In December 2015, I sat in my car in silence—equal parts shocked, scared, and excited. I had just bought a business. For a $900,000 purchase price, I had invested less than $25,000 of my own cash. The rest came from a mix of seller and bank financing.
The business was called Monkey Bizness, an indoor kids’ play concept. I hadn’t just bought one location—I had purchased the entire franchise. Overnight, I became a franchisor with four franchisees. Within six months, I’d face one lawsuit, file another, buy back a failing location, and shut down a franchisee. It was the best MBA money could buy—and in a way, I had.
If you’ve ever bought or sold a business, you’re in the “5% club.” You’ve already done what most entrepreneurs never experience. Do it twice, and the odds suggest you’re a business broker.
I’ve been fortunate to see deals from multiple sides. Personally, I’ve bought and sold three businesses. As a franchisor, I led the sale of four existing locations. Today, as a fractional CFO, I’ve guided clients through five more transactions.
Here’s what I’ve learned: nearly every entrepreneur dreams of an exit. In fact, 69% of business owners list an exit strategy as a priority. Yet, research shows only 20%–30% of businesses that go to market actually sell. Most owners don’t understand the process—and buyers often don’t know where to begin.
That’s why I’m writing this article. While every deal is unique, the fundamentals are not. My goal is to break down the basics, share insights from experience, and answer the questions I hear most often. Whether you’re preparing to sell or thinking about buying, the lessons here will give you a clearer path forward.
Business Buying and Selling Basics
Where Do I Even Start
It doesn’t take long in a conversation with an entrepreneur looking to buy or sell a business to get to the most basic question – where do I even start? This article is meant to speak to most business owners. According to the Economic Census, 90-95% of businesses reported revenues of less than $5 million. I can tell you based on experience that these businesses will typically have an EBITDA of between $250,000 and $1M (while I don’t agree that EBITDA is a correct way to value a business, most of the market does, so we’ll use that). Everything that I am going to write will apply to these businesses.
On a side note, if your business is over $2.5M in EBITDA, a whole new world of possibilities open up to you. All of a sudden private equity, investment bankers, and a whole new realm of “middle market” brokers are very interested.
For the 95% that have not achieved this level of EBITDA, the process looks very similar.
Seller’s Discretionary Earnings
You’ll often hear that you should begin preparing your business for sale two to three years in advance. A common starting point for valuation is something called Seller’s Discretionary Earnings (SDE).
SDE represents the income your business generates, adjusted for expenses that aren’t essential to operations. For example, many small business owners run personal costs—like gas or car insurance—through the business. Since those aren’t required for the company to function, they’re added back to net income when calculating SDE.
This is often the starting point for business valuation for both the seller and buyer. At a very basic level, this is where one can begin to determine the value of a potential business sale or acquisition.
Business Multiples
When people talk about what a business is “worth,” they often refer to multiples. A multiple is simply a way of valuing a company by comparing it to other, similar businesses. It’s a shorthand: rather than debating the details of every line on a financial statement, buyers and sellers often talk in terms of “this business is worth 4x earnings” or “6x EBITDA.”
Multiples give a quick, comparable snapshot of value. If a dry cleaner in one city sells for 3x its earnings, that provides a reference point for valuing another dry cleaner in a similar market. This comparability makes multiples a widely used tool for both buyers and sellers, especially in industries with many small to mid-sized businesses.
At their core, multiples are a ratio:
Multiples anchor expectations. Sellers want to know if their asking price is realistic, and buyers want to ensure they’re not overpaying. If most HVAC companies sell between 3x and 4x EBITDA, then a seller asking 7x will have a difficult time finding a buyer—unless they can justify it with unique growth potential or strategic value.
No two businesses are exactly alike, so multiples aren’t the whole story. Industry, size, growth rate, customer base, and risk all influence whether a business trades at the low or high end of its multiple range. That’s why brokers, investors, and CFOs like me always say: multiples are a starting point, not the finish line.
How Do I Sell My Business
here are several ways to sell a business, and the most common starting point is hiring a business broker. Think of a broker as similar to a real estate agent—only instead of houses, they help sell companies. For many first-time sellers, this feels like the most approachable option.
A broker’s role is to guide you through the sales process. They’ll assist with valuing the business (emphasis on assist—the final number is ultimately set by the market), list the business for sale, screen and engage prospective buyers, help with negotiations, and coordinate the contracts and legal documents needed to close.
For these services, brokers earn a commission. Unlike real estate, there’s no standard structure, so fees vary widely. That said, most small-business sales involve a success-based commission of 8% to 12% of the final sale price, while larger transactions often use the “Lehman formula” or a sliding scale where the percentage decreases as the deal size increases. Most brokers will charge a set amount for their services up front (typically between $10,000 and $20,000) and then credit this back from their commission percentage. However, be aware, this upfront fee is typically not refundable.
Here is my two cents on business brokers – most are not very good. Yes, I have ran into good business brokers and this is not a blanket statement. However, in my opinion several do not bring enough value to deals to warrant their commission.
