How to Sell a Business – The Process of Maximizing Value (Complete Guide)

FAQs When Selling A Business

What is the best way to sell a business?

Here is a brief overview of the process of selling a business. We’ll go into these steps (and expand upon them) in the article below

Here is what the best process of selling a business looks like:

  1. Gather all Pertinent Business Documentation
  2. Hire a business broker or M&A advisor
  3. Prepare a CIM & Data Room
  4. Create a Targeted Buyer List
  5. Market the Business to a Targeted Buyer List
  6. Solicit Indications of Interest (IOIs)
  7. Hold Management Meetings
  8. Gather Letters of Intent (LOIs)
  9. Conduct Due Diligence
  10. Fulfill Transition Duties

On average, It takes 8-9 months to sell a strong business.

For small companies (under $500k profit) we’ll refer you out to a local business broker. They’ll have you on the market in 2 weeks and with luck you’ll sell within a year.

For our full auction processes you’ll typically have multiple offers in 5-6 months. 

Privately owned businesses are typically valued on a multiple of either adjusted profit.

The valuations range from 2.5 – 3.5 for small (mom & pop) companies, and can range up to 7 – 10X+ for lower middle-market companies.

Looking to Hire a Business Broker?

Raincatcher is an Inc. 5000 M&A advisor and business broker. We work with business owners $2m+ in annual revenue to exit for the best price and terms. 

If you are entertaining an selling your business, start by requesting a complimentary valuation through completing the form below. If your business isn’t a fit for us, we’d be happy to introduce you to one of our partners in the industry who has the bandwidth to serve you as your listing broker.




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GC or Subcontractor?

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What Services Subsector?

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What Healthcare Subsector?

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What Technology Subsector?

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Your Name

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The Process of Selling A Company

Step 1: Getting Your Business Documents Together

Ideally, you’ll have most of your business documents saved to your computer and readily accessible for your business broker to get a better understanding of your company and create a data room.

There are some business brokers that will work with you if you just have tax returns and financial statements, but the larger your business gets and the more a buyer is expected to pay, the more clear and detailed documentation on your business operations you’ll need to be able to produce.

  • Financials
  • Tax Returns
  • Legal Documents (including client and supplier contracts)
  • Operational Docs
  • Customer/Supplier Info
  • Intellectual Property Docs
  • Employee Details (including employment agreements and benefits)
  • Future Projections (if available)

Step 2: Hire a Business Broker or M&A Advisor

We were fortunate enough to be named the #1 M&A Advisor and Business Broker by Inc Magazine. However, we don’t have the ability to work with all of the clients who come our way.

If your company makes less than $400k – $500k in annual profit, we’ll typically refer you to a local business broker who has had success working with companies your size, industry, and in your area. Their process is typically shorter than ours and more tailored to those smaller companies.

We act as both a business broker (for deals under $5m in valuation) and an M&A advisor for deals over $5m in value.

We find that the companies that benefit from our expertise and specialized auction process tend to be $500k – $10m in profit (adjusted EBITDA). 

— How to Sell Your Business Without a Broker

If you’re making under $100k, it may be worth trying to save it yourself. However, you’ll likely find it difficult to find a buyer and even more difficult to find a bank that will finance your deal.

Thinking About Selling?

If you are entertaining selling your company, feel free to request a consultation with one of our business brokers or M&A specialists to learn about our process and why we believe it is the best in the industry.

Step 3: Your Business Broker Will Prepare a CIM & Data Room

Our client’s companies are large enough to attract offers from investment groups and these investment groups expect a wealth of information on the businesses that they look to acquire/invest in.

If you’re selling a small business (under $500k profit), your business broker will likely put together a much shorter version of the same documents.

A confidential information memorandum (CIM) is a full detailed report on the business. It should cover each of the business departments, client/customer concentration, how it is differentiated from competitors, teams, forward-looking materials, and industry research.

This will be accompanied in the data room by redacted client information, contracts, forward-looking financials and historical tax returns among other materials.

This needs to be a thorough marketing document as it is how buyers know whether or not the business is worth their time and attention or not.

Here is a look at a CIM we put together for a previous client that sold for $22.5M.

Example Slide From a Previous CIM

Step 4: Create a Targeted Business Buyer/Investor List (Specialized for Your Business)

We’ve tailored our process to optimize the number of qualified bids from capable buyers we can get for a business. As part of this process, we’ve created the buyer list creation process that combines three resources:
  • Our in-house buyer database

    • We have an internal database of over 20k private equity groups, family offices, search funds and holding companies. We filter this list down to pull those groups that are interested in your industry, business size and location.
    • About 80% of buyer bids are sourced from this list as they are in our database from having looked at previous businesses that we took through the same marketing process.
  •  Outside Investor Databases

    • We purchase access to outside databases that track transactions. We’ll look for any groups that have recently invested in your industry and size companies.
  • We Develop a Strategic Buyer List 

    • Strategic buyers could be competitors, suppliers, customers, or any other investor that could have a strategic or synergistic interest in your company.

Step 5: Market the Business to Potential Buyers

Once all of the materials have been prepared, it is time for the business broker or M&A advisor to bring the business to market.

For small deals that are going to be sold to an individual, this means putting an asking price on the business, getting it pre-approved for an acquisition loan from a bank and putting it on market until a bid comes in.

For companies we work with that are a bit larger, the marketing process is typically 6-8 weeks. This process entails marketing the business with a confidential document called a teaser, having buyers sign NDAs, interviewing them and granting them access to a virtual data room (VDR) to review that business information. 

The process then concludes with us setting a date where potential business buyers will need to submit an indication of interest outlining the price, terms and structure of their proposal to buy the business.

