As a business owner, you've poured countless hours, effort, and passion into starting and growing your business. As the years go by, it’s easy to overlook this crucial question: What happens when you're ready to step away? 

Without a business exit plan, you may feel like you’re just working without a clear purpose or direction—almost as if you're navigating without a map. This is where an exit strategy can become the north star of your business financial planning. 

By considering your exit plan early, you can ensure a successful sale of your business with a smoother transition that benefits you, your employees, and your legacy. 

Here, we’ll explore how to sell your business effectively, including general preparation, pricing strategies, and the sales process. Whether you’re looking to sell a small business quickly or ensure a seamless transition for future ownership, this step-by-step approach will provide the clarity you need to succeed.

Four Common Business Exit Strategies

First, how can you choose a method to sell a business so that the sale aligns with your long-term financial goals?

While the right exit strategy will depend on your personal goals, the nature of your business, and how much control you wish to retain during and after the transition, these are the four most common business exit options:

1. Sell to a Third Party

Selling to a third party involves finding an external buyer—like a competitor, strategic partner, or private equity firm—who sees value in acquiring your business. This option often provides the highest payout and allows you to fully exit, but it requires careful preparation, including maximizing your business's value and ensuring a smooth transition.

2. Merger or Acquisition

If your business is a good fit for another company, you may consider merging with or being acquired by a larger business. This can be a quick and profitable exit route, especially if the acquiring company values your assets or customer base. 

3. Internal Sale (ESOP or MBO)

An internal sale is when you sell your business to someone within the organization—like your employees or the management team. This can be a smooth and rewarding way to exit, especially if you want the business to continue operating under the leadership of people who already know it inside and out.An Employee Stock Ownership Plan (ESOP) allows employees to gradually buy shares of the company over time. Alternatively, a Management Buyout (MBO) allows the management team to buy out your ownership stake.

4. Pass the Business to Family or Heirs

Passing the business to family or heirs allows you to preserve your legacy by transitioning ownership to the next generation. This approach requires careful succession planning to ensure your heirs are ready and capable of running the business successfully. If this is the route you choose, some of the key things you’ll need to address might be: assessing the skills and commitment of your chosen successors, balancing ownership fairly among multiple family members, and managing tax implications of the transfer, including estate or gift taxes.

What If You Need to Sell Your Business Quickly?

If you’re wondering how to sell a business quickly, the best option of these four may be selling to a third party. Third-party buyers often have the resources and motivation to move quickly, especially if your business aligns with their growth goals or fills a specific need.

To expedite the process:

• Prepare your financials and operations ahead of time to make the business more attractive.
• Work with a business broker or M&A advisor to connect with potential buyers quickly.
• Be flexible with terms, such as offering seller financing or a transitional role, to make the deal more appealing.

While this route generally maximizes speed, it may require compromises on valuation or terms.

Once you’ve chosen the best exit option for your business, here’s how to start preparing your business for the sale.

General Preparation for Selling Your Business 

Before you dive into the sales process, laying the groundwork is essential. Preparing your business to be "buyer-ready" increases its appeal and can speed up the process of finding the right buyer.

Here are a few key steps you can take to get started:

1. Organize Your Financial Records: Gather financial statements, tax returns, and operational records from the past 3–5 years. Buyers value transparency and this can help you answer their questions during negotiations.
2. Audit Your Finances and Obligations: Conduct a financial audit to ensure accuracy and demonstrate profitability. Prepare projections of future revenues and expenses under current operations and be ready to discuss alternative scenarios. If your business has any outstanding legal issues or financial obligations, ensure those are taken care of before promoting the business to potential buyers.
3. Streamline Operations: Document business processes, standard operating procedures, vendor contracts, and employee responsibilities. A clear operational framework is a major selling point because it makes things easier for the buyer.

Creating or using a Selling a Business Checklist will keep you organized throughout the process. This can include tasks like updating your business licenses, ensuring your branding is consistent, and assessing market conditions so you can negotiate from a position of strength.