In my opinion, the true value of a broker lies in their ability to market your deal. You can get advice that’s just as good—if not better—from a lawyer. But a lawyer can’t market your business. For a broker to truly earn their commission, they shouldn’t just post your business on the major listing sites; they should also be building and pursuing a list of potential buyers. For example, if you’re selling a pet food store, the broker should be reaching out to other pet stores, dog walkers, groomers, and anyone else who might have a natural interest. That’s where they bring real value.
If you decide not to use a broker, what’s next? The second option comes in a few different flavors but usually means either managing the process yourself or working with your accountant or outsourced CFO. I’ve personally helped several clients sell their businesses, and I sold mine without a broker as well. If you’re working with someone knowledgeable about the process, success often comes down to marketing the business. As I outlined earlier, the basics of marketing a business are straightforward. It takes effort, but the process itself doesn’t have to be complicated.
I just completed the sale of a business with one of my clients. What did I charge? Probably not enough!! I charged a non-refundable fee of 15% and a sliding scale of 2.5% on the first $1 million of sales price, 1.5% on the second million, and 1% on anything over $2 million.
The MLS of Small Businesses
Selling a business is somewhat like what I imagine the wild west was like. Few rules, few norms, and a wild ride. To bring some semblance of normalcy, there are two places that lists of thousands of businesses.
- BizBuySell – The largest and most widely recognized online marketplace for buying and selling small businesses, with thousands of active listings across industries.
- BizQuest – Another leading platform that allows business owners and brokers to list companies for sale, often overlapping with BizBuySell but with its own network of buyers.
You don’t need a broker to list your business for sale on these platforms—anyone can do it. But how successful are they? Personally, I’ve inquired about businesses on these sites but never purchased one through them.
That said, of the ten sell-side transactions I’ve been involved in, two were completed with buyers who first inquired through these platforms. And in the eight times I’ve listed a business myself, I’ve always received multiple inquiries.
What the Process Looks Like
OK—you’ve listed your business for sale, and now someone is interested! So, what happens next?
This is where the experience of a broker, or at least someone familiar with the process, becomes invaluable. I usually tell owners they need a gatekeeper. On that first communication, you don’t want prospective buyers speaking directly with the owner. Instead, the gatekeeper conducts a brief 15-minute call to gauge two things: whether the buyer is serious and whether they have the financial ability to afford the business. As a rule of thumb, out of every three inquiries, usually only one turns out to be a legitimate buyer.
Once you’ve identified a serious prospect, the next step is to have them sign a non-disclosure agreement (NDA). No exceptions—no one moves forward without it.
With the NDA in place, the buyer should then receive an offering packet. This document provides an overview of the business, details about employees, high-level customer profiles (without revealing names), and financial information. After sending the packet, the gatekeeper should set the expectation that they’ll follow up in a few days to discuss next steps.
If, after reviewing the packet, the buyer remains interested, that’s when it’s time to schedule the first meeting between the buyer and the seller.
The First Meeting
The first meeting between the buyer and seller is often a mix of formality and gut instinct. Buyers want to get a feel for the owner, the culture, and whether the business “matches” what they’re looking for. Sellers, on the other hand, are trying to gauge whether the buyer is trustworthy, capable, and someone they can envision carrying on the business. Expect lots of questions about operations, growth opportunities, and risks. This isn’t the time to negotiate terms—it’s about building trust and seeing if there’s a good fit.
After the Meeting
If both sides are still interested, the process typically moves toward sharing more detailed financials and operational information. Buyers may want to tour facilities, meet key managers (carefully controlled – typically there is a cover story about why the meeting is taking place), and review historical performance in more depth. This stage is about confirming the story that’s been presented and deciding if it’s worth making an offer.
Letter of Intent (LOI)
Once a buyer feels confident, the next major step is submitting a Letter of Intent (LOI). The LOI is not the final purchase agreement but a non-binding document that outlines the proposed deal structure—purchase price, payment terms, and any key conditions. Think of it as a roadmap for the negotiation and due diligence phase. While technically non-binding, it signals the buyer’s seriousness and gives both parties a framework to work from.
When I am helping clients, I typically push for this to happen within 1-2 weeks of the initial meeting. At this point in the process, the buyer should have all the information they need to decide if they want to keep moving forward. There is no point in wasting everyone’s time once all information has been exchanged.
After the LOI
After the LOI is signed, the heavy lifting begins: due diligence. This is when the buyer digs deep into the business—reviewing tax returns, contracts, leases, employee agreements, customer data, and more. The goal is to verify everything presented so far and uncover any red flags. Lawyers, accountants, and sometimes lenders all get involved. This stage can feel overwhelming, but it’s also the point where deals are either confirmed or fall apart.
Timeline
So, how long does all this take? From first inquiry to closing, most small-business sales take six to nine months. Some move faster—three to four months if everything lines up perfectly. Others can drag on for a year or more, especially if financing, negotiations, or due diligence hit snags. Patience and persistence are key—the process is a marathon, not a sprint.
Common Questions
OK, you have the basics of the process. Let’s go through a few common areas where there are often questions.
Financing
There could be an entire article written about how to finance a business. As an outsourced CFO, I actually find this to be a fun topic because there are so many ways to structure a transaction. For now, let’s walk through the basics.
