Selling a privately held business is one of the most significant milestones in an owner’s journey. Whether you're planning to retire, pursue new ventures, or simply capitalize on the value you've built, preparing for a sale or exit requires thoughtful planning and strategic execution.
Here are seven key steps every business owner should take to ensure a successful transition.
1. Clarify Your Goals and Timeline
Before diving into the mechanics of a sale, take time to reflect on your personal and professional goals. Are you looking for a full exit or partial liquidity? Do you want to stay involved post-sale in a management, advisory, or operational role? Understanding your ideal outcome will shape the structure of the deal and the type of buyer you would like to pursue – whether it's a strategic acquirer, private equity firm, or internal succession.
Establishing a timeline is equally important. Preparing a business for a sale can take 12 to 24 months or more. Starting early and evaluating your long-term goals and objectives will give you time to optimize value and address any issues that could derail a deal.
2. Get Your Financial House in Order
All buyers will evaluate the business’s ability to produce cash flows and will value the business accordingly. Buyers will scrutinize your financials, so it’s essential to ensure they are accurate, transparent, and professionally presented. This includes ensuring you have:
- Clean financial statements, ideally audited or reviewed by a reputable CPA firm
- Normalized earnings adjusted for one-time expenses, owner compensation, and non-operating items to reflect true profitability
- Forecasts and budgets, which demonstrate future growth potential with credible projections
- A sell-side quality of earnings report conducted before going to market. This helps identify issues early and builds buyer confidence
3. Assess and Strengthen Business Operations
Buyers want businesses that can run smoothly without the owner. Evaluate your operations and look for ways to reduce dependency on you or any single individual. Key areas to focus on include your:
- Management team: Develop and retain strong leaders who can carry the business forward
- Processes and systems: Document workflows, standard operating procedures, and key performance indicators
- Customer and supplier relationships: Diversify your customer base and ensure contracts are in place where possible
A business that runs like a well-oiled machine is more attractive and commands a higher valuation.
4. Understand the Valuation Drivers of Your Business
Valuation is both art and science. While financial performance is a major driver, other factors, such as industry trends, competitive positioning, and intellectual property will play an important role. Engage a qualified advisor to perform a valuation and help you understand what drives value in your specific market. This insight will guide decisions about timing, deal structure, and negotiation strategy.
5. Identify and Engage the Right Advisors
Selling a business is complex, and having the right team in place is critical. At a minimum, you’ll need:
- An M&A advisor or investment banker to help position the business, find buyers, and manage the sale process
- A transaction attorney with experience in business sales to handle legal documentation and protect your interests
- A tax advisor to structure the deal in a tax-efficient manner and plan for your post-sale financial future
- Transaction accounting to position the business’s financial records and historical results in a manner that sellers can clearly understand
These professionals will help you navigate due diligence, negotiations, and closing with confidence, and it is important to find the right advisors with the appropriate level of experience.
6. Prepare for Due Diligence
Due diligence is the buyer’s deep dive into your business. It can be intense and time-consuming, so preparation is key. Create a secure data room with organized documentation, including:
- Financial statements and tax returns
- Legal contracts and corporate records
- HR policies and employee agreements
- Intellectual property and licenses
Being proactive and transparent during due diligence builds trust and keeps the process moving.
7. Plan for Life After the Sale
Selling your business is not just a financial transaction, it is also a personal transition. Think ahead about what comes next. Will you start another venture, take time off, or focus on philanthropy? Work with a financial planner to manage the proceeds and align them with your long-term goals.
Also, consider the emotional impact. Many owners experience a sense of loss after exiting a business they’ve built over decades. Having a clear post-sale plan can ease the transition and help you embrace the next chapter.
Start Planning for Your Private Company’s Business Transition Today
Preparing your business for sale is a journey that requires foresight, discipline, and the right support. By taking these steps, you’ll not only maximize the value of your business but also ensure a smoother, more rewarding exit. Whether your transition is months or years away, starting now puts you in control of your future. If you would like guidance as you begin planning or if you have any questions, please feel free to contact our business transition planning experts.