Business Sale FAQ
Plain-English answers to the 30 most common questions business owners ask when preparing to sell their company.
Business Brokers
What does a business broker do?
A business broker manages the full sale process on the seller's behalf: valuation, CIM (deal book) preparation, confidential marketing to qualified buyers, NDA management, buyer qualification, negotiation, due diligence coordination, and closing. A good broker's job is to create competitive tension among buyers and maximize the final price — not just find a buyer.
→ What Is a Business Broker?How much does a business broker charge?
Business broker commissions range from 5–12% of the final sale price, depending on deal size. Businesses under $1M: 10–12%. Businesses between $1M–$5M: 6–10%. Larger deals often use the Lehman formula (5% on first $1M, 4% on second, etc.). Many brokers also charge an upfront retainer of $2,500–$15,000 for CIM preparation, typically credited back at closing.
→ Business Broker Fees ExplainedDo I need a business broker to sell my business?
No — but brokered transactions consistently close at 15–25% higher prices than unrepresented sales, and at significantly higher completion rates. The primary exception is if you have an identified buyer at an agreed price. In virtually every other scenario, professional representation more than pays for itself in final price and deal certainty.
→ What Is a Business Broker?What is an IBBA-certified broker?
The IBBA (International Business Brokers Association) is the professional body for business brokers. IBBA members agree to a code of ethics and continuing education. Those with CBI (Certified Business Intermediary) or M&AMI (Merger & Acquisition Master Intermediary) designations have completed additional transaction history and education requirements. About 20% of IBBA brokers hold a CBI; 4% hold an M&AMI.
→ What Is a Business Broker?What is the difference between a business broker and an M&A advisor?
Business brokers handle Main Street and lower-middle-market transactions — businesses selling from $100K to $10M. M&A advisors handle mid-market deals ($10M to $500M+) using investment banking processes, larger deal teams, and institutional buyer relationships. For businesses under $5M, a CBI-credentialed business broker is usually the right choice.
→ What Is a Business Broker?How do I find a business broker who specializes in my industry?
Use BizBrokerMatch to search 3,142 business brokers filtered by industry specialty and state. Industry-specialist brokers know your buyer pool, understand your valuation multiples, and have existing relationships with the PE firms and strategic buyers most likely to pay a premium. A generalist broker may not know that your pest control business should target PE roll-up buyers paying 6–8× EBITDA.
→ Get Matched FreeWhat is a listing agreement?
A listing agreement is the contract between a seller and broker formalizing the engagement. It specifies: commission rate, exclusivity period (usually 6–18 months), asking price, and the broker's responsibilities. Most listing agreements are exclusive. Pay close attention to the tail provision — if the broker introduces a buyer and the deal closes after the listing period expires, you may still owe the commission.
→ Business Broker FeesValuation
How is a small business valued?
Most small businesses (under $2M purchase price) are valued on Seller's Discretionary Earnings (SDE) multiples of 2–4×. Larger businesses use EBITDA multiples. SDE = net profit + owner salary + owner benefits + non-recurring expenses + depreciation/amortization. The multiple applied depends on industry, growth trajectory, recurring revenue percentage, customer concentration, and management depth.
→ Business Valuation MethodsWhat is SDE (Seller's Discretionary Earnings)?
SDE is the total economic benefit a business produces for a single owner-operator. It equals net profit plus owner compensation (salary and benefits), non-recurring expenses, and depreciation/amortization. SDE is the standard valuation metric for businesses under $2–3M in sale price. A business with $400K SDE selling at 3× SDE would have a purchase price of $1.2M.
→ Business Valuation MethodsWhat is EBITDA and when is it used instead of SDE?
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) excludes the owner's salary — it assumes the business will be run by paid professional management. EBITDA is used for mid-market businesses where the owner's personal compensation is above-market or where a PE buyer will install their own management team. Generally applied to businesses with $1M+ in earnings.
→ Business Valuation MethodsWhat valuation multiple should my business get?