Most business acquisitions involve a loan. Much like buying a house, the buyer is usually expected to put down 20–30% of the purchase price. The rest is financed through a bank. Local and regional banks tend to be easier to work with than national institutions, and loans are typically either SBA-backed or traditional business loans. SBA loans are the most common, but if a buyer can qualify for a standard business loan, it’s often preferable since those loans usually carry fewer fees.
The loan is the straightforward part. Where things get interesting is in the creative financing structures. This can be especially useful when a buyer’s eyes are bigger than their wallet.
One of the most common is owner (or seller) financing. This occurs when the seller agrees to finance part of the purchase price—essentially acting as the bank for a portion of the deal. This can reduce the amount of cash the buyer needs upfront, sometimes cutting the required down payment in half. Owner financing may be structured simply (fixed payments at an agreed interest rate) or more creatively. Payments, for example, might be tied to a percentage of revenue.
Another tool is the earnout. An earnout ties a portion of the purchase price to the future performance of the business. For instance, the seller may receive an additional $500,000 if revenue or profit hits certain targets in the next two years. Earnouts can help bridge valuation gaps—when a buyer is skeptical about growth potential but the seller is confident the business will deliver.
Beyond loans, owner financing, and earnouts, there are many other ways to structure deals. These include:
- Equity rollovers (where the seller keeps a minority stake in the business).
- Investor financing (friends, family, or private investors putting in capital).
- Mezzanine financing (a hybrid of debt and equity, often used in larger deals).
- Seller consulting agreements (paying the seller as a consultant post-sale, which effectively shifts part of the purchase price into service fees).
Each transaction is unique, and the financing often reflects both the creativity of the dealmakers and the realities of the buyer’s balance sheet.
How Can I Find a Business I Want to Buy
Above we listed two sites that by far have the most inventory of businesses for sale. But what if you can’t find what you want?
This was my situation before I bought Monkey Bizness. Monkey Bizness was never listed for sale on any site. It wasn’t an off market listing that I got lucky hearing about. I pursued Monkey Bizness. I reached out to the owner and initiated the process.
In other situations, I have put together a list of targets based on my clients desire and made direct approaches. This can be an extremely effective way to get the business you want – not just what is available. While it might sound intimidating, put yourself on the other side. Wouldn’t you be thrilled if someone reached out to you wanting to buy your business?
Lawyers, Lawyers, Lawyers
A lawyer is essential when you’re buying or selling a business for the first time. I can personally attest—my lawyer saved me hundreds of thousands of dollars when I purchased Monkey Bizness.
That said, I’ve also completed several transactions without a lawyer’s involvement, which saved me thousands in fees. If you’re working with someone experienced who has been through the process before, that may be sufficient in certain situations.
Due Diligence
Due diligence is one of the most critical stages of buying a business—and also one of the easiest to underestimate. It’s the buyer’s opportunity to dig beneath the surface of the offering packet and really understand what they’re purchasing. Financial statements, contracts, leases, employee agreements, and tax returns are standard items to review, but due diligence should always go deeper than the numbers.
When I bought Monkey Bizness, I learned this lesson the hard way. I didn’t inspect the equipment as thoroughly as I should have, which led to costly repairs and replacements after closing. I also overlooked the importance of evaluating the health of the existing franchisees. Had I done more due diligence in both areas, I could have saved myself significant time, attention, and likely negotiated a lower purchase price. While I was able to overcome these challenges, they made the transition harder than it needed to be.
The good news is that due diligence gets easier the more deals you go through. After that first experience, I learned to be much more methodical: checking assets carefully, reviewing customer and franchisee health, verifying compliance issues, and asking tough questions. Proper due diligence doesn’t just protect your investment—it also gives you leverage in negotiations and sets you up for a smoother post-sale transition.
Conclusion
When I sat in my car in December 2015, stunned that I had just bought Monkey Bizness, I had no idea the twists and turns that lay ahead. Lawsuits, buybacks, franchise struggles—it was trial by fire. Looking back, I realize many of those challenges could have been avoided or at least softened with better preparation, sharper due diligence, and a clearer process. Still, each hard lesson became part of my playbook. Every deal since has been smoother because of what I learned that first time.
Here’s the truth: buying or selling a business is never simple. It’s messy, emotional, and full of moving parts. But it’s also achievable—and incredibly rewarding—if you know what to expect. Understand how valuation works (we didn’t even scratch the surface in this article), market your deal effectively, get creative with financing, and never skimp on due diligence. Most importantly, surround yourself with someone whose been there before. That guidance can save you time, money, and stress—and in some cases, even make or break the deal.
This is why I built Krieger Analytics. As an outsourced CFO, I’ve not only been through my own acquisitions and sales, but I’ve also helped clients navigate theirs. From valuation and financial preparation to structuring deals and guiding negotiations, my role is to bring clarity to a process that often feels overwhelming.
If you’re thinking about buying or selling a business, let’s talk. The right preparation and the right team can turn one of the most stressful decisions of your life into one of the most rewarding.
