A silhouette of a woman wearing a knee-length dress and holding a bag in one hand walks down a dark office hallway lined with doors toward a golden light.
You're ready to move on from your business, but you can't just close up shop and walk away. One option is to sell your business to a new owner. — Getty Images/baona

Many entrepreneurs reach a point where they'd like to move on from their business, perhaps to start a new one or simply pursue a different career path. If you've found yourself in this position, selling your business may be the right next step. For those who are looking to market your business for sale, you'll want to take the proper steps to ensure you receive the proper compensation for all the hard work you've invested in your company. Here's a step-by-step process of preparing your business for sale.

[Read more: 6 Financial Terms to Know Before Pitching Investors]

Offer incentives to your employees

When selling your business, it's important to be open with your employees so that they have clarity throughout every step of the process. If any of your employees are shareholders of your business, offer them favorable incentives to sell back their share of the company. Shareholders have the potential to hold the company hostage during negotiations, so it's important to give your employees clarity and incentives, such as a sales bonus or stock options, to avoid these conflicts.

Get a business valuation

Before you can start fielding offers for your business, you'll have to know what your business is worth from an outside source. Getting a professional valuation gives you an idea of what your business is worth, as well as its market position, financial situation, strengths and weaknesses.

You can get a business valuation from a few different objective sources. These can include local accounting firms, regional business brokers and investment banking firms. To get the fairest result, make sure that whoever is performing the valuation has access to the most current national data regarding transactions in your industry.

[Read more: What Is a Business Valuation and How Do You Calculate It?]

Organize your books and paperwork

Perspective buyers will generally ask for at least three years’ worth of your financial information to review before they make an offer. Take an internal perspective of your business, books and paperwork to make sure that everything is organized, accurate and easy to review. The more formal and thorough that your financial statements are, the easier it is for buyers to review them and you'll be better off.

In some cases, having three years’ worth of tax returns may be sufficient for review. However, whenever a business is being prepped for purchase, it is always better to have more financial information than less.

Before you can start fielding offers for your business, you'll have to know what your business is worth from an outside source.

Understand your business's profitability

Many businesses incur nonoperational expenses, such as paying for a personal automobile lease or renting out office space. When organizing your financial documentation, make sure you have supporting information for all these expenses. This also includes any infrequent expenses that you may have incurred over the last three years. These expenses should be excluded from a buyer's analysis of your recurring cash flow. Having all these expenses understood makes it easier for both you and any potential buyer to understand the profitability of your business.

Market your business and find buyers

Once you have everything internally straightened out, you can market your business to attract buyers. There are a few different types of avenues you can use to find them. This can include going through a professional, such as a broker or real estate agent, or marketing yourself through traditional or digital media, your existing network or word of mouth. The method you choose will depend on what industry you're in, the location of your business and the size of your organization. To help gauge the best way to market, look at how businesses of similar size and structure were sold off and how they found buyers.

Make a sales agreement and transfer ownership

After you’ve found a buyer and negotiated a sales price, work with a lawyer to create a sales agreement and transfer ownership to the buyer. This process could go back and forth for some time, as there are many specific documents that need to be created and carefully executed. Work with your lawyer and your buyer's legal representative to ensure clear communication between both parties during this process.

[Read more: ‘Invest in Yourself’: How to Grow Your Business With Self-Investment, Education and Authenticity]

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

Follow us on Instagram for more expert tips & business owners’ stories.

To stay on top of all the news impacting your small business, go here for all of our latest small business news and updates.

CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here.

A message from
You’re invited to join a private network of CEOs.
Discover how 45,000 CEOs are growing their businesses. Connect with verified companies on a secure private network to find new clients, raise money and find reliable solutions for any business priority.
Learn More
Published December 21, 2021