buyer to drafting ironclad legal agreements.

If you take the time to prepare in advance and put together a strong package, you’ll be in a much better position to navigate the business sale process and get top dollar.

I hope you found this post helpful – was there anything in particular that resonated with you?

Let me know in the comments.