Selling a Business: The 6 Stages

31 January 2022: Selling a Business – The 6 Stages

As I’ve often mentioned in this weekly missive, selling a business is a process.

And any process has certain steps that must  be taken – usually in a specific order – if the objective – a successful sale, in this case – is to be realized.

The process involved when selling a business is often generalized – and just as often not followed – to the determent of the seller. But the process is extremely important and over that past 20 years of advising sellers, we’ve realized that a major element of managing our client’s expectations is their understanding of this process. To facilitate that understanding, we’ve broken the process down into the following six stages.

1) Engagement

We get the call (or email) from a business owner stating that they are considering selling their business.

At this stage, the owner is searching for information and, more specifically, a knowledgeable and professional specialist; someone that the owner feels comfortable with and feels that a level of trust can be established.

It is during this stage the management of client expectations begins.

Managing the client’s expectations is an extremely important aspect of any successful business sale. The overall process involves lots of moving parts, dozens of ways the process can be derailed, time commitments, multiple people, six to 12 months or more to reach the goal and plenty of agony, stress and sleepless nights. (Sounds exciting, doesn’t it?)

But if the client’s expectations are managed properly, all of that crap will be reduced. And the effort to reduce it starts in the Engagement stage.

Each of the following stages must be discussed, some in greater detail than others, in this stage. Doing so will clearly convey that you, the broker, know what you’re doing. It will also significantly lessen the likelihood of friction as the process unfolds over the next six to 12 months.

2) Valuation

As I’ve preached ad nauseum, any business that is expected to come to market MUST be valued.

If the price expectation is too high, the business will never sell. If it’s too low, the owner leaves money on the table. The client has to know the importance of having the business valued. Will the Most Probable Selling Price be enough for the owner to live as they expect to live post-closing?

Getting owners to understand the need for a valuation is rarely a problem with owners of larger businesses as such owners are generally more knowledgeable and sophisticated about business. However, owners of smaller business often hesitate about getting their business valued. Either they know what they want (regardless of what their business is worth in the marketplace) or they don’t want to spend the money to have a valuation done.

The way we handle such situations is to let the owner know that WE don’t need to value to business but it must be done by someone with the necessary training and experience that will ensure a result that a professional broker can defend.

We never take on a selling assignment unless a business valuation is done. Without a valuation, it’s impossible to defend our – the seller’s – asking price.

We offer a comprehensive coaching program tailored to Realtors, business owners and anyone interested in buying or selling a businesses.

If you’d like to learn more, email me at

jo*@Wo*******************.com

3) Marketing

When selling a business, the marketing must be done in such a way that the benefits of owning the business are extolled while at the same time the identity of the business is not disclosed.

As part of the engagement stage, the importance of confidentiality must be established. But equally important are the elements of a marketing plan.

We generally provide redacted copies of the documentation we use as the keystones of our marketing plan and we explain to the seller how these documents – and the way we use them – provide nearly all the information a buyer needs while keeping the identity of the business confidential until the appropriate time for disclosure.

4) Due Diligence

To the owner of a business, a buyer’s due diligence can feel very invasive. We generally introduce an initial discussion of this stage during the Engagement stage – and we refer to that initial discussion as soon as we receive a letter of intent or contract offer.

The issues that usually arise from the seller’s standpoint during due diligence boil down to time and detail; how much time the due diligence will take and how much detail about the business the buyer is likely to want.

One way we address these concerns is with a question to our client, the seller: “If you were considering acquiring a business – or ANY asset – for $2.5 million (or whatever the price is), wouldn’t you want to know every aspect – all the pros and cons – of the business you were considering acquiring?”

While this rhetorical question doesn’t always eliminate the seller’s unhappiness with how he or she perceives the buyer’s level of intrusion into their business, it usually reduces the grumbling substantially.

5) Financing

One of the most important aspects of managing the client’s expectations is making sure they are aware, up front, of how business acquisition financing is usually structured. And the most important aspect of this is the likelihood that the seller will usually be required to provide a portion of the financing.

In the United States, many Main Street and Lower Middle Market deals involve the U.S. Small Business Administration (SBA). As a rule, the SBA requires the seller to provide a portion of the financing. Outside the U.S., other government guaranty programs or lenders may have similar requirements.

Even if no government-guaranty program is involved, conventional lenders feel safer and more willing to loan a sizeable portion of the acquisition price when the seller agrees to provide a portion of that financing. A seller’s willingness to do so, suggests to a lender that the seller not only is confident in the business’ future but also confident that the buyer is qualified to run and continue to grow the business.

6) Closing

For a business broker or M&A professional, the weeks leading up to the closing can seem like an exercise in herding cats. The details, large and small, can seem endless.

At the least, there are multiple attorneys. There may also be multiple appraisers (real estate, if any is involved; business appraiser), inventory specialists, lender’s personnel, insurance companies and a partridge in a pear tree.

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Our course, “Learn How to Value and SUCCESSFULLY Sell Businesses“, teaches you how to value and sell businesses.

Become a Professional Business Broker…

As part of the initial conversations with the seller – during the Engagement stage – we outline the subsequent five stages and spend a little time discussing each. As the deal progresses through the stages, we again review the upcoming stages, this time in greater detail.

The Closing stage can resemble an exercise in barely-controlled chaos and our clients need to be aware of this.

The Bottom Line

Discussing the process of selling a business and breaking that process down into these six stages is a critical part of managing our client’s expectations. Having this overall discussion during the Engagement stage will underscore the fact that selling a business ain’t for sissies.

This post is really for the benefit of business owners as much as it is for business brokers.

Many owners think that selling a business is like selling a house; anybody can do it. And, in fact, many owners initially try to do it themselves.

But if they spent a little time considering these six stages of selling a business, they generally will realize that it is rarely possible to perform all the aspects of selling a business while continuing to run one. One or the other effort will suffer.

If you have any questions or comments on this topic – or any topic related to business – I’d like to hear from you. Put them in the comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast.

I’ll be back with you again next Monday. In the meantime, I hope you have a safe and profitable week.

Searching For…

We have a Canada-based buyer of cyber security service companies in the New York area. Of particular interest are services organizations, resellers (VARs), systems integrators (SIs), and others in the cybersecurity space.

If any of you know of something that might fit, please let me know.

#business #businessacquisition #sellabusiness #becomeabusinessbroker #businessbrokering #businessvaluation #MergersandAcquisitions #buyabusiness #sellabusiness #realtor #realestateagents

The author is the founder of Worldwide Business Brokers and holds a certification from the International Business Brokers Association (IBBA) as a Certified Business Intermediary (CBI) of which there are fewer than 1,000 in the world. He can be reached at

jo*@Wo*******************.com