Multiples vary significantly by industry: restaurants (1.5–2.5× SDE), HVAC (2.5–5× SDE), pest control (4–10× EBITDA for PE buyers), SaaS (4–10× EBITDA), dental practices (55–85% of collections). Within any industry, businesses with higher recurring revenue, lower customer concentration, and stronger management teams command higher multiples. Your broker's job is to justify the top of the range.
→ Business Valuation MethodsWhat are add-backs and why do they matter?
Add-backs are owner-personal or non-recurring expenses that inflate reported costs but won't exist under new ownership. Common add-backs: owner salary above market rate, personal vehicle lease, family member payroll, one-time legal fees. Add-backs increase your stated SDE, directly raising your asking price. Every add-back must be documented with supporting records — unsupported add-backs get challenged in buyer diligence.
→ Business Valuation MethodsThe Sale Process
How long does it take to sell a business?
On average, 6–12 months from broker engagement to close. The timeline breaks down as: CIM preparation (4–8 weeks), buyer outreach and qualification (4–12 weeks), LOI negotiation (1–2 weeks), due diligence (30–90 days), and closing (2–4 weeks). SBA-financed deals add 30–60 days. Deals over $2M typically take 9–18 months due to more complex buyer processes.
→ How Long Does It Take to Sell?What is a CIM (Confidential Information Memorandum)?
A CIM is the deal book a broker prepares to market your business to qualified buyers. It's a 20–60 page document covering: 3-year financial summary, business description, products and services, customer base overview, management team, growth opportunities, and reason for sale. It's distributed only after a buyer signs an NDA. The quality of the CIM directly affects buyer interest and initial offer quality.
→ How to Prepare Your Business for SaleWhat is an LOI (Letter of Intent)?
An LOI is a non-binding term sheet that outlines the proposed deal: purchase price, deal structure (asset vs. stock), payment terms, deposit, and exclusivity period. Signing an LOI is a major milestone — it triggers formal due diligence and exclusive negotiations. The LOI is non-binding on price but typically binding on exclusivity and confidentiality.
→ How Long Does It Take to Sell?What is due diligence and how long does it take?
Due diligence is the buyer's verification process — confirming that every material fact about the business is accurate before committing to close. It typically runs 30–90 days after LOI. Buyers review: 3 years of tax returns and P&Ls, all contracts and leases, employee records, licenses, litigation history, equipment, and operations. Sellers who prepare a data room before listing dramatically reduce diligence friction.
→ Due Diligence ChecklistWhat is an earnout and should I accept one?
An earnout makes part of the purchase price contingent on post-close business performance. Typically 10–30% of total price, measured over 1–3 years. Buyers propose earnouts to bridge valuation gaps or reduce risk on uncertain future performance. Research shows 50–60% of earnouts are never fully paid. If you must accept one, insist on: hard revenue targets (not profit), short measurement periods, buyer non-interference provisions, and acceleration clauses if the business is sold.
→ Earnouts ExplainedWhat is the difference between an asset sale and a stock sale?
In an asset sale, the buyer acquires specific business assets (goodwill, equipment, contracts) and you retain the legal entity. In a stock sale, the buyer acquires your ownership stake in the company — everything transfers including all liabilities. Most small business transactions are asset sales. Buyers strongly prefer them (no inherited liabilities, better tax treatment). Sellers sometimes prefer stock sales for better capital gains treatment.
→ Asset Sale vs. Stock SaleWhat is a non-compete agreement?
A non-compete prohibits you from starting or working for a competing business in the same industry and geography for a defined period after close — typically 2–5 years within a geographic radius. Non-competes are standard in virtually every business sale and are required by SBA lenders. They are generally enforceable in most states when tied to a business sale (as opposed to employment non-competes, which face more scrutiny).
→ Sale PreparationFinancing & Deal Structure
How do most small business sales get financed?
The majority of small business sales under $5M are financed at least in part by SBA 7(a) loans. The buyer contributes 10–15% down, the SBA loan covers 70–80%, and seller notes or earnouts cover the remainder. All-cash deals exist but are the minority. Knowing how buyers finance deals helps sellers set realistic expectations and structure deals that close.
→ SBA Loans for Business AcquisitionWhat is an SBA 7(a) loan and how does it affect my sale?
