Plenty of ETA owners aim for a long-term hold (hell, that's the camp I plan to be in). There's no shame in holding into a proven business that's spitting off cash, but then again if someone wants to pay top dollar or you're checked out, exiting ain't the worst idea....
1. Introduction: Selling Is a Different Game
So, you’ve built (or at least maintained) a solid business, and now it’s time to cash out. Whether you’re retiring, moving on to a new venture, or just want to take some chips off the table, exiting your business the right way is just as important as buying it the right way.
Here’s the truth:
• Most business owners wait too long to prepare for a sale. (And it costs them.)
• Valuation is more art than science. (Multiples aren’t set in stone.)
• The best exit is planned YEARS in advance. (Even if you don’t think you’re selling soon.)
This guide covers:
• How to maximize your valuation before you sell
• Who you can sell to (and why it matters)
• The deal structures that make you the most money
• How to avoid getting burned by buyers
• What happens after closing
Let’s get into it.
2. When Should You Sell? The “Not Too Soon, Not Too Late” Rule
Timing is everything.
Sell too early? You leave money on the table.
Sell too late? Revenue starts declining, and buyers lowball you.
A. The Best Time to Sell
🚀 Revenue & profits are trending UP. Buyers pay for growth.
📈 The industry is hot. More competition means better multiples.
🏆 You’ve built a real team. If everything depends on you, buyers will hesitate.
B. The Worst Time to Sell
📉 Revenue is declining. (Buyers see this as a red flag.)
😰 You’re burned out and checked out. (It shows, and it lowers value.)
⚠️ You’re the key to the business. (Buyers don’t want to replace you.)
📌 Tactic: Even if you’re not ready to sell, start preparing 2-3 years ahead. A cleaner, more predictable business = higher valuation.
3. Maximizing Valuation: How to Get the Highest Multiple
Buyers don’t just look at revenue. They care about risk, growth potential, and how easy the transition will be.
A. The 3 Key Levers of Valuation
1️⃣ Profitability (SDE or EBITDA) – More profit = higher multiple.
2️⃣ Revenue Quality – Recurring revenue is worth more.
3️⃣ Owner Dependence – The less you’re needed, the better.
B. How to Increase Your Multiple Before Selling
🔹 Increase Profit Margins – Cut unnecessary expenses and renegotiate supplier contracts.
🔹 Diversify Revenue – Avoid having one customer make up 50% of sales.
🔹 Build a Leadership Team – Buyers will pay more if the business can run without you.
🔹 Tighten Up Financials – Buyers will trust clean books over a “trust me, bro” spreadsheet.
📌 Resource: Read “Built to Sell” by John Warrillow. It’s the blueprint for making your business more attractive to buyers.
4. Who Are You Selling To? Know Your Buyer Types
Different buyers pay different prices and expect different things.
A. Individual Buyers (Searchers & Entrepreneurs)
✅ Pros: Can move quickly, often willing to take seller financing.
❌ Cons: May need SBA loans (which slow down deals).
B. Strategic Buyers (Competitors & Larger Companies)
✅ Pros: Pay the highest multiples, already understand the industry.
❌ Cons: Can take forever to close, might fire your team post-sale.
C. Private Equity & Investment Groups
✅ Pros: Can pay well, may allow you to keep equity in the business.
❌ Cons: They’re financial buyers—they care about numbers, not emotions.
📌 Tactic: If you want top dollar, target strategic buyers or PE firms. If you want a smoother sale, go with an individual buyer.
5. How to Structure the Deal (And Actually Get Paid)
Most sales aren’t all-cash up front. Buyers want to de-risk their purchase.
A. Common Deal Structures
💰 All-Cash Sale (Rare but Best for You)
✅ Full payout at closing.
❌ Harder to find buyers willing to pay this way.
📌 Tactic: If a buyer wants a discount, push for all-cash. Less risk for you = less negotiation room for them.
📈 Seller Financing (Very Common)
✅ You finance part of the sale (e.g., 20-30%).
✅ Helps sell faster and at a higher price.
❌ You take the risk that the buyer runs the business into the ground.
📌 Tactic: Keep seller financing at 10-20% max, and require personal guarantees.
📊 Earnouts (Risky but Sometimes Necessary)
✅ You get extra money if the business hits revenue/profit goals.
❌ Buyers can manipulate numbers to avoid paying you.
📌 Tactic: Avoid earnouts unless the buyer has a strong track record.
6. Due Diligence: What Buyers Will Dig Into
A. What Buyers Will Ask For
✅ 3 years of tax returns – No, your “cash sales” don’t count.
✅ Profit & loss statements + balance sheets – Keep them clean and accurate.
✅ Customer & vendor contracts – Are they locked in or can they leave anytime?
✅ Employee org chart – Who’s staying post-sale?
B. Red Flags That Kill Deals
❌ Sketchy financials – If your numbers don’t add up, buyers will walk.
❌ High customer concentration – If one client makes up 50% of revenue, that’s a risk.
❌ Pending lawsuits – A huge red flag for buyers.
📌 Tactic: Hire a CPA and M&A lawyer early. Buyers will try to poke holes in your financials—make sure they’re airtight.
7. Closing the Deal: The Final Steps
Once due diligence is done, here’s what’s left:
A. The Purchase Agreement
✅ Defines the final price & terms
✅ Outlines seller financing (if applicable)
✅ Includes transition & training details
📌 Resource: Work with an attorney who specializes in SMB deals. Regular lawyers overcomplicate things.
B. Transitioning Out Smoothly
Most buyers want you to stick around for a bit (usually 3-6 months).
📌 Tactic: If possible, negotiate a shorter transition period (or get paid extra for extended support).
8. What to Do After You Sell
So, you got paid. Now what?
🔹 If you’re retiring: Congrats. Enjoy your free time.
🔹 If you’re buying another business: Take what you learned and do it even better next time.
🔹 If you kept equity: Stay involved, but let the new owner run things.
📌 Tactic: Negotiate a non-compete that’s reasonable. Buyers will want one, but don’t let them lock you out of an entire industry forever.
9. Final Thoughts: Sell Smart, Don’t Rush
Selling a business isn’t just about cashing out—it’s about exiting on your terms.
🚀 Start preparing at least 2 years in advance.
📈 Make sure your numbers are clean and predictable.
🤝 Find the right buyer, not just the highest offer.
A well-run exit means more money for you and an easier transition for the new owner. Play it smart, and this could be the biggest payday of your life.
Now, go get that multiple. 💰