Step 6: Receive Indications of Interest (IOIs)

This indication of interest outlines the broad terms of their proposed offer for the business. It will include at a minimum: Purchase price (typically in a range), structure (earnout, seller note, rollover, etc.), what is needed from the sellers in transition, source of financing, time to close, etc.

It is important that all IOIs are received simultaneously so that we can narrow the list of finalists and who to bring to the next round of bids. These finalists will then be invited to meet with the business owners in person. We will also work to conduct a secondary presentation to share more granular business information with them that was not included in the CIM or data room at the previous stage.

One of the questions we get most frequently is “what is my business worth” and while that answer differs for everyone, we put together a business valuation calculator to help you get started. 

The M&A Auction Process

M&A and business brokerage process of selling a company

Step 7: Hold Management Meetings With Finalists

Once we have received and reviewed the IOIs, there are typically 3-4 offers that stand apart from the rest based on the business buyers track record, the offer price and structure and their plans for the business moving forward.

You and your m&a advisor then meet in person with these finalists to conduct management meetings, share more information on the company with them and give them everything they need to write a letter of intent (LOI).

Step 8: Receive Letters of Intent

Finally, it’s been 5+ months of hard work, and while the deal is still far from closed, offers have been received!

The LOIs will include everything that was in their IOI, plus a number of other terms that may be important to understand before proceeding. Additionally, we look for the final price and payment terms that they are proposing, not a range that we accepted at IOI stage.

LOI’s always require exclusivity as after they are signed the buyer will spend significant time and money performing diligence on the business in order to get to a close. Because the LOIs are always exclusive, it is important that we negotiate any items that could cause the deal to fall apart before the LOI is signed.

Step 9: Conduct Due Diligence

Remember when I told you at the outset that we do robust data collection at the start of the process, well now is the time that it comes in handy as all of those materials will need to be shared with the buyer.

As your advisors, we have data room software that streamlines the process as it allows lawyers, accountants and other diligence professionals to request items all in one place and for uploaded files to by synced with these requests.

Step 10: Fulfill Transition Duties

As part of the sale process, it is most common for the buyer to require that the seller stay on to assist with the transfer of the business, and in many cases they are expected to stay in their current role for a year or more.

Some sellers are only recapitalizing their business and are not looking to sell the whole thing. They look to ‘take some chips off of the table’ and to bring on a professional partner. In these cases, the new employment agreement and operating agreement will be part of the documents that are finalized with the business transaction closing.

Other Key Considerations for Selling

There are a litany of other factors to consider when looking to sell your business. We’ll highlight a few of them here:

  • What is the Market doing?

    Interest rates, the overall economic climate, what private equity’s view is on the industry that your business is in, etc. A good M&A advisor/business broker should be able to shed some light on this.

  • How Will the Business Buyer Get Financing?

    There is a gap in liquidity from $5m – $10m in enterprise value. Does your broker have a network of search funds, independent deal sponsors, small PE groups etc. that buy in this range? Many business brokers rely solely on the SBA business financing program that caps out at $5m.

  • Have you fully prepared for a sale? 

    Sure, you want to get out, but can this business run without you? Planning ahead of time and building a strong management team will bolster interest from buyers in a major way.

  • Are your expectations in line?

Unfortunately, a fact of our industry is that some listing brokers will tell you what you want to hear to get your business on the market. Ask how many companies your size the broker has sold. It’s also worth noting that lower middle-market companies trade for higher multiples (mid to high single digits) than the average small business does (2- 3.5 X).

  • Allocate adequate time to the selling process.

Selling a business is a much more nuanced and prolonged process than selling a house. Business selling is something that most entrepreneurs and business owners only do once, and unfortunately, many are unprepared for. Note that most business transactions take upwards of 8 months to complete. 

It is highly encouraged to have all of your business documents in order, a well trained team in place and a strong deal team around you to support you in all aspects of your business sale from marketing, to taxes, to M&A law, etc.

What Buyers Look For in Businesses

Now that you’ve learned how to sell your business, it’s likely worth getting a deeper sense of what business buyers (both individual buyers and private equity firms) are looking for in an investment.

Buyers will look primarily at industries they understand. Unfortunately, this works against some entrepreneurs who invented their own business model. It may be obscure and differentiated, and while that may add value while you’re at the helm, it makes you hard to replace as the business’s owner-operator.

In addition to having a strong management team, financial performance, and clarity on the business’s books and records, many buyers will look primarily (or solely) at companies that have recurring (or re-occurring) revenue. Not only does this provide predictable revenue for the business, it makes it easier for the bank to underwrite debt on the business, thereby increasing the amount the buyer can pay for the business.

Next Steps to Sell A Business

If you’re entertaining an exit and want some guidance from professionals on value, process, and deal terms, feel free to get in touch to see how we can help you sell a business. You can also have a look at our selling your business checklist to get started.

How to Ensure Privacy and Confidentiality When Selling Your Business

When embarking on the journey of selling your business, safeguarding privacy and confidentiality is likely one of your top priorities. Working with your advisor to make sure that the deal is not marketed to competitors or other companies in the industry is of paramount importance.

It is also important that your buyers complete a NDA and are thoroughly vetted by your m&a advisor before they are allowed to have any access to company files or know the name of the business.

Additionally, facility tours are conducted for buyers during non-business hours. They are also instructed to not wear any apparel that would give away that they are with a private equity firm or other invest.

If you’re contemplating selling your company, we invite you to get introduced. While many business owners who come to us are too small or not in an industry that we serve, we’re happy to give you our input on your situation and refer you to a colleague if we have one that would be a fit for you to work with.