From Listing to Closing: The Steps of a Typical Business Sale

Most owners have never sold a business, so the process is unfamiliar. What follows is a step by step guide for many small business sales.

A business sale runs through several stages over 8 to 12 months: preparation and valuation, confidential marketing, buyer screening, meetings and offers, the Letter of Intent, due diligence, financing, the purchase agreement, non-compete, consulting agreement, closing, and transition.

The steps at a glance

#	Stage	Typical duration
1	Preparation and valuation	4 – 6 weeks
2	Confidential marketing	12 – 20 weeks
3	Screening buyers	Ongoing through marketing
4	Buyer meetings and offers	Within marketing window
5	Negotiation and the LOI	2 – 4 weeks
6	Due diligence contingency	30 – 90 days
7	Financing contingency	Often overlaps diligence
8	Purchase agreement	Completed after due diligence
9	Closing	1 – 2 weeks
10	Transition	Weeks to months, negotiated

Stage 1: Preparation and valuation

Before your business is shown to buyers, there is groundwork and preparation. We establish a range for what we think the business should sell for, determine a go to market price, assemble the business financials, and build the materials that will market it.

We look at the historical earnings of the company, review similar sized business sales and prepare a marketing package that tells the story of the business history and growth prospects.

A well-prepared business with clean financials and a compelling story is naturally more attractive to buyers.

Stage 2: Confidential marketing

A comprehensive package is assembled about your business discussing the history, growth prospects, typical customers, competitors, operations, facilities, financial overview, key employees and licensing requirements.

Stage 3: Screening buyers

Buyers sign an NDA and we have discussions with them about their timing, finances, background and business goals to make sure there is a good fit. Many people who inquire about buying a business are not qualified for various reasons. We never send any materials to buyer prospects without first having this discussion.

We explain the process we follow to manage a transaction and maintain your business confidentiality.

Stage 4: Buyer meetings and offers

Qualified buyers learn more, and eventually meet you. As buyers demonstrate their seriousness and financial readiness, more information such as a facilities video and seller video are provided. Business financials are never distributed and only made available in our offices for review. We then gather buyer disclosure documents that address any legal issues they may have or have had and send them a presentation on the agenda and expectations of a face to face meeting with the seller.

Stage 5: Negotiation and the Letter of Intent

After the buyer seller meetings we turn our attention to assembling an offer. The LOI sets out proposed price, structure, and major terms.

Stage 6: Due diligence

Once a LOI is accepted, we obtain earnest money deposits from the buyer, open a data room for secure document exchange and set a timeline to close the transaction. The buyer will ask for a specific list of items to be addressed in due diligence. They and their buying team will comb through financials, tax returns, contracts, leases, licenses, and operational details among other things. Customer names are redacted and not provided during due diligence.

Stage 7: Financing

Many small business acquisitions use SBA financing, particularly the 7(a) program and 504 program. The U.S. Small Business Administration has announced a new rule that will allow eligible borrowers to access up to $5 million through the SBA 7(a) loan program and up to $5 million through the SBA’s 504 loan program. Previously regulators had the loans coupled at a $5 million dollar limit.

If the acquisition does not include commercial real estate, the maximum loan term is 10 years, fully amortized with no prepayment penalty. If commercial real estate is included, the SBA allows a blended loan term with 10 years for the business acquisition and 25 years for real estate. However, if 51% or more of loan proceeds are allocated to real estate, the SBA allows a 25-year term. The lender runs its own review of both the business and the buyer.

A business with clean, financeable numbers moves through faster. One more reason preparation helps expedite the successful closing.

Stage 8: Purchase agreement

While diligence and financing proceed on track, the buyer’s attorney then drafts the definitive purchase agreement — the binding contract that actually governs the sale and other underlying legal documents for the sale.

This is where the basic deal terms that are outlined in the LOI become the foundation for what the purchase agreement will look like. Make sure that a transaction attorney is handling the transaction — there are very specific types of attorneys for very different legal needs, and a transaction attorney is one who handles business sales.

This is then sent to the seller’s attorney for review and modifications.

Stage 9: Closing

Once the underlying legal documents have been agreed to by all parties, the documents are then sent to the bank for their review. At this point in the transaction, generally speaking, all parties have a vested interest in seeing the transaction through to completion, and your lender and attorney will work with the buyer’s attorney to facilitate a successful close.

Stage 10: Transition

Most sales include a period of time where you stay on for a few weeks or months to work with the buyer to make key introductions, transfer business operational knowledge, and generally get the buyer up to speed with everything they need to know to run the business. The length of the training and transition would have been previously agreed to when the letter of intent was signed.

What determines whether it goes smoothly

Deals that close cleanly share a pattern:

• Financials clean and organized before listing
• A buyer and seller who are genuinely ready for either a business transition or business ownership
• No hidden surprises uncovered during due diligence

Deals that fail to close often will have unorganized financials and an unrealistic price, or a buyer and seller not truly committed to seeing the transaction through. Nearly all are avoidable with preparation, which is why so much of the real work happens before the business ever goes to market.

If you have any questions please reach out.

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Mark Herrmann is the founder of Trustmark Mergers & Acquisitions in Charlotte, North Carolina. This article is general information, not legal, tax, or financial advice.