Ready to list your business for sale?
Whether you choose to sell it with a broker or go it alone, you’ll need to devote time to determine how you should present your business to your pool of potential buyers. What does this mean? For one thing, you should think about how many specifics you’re willing to reveal in your listing. You’ll also need to decide how you’ll address its strengths and speak to its limitations to present the current state of your business in a fair and accurate light.
With those points in mind, let’s dive into this important task.
How do I list my business for sale?
You’ll need marketing materials that will attract attention and drive qualified buyers to make an inquiry about your business. Often, sellers (or their brokers) create a business listing and a prospectus that describes the unique attributes of your operation.
Your business listing should be descriptive, but it should never contain confidential information about your operations, financials, or trade secrets.
To maintain the confidentiality of their sale, most owners avoid sharing the name of their business or specifics about its location. Instead, they use generic terminology that helps buyers understand what kind of business is being offered and the general market that the business serves.
Here are a few examples of how owners title their listings:
Profitable Lawn Care and Landscape Business in Western Kentucky
Established Industrial Coating Business in NE Florida
Quick-Service Sandwich Restaurant in Columbus, Ohio
Most sellers share high-level financials that help potential buyers understand the revenue, cash flow, and valuation of any real estate or inventory that’s offered in the sale of the business. The following example illustrates how one business chose to share this information:
Electrical contractor business for sale in Central Michigan
- Asking price: $320,000
- Gross revenue: $554,000
- Cash flow: $130,000
- EBITDA: $100,000
- Down payment: $256,000
- FF&E included: $30,000
- Inventory: $40,000
- Real estate: $300,000 (optional additional cost)
- Financing: Yes
- Distressed: No
The owner of this business chose to provide some specifics so that buyers can make a preliminary assessment of the strength and viability of the business as well as the investment that’ll be required to attain it.
The same business owner chose to disclose additional information to help buyers with their initial assessments. Here, you’ll notice that the owner included some important information without sharing any data that identifies the business or reveals the secrets of its operations:
- Location: Confidential; Central Michigan
- Primary Business Category: Electrical Contractor
- Franchise: No
- Established Date: 2010
- Real Estate: Owned
- Building Square Footage: 2,000
- Lease Expense: N/A
- Home-based: No
- Relocatable: Yes
- Employees: 6 FT, 1 PT
- Is Management Staying On: No
- Required License(s): Electrical
For the past ten years, this single-owner electrical contractor has been providing quality services to residential and commercial clients in the Central Michigan area. The owners have built a solid, loyal base of customers, resulting in a high percentage of repeat customers. The firm has an A+ rating with the BBB.
There is competition in the area, but this company has an outstanding local reputation for providing exceptional service to its residential and commercial customers.
There is potential for growth for a buyer who is interested in expanding service to other target markets.
The company employs a part-time salesperson and sets a minimal budget for advertising. Additional sales and marketing expenditures would likely increase the business’s total sales.
Support and Training
The owner is willing to offer up to six months of training and transition support.
Reason for Selling
The depth of information this business owner provided makes for a great business listing. Potential buyers can learn a great deal about the organization and its positioning without learning any of the critical private details of the business.
Your listing will provide prospective buyers with the first glimpse of your business. Those who are interested will want to learn more. For this audience, a prospectus can be a useful selling tool.
Your prospectus, which will total up to 10 pages in length, should include the following elements:
- A brief description of your business, its ownership structure, and its history
- A summary of the opportunity you’re providing
- Information on the current management team and the role of the owner in the day-to-day management of the business
- The certifications and licenses the business holds
- High-level personnel information
- The markets your business serves
- How you have marketed your business to date
- The product lines or services your business offers
- The price ranges of your products
- How your products are distributed
- The size and strength of your key competitors
- The price and terms of your sale offering
- A listing and fair market value of the tangible assets that are included in the business sale
- An overview of the business’s financial performance and a realistic set of projections
If you plan to list real estate as part of the business sale, you should also include key information about the size, features, and location of the facility.
|Be sure to obtain a non-disclosure agreement (NDA) from any buyer who makes an inquiry about your business before providing them with a prospectus. This agreement, which an attorney can help you draft, will help you ensure that the information you share is kept confidential.
And, be sure to read our guide: How to Find the Right Attorney to Help You Sell Your Business.
Do I need to share my books?
Serious buyers will want to view your current and historical financial statements. Before sharing this information, you should take two important steps:
- Attain a signed non-disclosure agreement from the buyer.
- Ask an accountant to ensure your financials show the earning power of your business. This process, called recasting, is an important step, especially if your accountant underestimated your earnings to help you realize tax savings. You can learn more about recasting in our guide, Recasting: Demonstrate to the Financial Earning Power of Your Business.
You can also learn more about the tax savings your accountant may have helped you attain in our article, How to Reduce Your Tax Liability When Selling Your Small Business.
Looking for an accountant with recasting experience or tax knowledge? We can help. Read our guide, How to Find an Accountant Who Can Help You Sell Your Business.
Then, be sure to check out these business-friendly accounting firms:
Should I share my customer list for this sale?
Your buyers will want to know how many customers you have, how many are locked into contracts, and whether your largest accounts represent a large percentage of your total sales volume. To answer those questions, you should provide buyers with an account of your sales for the past three years with complete and accurate sales numbers. But to maintain some privacy (and ensure the buyer doesn’t use this list for other purposes), you may want to blur the names of your customers or use pseudonyms for each account.
What about my proprietary information?
It’s important to disclose whether you hold trademarks, patents, or any other form of proprietary information that’s valuable to a future owner. However, you don’t have to reveal the details of those items or any of your practices that are essential for the operation and success of your business.
What else should I prepare before I list my business for sale?
In addition to the listing, prospectus, financials, and an overview of your customer base, you should prepare for the verbal discussions you’ll have with prospective buyers. Often, buyers will want to meet with you to discuss your reasons for wanting to sell, the problems your business is facing, and any questions they may have after reviewing your write-up and financials. Be honest, and answer their questions without hesitation. More than anything else, your buyers will want to see that you are earnest and forthcoming about your business and that you want the future owner to be prepared for all that it entails.
Who can help me list my business for sale?
A broker can help you. Check out our guide, Smart Strategies for Finding a Business Broker. Then, click the button below to find one who can get the job done:
You can also do it alone. Many of the business listing sites you’ll consider will provide you with a template you can use to describe your business and the preferred terms of your sale.
With your marketing pieces in place, you can list your business for sale, field questions, and talk with interested buyers.
Selling your business is a complicated process, but we have articles and advice that can help you with every action you need to take. Log into your owner’s portal for free, personalized guidance that will help you succeed with your sale.