A practical guide for small and mid-market owners exploring an exit: what your business is worth, how to protect that number, and how to get to closing.
The best time to sell is when three things line up: you're personally ready, the business is performing, and buyers are active in your industry. Most owners wait until burnout forces the decision, and sell from a position of weakness instead of strength.
Selling while earnings are growing and you still have energy for a 6 to 12 month process is the single biggest lever on price. Most owners benefit from 12 to 18 months of preparation before going to market.
Preparation moves price more than marketing does. Buyers look hardest at four things:
Three years of consistent, documented earnings, with personal and business expenses separated and every add-back defensible.
Documented processes and a team that can run the business without you in the room.
No single customer should be much more than 15 to 20% of revenue. High concentration discounts value.
Contracts, subscriptions, or documented repeat customers reduce a buyer's risk and raise what they'll pay.
Buyers pay a multiple of earnings, not revenue. Smaller owner-operated businesses are usually valued on SDE (seller's discretionary earnings: net income plus owner pay plus add-backs). Larger businesses with a management team are valued on EBITDA.
The multiple depends on your industry, growth, and risk. Growing earnings, recurring revenue, documented systems, and a diversified customer base push it up. Volatile revenue, owner dependence, and messy books push it down.
See general market ranges on the business brokerage page. They're illustrations, not a valuation of your business.
Most small and mid-market sales take 6 to 12 months. First the business is valued and a confidential information memorandum is prepared. Then it's marketed anonymously, and buyers sign an NDA before learning who you are. Qualified buyers are screened, offers come in, and a letter of intent starts due diligence. Clean books and no surprises carry the deal to closing.
Confidentiality matters. Your employees, customers, and competitors should not find out until you choose to tell them. A good broker manages that at every step.
Compressed timelines and lost leverage. Start planning 2 to 3 years out.
They discount everything, even strong numbers.
One wrong conversation can unravel a deal.
Competition between serious buyers is what drives price.
Cash at close, earnouts, and taxes decide what you net. Involve a CPA early.
Disclose anything material early. Buyers who find surprises reprice or walk.
This guide is general educational information, not legal, tax, or financial advice. Every transaction is different; consult your attorney and CPA. Business brokerage services are provided by Kyle Atwood through Hedgestone Business Advisors and are separate from ERA Martin & Associates.
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