Is Your Business is Worth Selling?
You're getting ready to retire, or move on to something new. Now is the time to evaluate your business in its entirety and determine if it's a business worth selling. Does it have the potential to become a good purchase prospect given some work? Or, would it be best to liquidate it?
Most owners answer this question with a guess. Only about 14% have completed a professional valuation, according to BizBuySell's Insight Report, which means the majority are making a major financial decision without the one number that anchors it.
You'll need to think about your business's valuation beyond just physical assets, as you've added many tangible and intangible elements over the years and created a whole business that is much greater than the sum of its parts.
Here are eight steps to determine if your business is worth selling:
1. Establish What Your Business Is Actually Worth
Review your financials, including your sales and profit history to ensure that your business is in sound financial condition, with its assets exceeding its liabilities. Ideally, you will have at least three years of financial records, displaying consistency in keeping profits ahead of your operating expenses.
The single biggest factor in the value of your business is its earnings history — specifically the full financial benefit it generates for its owner.
Financial statements tell you how the business performed. They don't tell you what it's worth. To get there, start with Seller's Discretionary Earnings, then compare against multiples for your industry. Estimate a range with our SDE Calculator and Business Valuation Calculator. If you're within two years of selling, consider a formal valuation from a business broker who can ground the number in comparable sales.
(To understand how businesses are priced and valued, be sure to see our Business Valuation Learning Center.)
2. Identify What Makes Your Business Hard to Replace
Review the products and/or services that your business provides. Buyers are attracted to a business that is unique and stands out above its competition. Features like a proprietary process that set the business apart from the crowd make it more saleable.
Potential buyers seek a clean transition, so, for example up-to-date operation manuals that make your production process easy to transfer to a new owner, would be seen as an asset.
Other facets of your business worth considering are its brand and reputation. Assets in this area include being well known and respected in your market, having a recognizable trademark and domain name, a strong online and social media presence, or an effective marketing program.
3. Assess Your Location, Facilities, and Lease Terms
Location also influences your business sales potential. A growing population of customers, assuming that your business is not solely conducted online, in a location with geographic and demographic stability, can be positive points when it comes time to sell your business.
In addition, the image that you present to potential buyers, including the facilities and equipment that your business relies upon should be up-to-date and running smoothly.
If you lease your space, the lease itself becomes part of what you're selling. Buyers and lenders both want to see enough remaining term to make the purchase worthwhile — a business with eighteen months left on its lease is a harder sale than the same business with five years and a renewal option. Check whether your lease is assignable, and whether your landlord's consent is required to transfer it. Landlord approval is a common stalling point, and some leases allow the landlord to reset terms when ownership changes, which can affect the numbers a buyer is working from.
If you own the property, decide early whether it's part of the sale. Including real estate raises the capital a buyer needs, which narrows your pool; keeping it and leasing to the new owner is a common alternative. Either way, get a clear sense of the property's market value separately from the business — the two are valued differently.
4. Determine Whether the Business Can Run Without You
Buyers pay a premium for businesses that don't depend on the owner's daily involvement, and lenders look at the same thing. A business that only works because you're in it every day is harder to finance and harder to transfer.
Ask yourself honestly: if you stepped away for a month, what would break? Who holds the customer relationships, the vendor relationships, the operational knowledge? If the answer is you in every case, that's the single highest-value thing you can fix before selling.
Your team is the other half of this. Dependable staff and management smooth the transition for a new owner, particularly when their roles are documented and their employment terms are clear. Up-to-date operations manuals, current job descriptions, and clear staffing policies all signal that the business transfers as a working system rather than a collection of assets. Note where non-compete or retention agreements are in place for key employees — buyers will ask.
5. Know How Concentrated Your Customer Base Is
A growing customer base and a roster of loyal clients are real assets. But concentration cuts the other way: if a single customer accounts for a large share of revenue, buyers and lenders treat that as risk, no matter how strong the relationship or how long the contract runs.
Before a buyer asks, know what percentage your largest customer represents, and your top three combined. Then be ready to explain how the business would absorb the loss of any one of them. Diversifying your customer base takes time, which is exactly why this is worth identifying early.
Also consider how transferable those relationships are. Long-term contracts help, but only if they survive a change in ownership. A customer database that transfers cleanly to a new owner is worth more than a set of relationships that live in your head.
6. Check Whether Your Business Will Qualify for SBA Financing
Most small business acquisitions are financed, and SBA-backed loans are the most common path for individual buyers. That makes SBA eligibility a marketability question, not just a financing detail — a business that qualifies reaches a far larger pool of buyers than one that doesn't.
Lenders look at many of the same things buyers do: consistent earnings, clean and verifiable financials, a transferable lease, and a business that doesn't depend entirely on the departing owner. Customer concentration matters here too. Eligibility rules also change periodically, so confirm current requirements rather than relying on what was true a few years ago.
If you're unsure where your business stands, a broker or an SBA-preferred lender can tell you early, while there's still time to address what's holding you back.
7. Find the Gaps Buyers Will Spot First
After assessing the condition of your business, determine which areas could be improved upon in order to make it more marketable. Create a list of specific improvements to be made for each area of weakness. Next, determine how long each will take to implement and create a timeline within which those changes can take place.
A practical way to find gaps: try filling out a business listing. Listings require financial detail, and buyers filter their searches on those numbers. You'll also be asked for number of employees, year established, facilities and assets, support and training you'll provide, and your reason for selling. If you can answer all of these with specifics today, you're closer to market-ready than most owners. If several require a "let me check," that's your improvement list.
(For specific areas to look into, see How to Increase the Value of Your Business to Sell It.)
8. Decide: Sell Now, Improve First, or Liquidate
Now that you've established your business's worth and sale potential, and have created a plan of action and timeline for improving your selling prospects, you have the tools to make an informed decision on how to proceed.
Depending on the current condition of your business and your willingness to spend the time and effort to improve it, you have choices to consider:
- Ideally, you've found that your business is in great shape and ready for sale, and you may proceed to set an asking price and to list it confident in its salability.
- You may find that your business needs improvement before it can be placed on the market and receive a competitive asking price, but decide to sell it as is. You decide this knowing that your selling price might be lower than if you were to make improvements.
- Or, you may follow through with the plan of action that you've created, which will delay selling your business in exchange for more potential buyers and the likelihood of a higher sales price.
- Lastly, you may decide that the condition of your business makes it uncompetitive in the sales market and not worth the effort to improve, opting to liquidate your assets instead.
Whichever route you ultimately decide to take, you'll be able to rest assured that you've made the right exit-strategy decision once you've examined your business and explored your options. If you decide to move forward, plan how you'll protect sensitive information during the process. Most owners don't want employees, customers, or competitors to know the business is for sale before they're ready. Selling your business confidentially covers how to manage that.
When you're ready to sell your business, BizBuySell gives you the option to list your business as an established business or as an asset sale.