The SBA 7(a) program guarantees 75–90% of acquisition loans, allowing lenders to accept 10–15% down payments and 10-year amortization. Maximum loan amount: $5M. The business must demonstrate a 1.25× debt service coverage ratio. SBA financing adds 30–60 days to your timeline. Sellers should require buyer pre-qualification letters before entering exclusivity.
→ SBA Loans for Business AcquisitionWhat is a seller note?
A seller note (seller financing) is when you loan the buyer part of the purchase price, accepting a promissory note instead of cash at close. Typically 10–20% of price at 5–8% interest, repaid over 2–5 years. Seller notes reduce the buyer's financing gap and can make deals possible that otherwise wouldn't close. SBA lenders sometimes require a seller note on standby as a condition of approval.
→ SBA Loans for Business AcquisitionWhat is working capital and why does it affect the purchase price?
Working capital is current assets minus current liabilities — the operating cash needed to run the business day-to-day. Most purchase agreements include a working capital peg: a minimum amount of working capital that must be left in the business at close. If actual working capital at closing is below the target, the purchase price is adjusted down dollar-for-dollar. Disputes over working capital are one of the most common sources of post-close conflict.
→ Due Diligence ChecklistPreparing to Sell
When should I start preparing to sell my business?
18–24 months before you want to close. The most impactful actions — cleaning up financials, normalizing add-backs, building recurring revenue, reducing owner dependency, and resolving legal issues — take time to implement and show up in financial statements. Sellers who go to market without preparation leave 20–40% of value on the table.
→ How to Prepare Your Business for SaleWhat financial records do I need to sell my business?
At minimum: 3 years of business tax returns, 3 years of monthly P&Ls, trailing 12-month P&L, accounts receivable aging, accounts payable aging, and a current balance sheet. Buyers and SBA lenders will require all of these. If your reported income on tax returns is significantly lower than your actual SDE, be prepared to explain the gap through documented add-backs.
→ Due Diligence ChecklistWhat is a virtual data room?
A data room is a secure, organized digital repository of all documents a buyer will review during due diligence. Setting it up before going to market (rather than scrambling during diligence) signals professionalism, accelerates the process, and reduces the chance of delays killing a deal. Tools: Dropbox, Google Drive, or dedicated deal platforms like Digify or DealRoom.
→ Due Diligence ChecklistShould I tell my employees I'm selling?
Generally no — not until the deal is under contract and close is imminent. Employee disclosure before a deal is signed creates uncertainty that can accelerate attrition. Key employees who are essential to the business should be disclosed to earlier, typically with retention bonuses tied to deal close. Your broker will advise on timing based on your specific situation.
→ How to Prepare Your Business for SaleWhat mistakes do sellers make that kill deals?
The most common deal-killers: (1) undisclosed liabilities discovered in diligence, (2) customer concentration — one customer is >30% of revenue, (3) financials that don't match tax returns, (4) key employee departure during diligence, (5) environmental issues discovered late, (6) lease that can't be assigned, (7) licenses held personally rather than by the entity, (8) seller demanding all-cash with no flexibility on structure.
→ How to Prepare Your Business for SaleAbout BizBrokerMatch
Is BizBrokerMatch free?
Yes. BizBrokerMatch is completely free for business owners. There is no charge to get matched with brokers, browse the directory, or read guides. Brokers can claim a free basic profile; paid profile features for brokers may be introduced in the future but will never affect broker ranking position.
→ About BizBrokerMatchHow does BizBrokerMatch match sellers with brokers?
The matching algorithm scores every broker in your state on four dimensions: industry specialty match (45 points), geographic proximity (25 points), deal size fit (20 points), and BBM broker quality score (15 points). The top 3–5 brokers are returned as matched results. No broker can pay to rank higher. The algorithm is fully described at bizbrokermatch.com/methodology.
→ Our MethodologyWhat states does BizBrokerMatch cover?
All 50 U.S. states. Deepest coverage in Texas, Florida, California, North Carolina, Georgia, and Colorado. The database contains 3,142 IBBA-member brokers sourced from the IBBA member directory and BizBuySell broker listings.
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