How to sell a business: the 9 steps, what it is worth, and what you keep after tax

Selling a business is something most owners do once. Buyers, brokers and lenders do it every month, so they know the game and you do not. This guide is for an owner of an established, profitable business who wants to sell for a good price without the deal falling apart. By the end you will know the order of the steps, what moves the price, and where the money leaks out. It is the mirror image of our guide on how to buy a business.

Step 1: Decide when to sell

The best time to sell is when the last three years show rising profit and you are not yet tired. Buyers and their lenders read three years of tax returns, so a strong year that is still in progress does not count until it is filed. If you are two years from wanting out, you have time to fix the things in the next steps. If you need out in three months, you will sell for less, because every buyer can see it.

Market mood matters less than your own numbers. In the IBBA and M&A Source Market Pulse survey for the fourth quarter of 2025, the Main Street deals under $500,000 drew about two offers each on average, and lower-middle-market deals drew more. One or two offers is normal. You are not choosing from a crowd, so the business has to be ready for the buyer who does show up.

Step 2: Get the books clean

Buyers price what they can prove. The checklist:

• Three years of filed tax returns that agree with your profit-and-loss statements.
• Monthly P&Ls and balance sheets, kept in accounting software, not a shoebox.
• Personal expenses out of the business, or listed one by one as add-backs with receipts.
• Cash sales recorded. Unrecorded cash is worth nothing to a buyer because a lender cannot see it.
• Contracts, leases, licences and permits in a folder, current and in the business's name.
• Customer concentration known: if one customer is over 20 to 25% of revenue, start widening the base now.

A bookkeeper can do most of this in a few months. It is the cheapest money you will spend on the sale.

Step 3: Raise your margins before you list

This is the step most owners skip, and it is the one that moves the price most. Small businesses sell on a multiple of earnings, not revenue. If your business earns $400,000 and sells at three times earnings, every extra $10,000 of profit you add is worth $30,000 at closing.

So the year before you list, treat cost like a project. Reprice the customers who are below market. Cut the subscriptions nobody uses. Automate the work that a person does by hand: quoting, scheduling, invoicing, follow-up emails, first-line customer questions. Much of this is now done by AI agents that a small business can afford, which is why we set them up for owners who plan to sell; the details are on our AI page. A buyer pays for the margin on the day of closing, whether you built it over ten years or over twelve months.

Step 4: Value the business

Two measures matter:

• SDE (seller's discretionary earnings): net profit plus your salary, perks and one-off costs. Used for businesses where the buyer will run it.
• EBITDA: earnings before interest, tax, depreciation and amortisation, with a manager's salary left in the costs. Used for larger businesses with a team.

The IBBA and M&A Source Market Pulse report for Q4 2025 shows average multiples by deal size:

These are averages across every industry. A business with a manager in place, recurring revenue and clean books sits above its bracket; one that stops when the owner goes on holiday sits below. A buyer's lender will also run the debt test: after the loan payments, the business must still pay the buyer a salary. Our roll-up calculator does that sum in a minute, and it tells you what a bank-financed buyer can actually pay.

Step 5: Prepare the CIM

The confidential information memorandum is the document a serious buyer reads after signing an NDA. A good one is 20 to 40 pages and answers every question a buyer would ask in the first meeting:

1. What the business does, for whom, since when.
2. Three to five years of financials, with the add-backs listed and explained.
3. Customers by type and share of revenue, without names.
4. Staff, roles, tenure, and who could run the place without you.
5. Premises, lease terms, equipment and its age.
6. Why you are selling, and how long you will stay to hand over.
7. Growth you can see but have not chased.

Write it honestly. Anything the buyer finds in diligence that the CIM glossed over costs you price or costs you the deal.

Step 6: Choose who sells it

Brokers work for the seller and are paid on closing, so they are motivated to close, not always to hold out for the best price. Ask any broker or advisor for the last five businesses they sold, the asking price and the sale price. Acquisitions.com runs a sell-side advisory practice; what it covers is on our sell page.