Selling a Business Checklist

• Gather financial statements and tax returns (3–5 years).
• Document all operational processes.
• Resolve outstanding legal or financial issues.
• Research and set a fair price for your business.
• Create a marketing plan to attract buyers.
• Consult professionals: financial planners, brokers, lawyers, and accountants.

One of the important parts of taking the initial steps to preparing your business for sale is figuring out how to price your business. Let’s take a look at this important piece further.

Pricing: How to Value Your Business 

Determining how to value a private business isn’t always easy because so many different factors can come into play. The risk you face in pricing a business too high is that this may deter buyers, while pricing too low may undervalue years of effort.

There are three main approaches to valuing a business—asset-based, income-based, and market-based. Using all three can provide a well-rounded view, so you can capture the full value of the business from multiple perspectives.

The 3 valuation methods commonly used for business valuation include:

• Asset-Based Valuation: Focuses on the net value of the business’s assets (tangible and intangible), making it useful for asset-heavy businesses or liquidation scenarios.
• Income-Based Valuation: Projects the future earnings or cash flow of the business and calculates its present value, ideal for businesses with strong profitability and growth potential.
• Market-Based Valuation: Compares your business to similar businesses that have recently sold, offering a real-world benchmark of what buyers are willing to pay.

While you may not need to use all three valuation methods, doing so helps you cross-check results, address any discrepancies, and select the most relevant method based on your business type and circumstances. For instance, a service business may rely more on income-based valuation, while a manufacturing company might emphasize asset value.

When determining how to value a private business, it can also be helpful to turn to tools like business valuation calculators or consult experts to refine your pricing strategy. 

The Four Key Steps of the Sales Process 

The process of selling a business can be complex and time-consuming. So break it into manageable steps when possible to maximize efficiency and reduce stress.

1. Marketing the Business: Advertise on industry platforms, approach potential buyers directly, or use a broker’s network.
2. Screening Buyers: Vet interested buyers to ensure they have the financial means and intent to close the deal.
3. Negotiating Offers: Prepare for negotiations by knowing your bottom line. Be flexible but firm about your business’s worth.
4. Closing the Sale: Finalize the sale with a clear and comprehensive sell business contract, including provisions for legal and tax implications.

For those wondering how to sell a small business quickly, focusing on streamlined operations and professional marketing can help attract buyers faster.

Post-Sale Considerations: Tax and Financial Planning 

Selling your business doesn’t end with the final handshake. Post-sale planning is essential to secure your financial future, keep things organized, and aligned to your personal goals.

Start by addressing the tax implications of selling a business, which can include capital gains tax or state-specific taxes. Consult a professional accountant in your state to help you minimize liabilities and manage your finances wisely.

Consider how you’ll reinvest the proceeds from the sale—whether in new ventures, retirement savings, or other financial or legacy goals. Proper financial planning is a key element to success here to ensure you use the proceeds wisely over the long-term. Get in touch with our financial planners in Tampa if you’d like guidance before, during, or after selling your business.

Last but not least, stepping away from your business may initially feel uncomfortable or emotionally challenging, so take time to adjust and plan where you’d like to spend your time instead.

Choose the Right Professionals to Help You

Selling a business is rarely a solo effort. Working with qualified professionals can save you time and ensure every detail is handled correctly. Here are some people you may consider adding to your team when selling your business:

• Business Brokers: Brokers connect you with potential buyers, market your business, and assist with negotiations. Search for the best business brokers near you to find local experts.
• Legal Advisors: An attorney who understands business sales can ensure your contracts and agreements comply with regulations and protect your interests.
• Accountants: An accountant can help you assess the tax implications of selling a business, so you don’t get hit with unexpectedly large tax bills after the sale.
• Financial Planners: A financial planner will help you create a strategy to manage the proceeds from your sale, minimize taxes, and ensure you’re on track to achieve your retirement and financial goals.

When hiring professionals, vet their experience in your industry and ask for references. These experts can advise you on when to sell your business for maximum profit and help navigate the transition process smoothly.

Selling your business is a significant transition, but with proper preparation and expert guidance, it can be a smooth and rewarding process. If you’d like the help of a local financial advisor to get started, click here to get in touch!