Selling Your Company, Stage by Stage
Selling a business is something most founders do once, so the order of events is new territory even for experienced operators. The stages below lay out what happens, which decisions fall to you and what your broker handles, so you know what is coming before any acquirer hears about the business. Whether you plan to sell this year or are early in exit planning, the business sale follows the same path.
What Happens at Each Stage of a Sale
The first stage takes place before anyone outside the business knows. Your broker recasts the financials to show the earnings an acquirer would actually receive, finds the questions diligence would raise, and agrees a value range with you that the numbers back up.
Then marketing starts. An anonymous teaser reaches a targeted list, and the full offering memorandum is shared only with parties who sign a nondisclosure agreement and show they can fund the transaction.
Offers are compared on everything they contain: the cash paid at closing, any earnout or seller note, how working capital is treated and what you are asked to do after closing.
Through diligence and closing, your broker runs the calendar, keeps the attorneys and accountants on both sides moving together, and clears the late information requests that tend to stall deals. You keep your focus on the business, which is what protects its value until the purchase agreement is signed.
Why Use Professional Representation for Your Exit?
The acquirers most willing to pay for a business like yours seldom stumble on it. Strategic buyers from Seattle and California, private equity groups active in the Northwest, and individual buyers with investor backing all look at Northwest companies, and each weighs risk and growth in its own way. The strongest outcome usually comes from bringing several of them into the same process at once.
A broker builds that competition, keeps the selling process confidential and handles a negotiation that most sellers have never been part of.
It also keeps the business on course while you sell. Selling a business is close to a second job, and businesses often lose value when the person running them is busy managing buyers.
If you are choosing among business brokerage firms to help you sell, our guide on how to find the right broker explains what to ask before you sign an engagement.
How a Company Changes Hands, Step by Step
When you sell a business, the deal follows a known sequence, and understanding it early takes away much of the uncertainty. It opens with valuing the business. Your broker reviews several years of financial statements and returns, adjusts for your compensation and one-time costs, and reaches the earnings figure acquirers will underwrite. Our business valuation calculator gives a fast first read if you want one before that discussion.
Second is preparation for business sales of every size. The offering memorandum is written, the data room is built with the financial and operating information acquirers will request, and anything that might surprise them is addressed while there is still time.
Third is confidential marketing. Parties sign a nondisclosure agreement before learning the company’s name, and outreach goes only to groups with a specific reason to want what the business does.
Fourth, indications of interest and management meetings narrow the list to the parties with the best balance of price, structure and fit. Fifth, a letter of intent sets the price, the structure and a period of exclusivity.
Sixth is due diligence, where the acquirer confirms the financials, contracts, employees and operations, and a prepared seller keeps the deal moving. The last step is the purchase agreement and closing, followed by the agreed transition. Our guide on how to sell a business explains each step in more depth.
Questions to Ask a Broker
01
How does a business broker value a company?
A business here is valued on its normalized earnings, the profit an acquirer would actually earn after adjusting for your compensation and one-time costs, multiplied by a figure that reflects risk and growth. Size, industry, customer concentration, recurring revenue and how much the business depends on you all move that figure. Your broker documents the earnings accurately and brings the business to the acquirers likely to value it most.
02
Who buys businesses in the Portland area?
Three groups do most of the buying of Portland businesses: strategic acquirers in the same or an adjacent industry, private equity groups building or adding to a platform, and individual buyers, often backed by investors or a bank loan. Each underwrites a business differently, so a competitive sale that reaches all three tends to produce the strongest offers.
03
Does a business brokerage keep the sale confidential?
Yes. A business brokerage keeps the sale confidential until you choose to share it. Parties sign a nondisclosure agreement before learning your company’s name, marketing materials omit identifying details, and meetings are scheduled around your staff. Most sellers tell key employees late in the process, once a deal is close to final, and we help plan that conversation.
04
Can I go it alone?
You can sell a business yourself, and some sellers do, usually when an acquirer has approached them first. The risk is that one bidder sets the price and terms with no competition, and that months go into the deal rather than the business. Before deciding, read our overview of how to value a business so you know the business’s worth before the first offer arrives.
05
Is Raincatcher a small business brokerage?
No. Raincatcher represents owners of lower middle market companies, generally those generating $2 million to $50 million in revenue, and runs an investment banking style auction process.
06
Is There Such a Thing as a Business Broker?
Yes, there is such a thing as a business broker, and our guide on what a business broker does in Portland explains each part of the role, from valuation and confidential marketing through negotiation and closing.
07
How Should an Owner Choose a Business Broker?
An owner should choose a business broker by comparing completed sales, valuation method and acquirer outreach, and our guide on how to choose a business broker in Portland sets out the steps and questions.
08
What Does a Business Valuation Involve?
A business valuation involves normalizing earnings and comparing them with closed sales of similar companies, and our guide on what a business valuation involves in Portland walks through each step.