The reality of business succession
is that you're going to have to sell your business

Buyers pay multiples of your adjusted EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortization) - but they make significant adjustments first. That $200k you took in dividends instead of paying yourself a proper salary? They'll add back a $120k general manager salary and subtract it from your "profit." Your company car and lifestyle expenses get adjusted out. That inventory sitting unused for 2+ years gets heavily discounted. They're buying the business as they'll need to run it, not the lifestyle business you've been operating.

Take last year's profit, add back depreciation and your drawings, then subtract what you'd pay a competent general manager to replace you (usually $100k-150k depending on complexity). Subtract 20% for inventory that needs turning over, equipment requiring replacement, and customer concentration risks. That's your adjusted EBITDA. Multiply by 2-4x depending on your industry. Many business owners are surprised to learn how these buyer adjustments affect their perceived profitability. Understanding these adjustments early helps you prepare more effectively.

Tech services, healthcare, and recurring revenue models are getting 4-6x adjusted EBITDA. Remember - that's after they add back your theoretical salary and subtract what they'll actually pay a manager. Your $300k EBITDA might become $180k after adjustments, then multiply by 4x = $720k, not the $1.2M you initially calculated. Traditional retail, hospitality, or personal service businesses typically see 2-3x adjusted earnings when the numbers are properly structured.

Yes, but it typically comes with a price compromise. Buyers recognize urgent timelines and often adjust their offers accordingly. If you absolutely must sell quickly, expect offers 10-20% below optimal market value. The smart approach? Start preparing now even if you don't need to sell for 12-18 months. This way when you do decide to proceed, you're negotiating from a position of strength rather than urgency.

For actual cash in your bank account? 6-12 months minimum for a well-structured sale. Be cautious of promises for extremely quick sales, as they often come with significant price compromises. The "quick sale" companies offering 30-day closures typically pay 50-70 cents on the dollar. Want optimal value? Plan on 12-18 months from start to completion.

Because you're aging, your business might be at its peak, and market conditions evolve constantly. That extra year of profits you're hoping for could be offset by interest rate changes, economic shifts, or new competition. Additionally, if you're 60+, buyers start considering health and business continuity factors. Often, the optimal time to sell was 12 months ago - the second best time is now.

Industry Competitors - Often your best bet for top dollar because they see synergies. Can move fast (60-90 days) with cash deals, but they understand your business challenges. Your brand usually gets absorbed into theirs.

Successful Industry Operators - People who've built similar businesses. More likely to maintain your culture, moderate timeline with mix of cash and owner financing.

Search Fund/ETA Buyers - Young professionals with investor backing looking to buy and run a business long-term. Slower process (6+ months), more earnouts, but they typically respect your existing systems.

Individual Investors - Lower multiples (2-3x) but faster closers with predominantly cash deals. Often more hands-off.

Private Equity - Only for businesses with $2M+ EBITDA. Your business will undergo significant operational changes.

Sellers who can't substantiate their numbers, buyers who can't actually afford what they're offering, and unrealistic expectations on both sides. Also, sellers who keep "remembering" important details during due diligence that they didn't mention upfront. Complete transparency from day one is faster and more profitable than getting caught in inconsistencies later.

Plan on 15-25% less than asking price, then subtract legal fees, broker commissions, tax implications, and whatever "adjustments" come up during due diligence. That impressive $2M asking price might net you $1.2M after everyone takes their share. Calculate net proceeds before getting emotionally attached to headline numbers.

Most deals involve 50-70% cash at closing, with the rest tied to future performance or paid over time. That "earnout" payment you're counting on? Studies show only 60% get paid in full. If you need $2M cash, you need a $3M+ deal with strong cash-at-closing terms. Don't count money that depends on hitting targets after you've handed over control.

Start by documenting all your processes and training others to handle key functions. Hire a general manager 12-18 months before selling. Ensure major client relationships aren't solely dependent on you. Create systems that can run without your daily involvement. The goal is to show buyers the business will thrive after you leave.

Clean, professional financial statements for the last 3-5 years. Document all add-backs (owner salary, personal expenses, one-time costs) with supporting evidence. Separate business and personal expenses clearly. Have your accountant prepare a quality of earnings report that shows your true cash flow to buyers.

For businesses worth over $1M, probably yes. Brokers have buyer networks, handle confidentiality, and negotiate terms. They typically charge 10-12% but often get higher prices that more than cover their fees. For smaller businesses, you might sell directly but expect to invest significant time learning the process and managing buyer communications.

Only after you have a signed letter of intent with a qualified buyer. Premature disclosure can damage your business if the sale falls through. Key employees might leave, customers might panic, and competitors could use the information against you. Maintain strict confidentiality until you're certain the sale will complete.