Step 7: Market it confidentially and qualify the buyers

Staff, customers and suppliers should hear about the sale from you, after it is done. Until then:

• The listing uses a blind description: "HVAC company, Midwest, $3.2 million revenue", not your name.
• Buyers sign an NDA before they see the CIM.
• Site visits happen after hours or as "a consultant's visit".
• Your email about the sale goes to a separate address, not the company domain your office manager reads.

Where the buyers are depends on size. Small businesses sell through the marketplaces and the broker's buyer list. Larger ones sell through direct outreach to strategic buyers and investors who have bought in your sector. Our buy-side AI reads 15+ marketplaces every day for our buyer clients, so a well-written listing is seen by more serious buyers than it was a few years ago.

Then qualify the buyers who come. Most enquiries never turn into an offer. Before a buyer takes up your time, ask for three things:

1. A buyer profile: who they are, what they have run, what they want to buy.
2. Proof of funds or a lender pre-qualification: a letter saying they can raise the money. A bank-financed buyer in the US usually uses an SBA 7(a) loan, which needs the buyer to put in equity and the business to cover the loan payments; the SBA sets out the 7(a) program rules.
3. A reason: a buyer who can explain why your business fits them is more likely to close than one who liked the price.

A buyer who refuses all three is not a buyer.

Step 8: Letter of intent

The letter of intent (LOI) sets the price, the structure, what is included, the diligence period, how long you will stay, and that you will not talk to other buyers in that time. It is mostly non-binding, but it frames everything after it.

Structure matters as much as price. A $1,500,000 offer with $1,350,000 at closing and a $150,000 seller note over five years is a normal small-business deal. A $1,700,000 offer with $700,000 at closing and the rest as an earn-out tied to future revenue is a different animal: you are lending the buyer your business and hoping they run it well. Read the whole structure, not the headline, and read it with your CPA and attorney in the room.

Step 9: Due diligence and closing

The buyer now has 30 to 60 days to prove what you told them. Expect requests for bank statements, tax returns, payroll, customer lists (often anonymised until late), contracts, leases, insurance, and a day or two of questions. Answer fast and in full: a slow data room makes buyers nervous, and nervous buyers re-trade the price.

If the buyer finds something, three things can happen: the price drops, the structure changes (a bigger seller note or an earn-out), or they walk. Most problems that surface here were knowable in Step 2. The cleaner the books, the shorter this stage.

Then you close. The purchase agreement replaces the LOI. Your attorney negotiates the representations and warranties, what happens if something was misstated, and your non-compete. The buyer's lender funds, the money moves through escrow, and the business changes hands. You then stay for the transition period written into the agreement, often 30 to 90 days, sometimes longer for a seller note or earn-out.

Taxes: asset sale or stock sale

Most small-business sales in the US are asset sales: the buyer buys the equipment, customer list, name and goodwill from your company, not your company's shares. The IRS treats the sale of a business as the sale of each asset separately, so the price is split across the assets and each piece is taxed on its own terms (see the IRS's page on the sale of a business). Both sides report that split on Form 8594, the Asset Acquisition Statement, and the two forms must agree.

Why it matters to you:

• Goodwill and most capital assets held over a year are taxed at long-term capital gains rates, which the IRS sets at 0%, 15% or 20% depending on your income (IRS Topic 409).
• Inventory and some other items are taxed as ordinary income, at higher rates.
• Depreciation you claimed on equipment can come back as ordinary income when it is sold.

A stock sale (the buyer takes your company's shares) is usually simpler for the seller and often taxed entirely as capital gain, but buyers prefer asset sales because they get a fresh tax basis and leave old liabilities behind. The allocation between asset classes is negotiated, and a few lines moved from equipment to goodwill can change your tax bill by tens of thousands of dollars. IRS Publication 544 explains the rules. Get a CPA who has done business sales involved before you sign the LOI, not after.