Step-by-Step Guide to Selling Your Small Business
By Josie Brosovic | May 01, 2025
Selling a small business is a significant milestone, requiring careful planning to maximize value and ensure a smooth transition. This guide walks you through the essential steps, with insights from our team at SaaS Valuation App. For more resources, check out our due diligence checklist or get a free valuation on our homepage.
Step 1: Prepare Your Business for Sale
Start by assessing your business’s value using tools like SaaS Valuation App’s AI-driven platform. Clean up financials, ensuring 2-3 years of accurate records, and document key processes (e.g., operations, customer acquisition). Reduce owner dependency by delegating tasks to staff or outsourcing, boosting appeal to buyers.
Address risks like customer concentration (no client over 20% of revenue) and secure intellectual property (e.g., trademarks). A strong Monthly Recurring Revenue (MRR) and low churn (under 5% monthly) can lift valuations by 0.5x-1x. Our data shows businesses with documented SOPs sell 20% faster.
Step 2: Determine Your Valuation
Valuation methods vary by business size and model. For small businesses under $2 million, Seller Discretionary Earnings (SDE) multiples (2x-4x) are common, adding back owner salaries. Larger firms may use EBITDA (4x-6x), while SaaS or tech businesses lean on revenue multiples (3x-7x ARR). Key metrics include MRR, churn, and growth rate.
Use SaaS Valuation App to analyze 80+ factors, from financials to market trends, for an accurate valuation. Businesses with consistent growth (20%+ YoY) and diversified revenue streams command premiums. Our recent sales data shows average SDE multiples of 3.2x for small businesses in 2025.
Step 3: Find the Right Buyer
Engage a business broker for access to vetted buyers, or list on marketplaces like Flippa or Empire Flippers. Brokers charge 10-15% commissions but streamline negotiations. Highlight your business’s strengths—stable MRR, low churn, or scalable tech—to attract strategic buyers or private equity.
Prepare a confidential information memorandum (CIM) summarizing financials, operations, and growth potential. Our AI data room at SaaS Valuation App helps organize documents securely, impressing buyers with clear metrics like LTV/CAC (ideally 3+). Avoid sharing sensitive data until NDAs are signed.
Step 4: Negotiate and Close the Deal
Negotiations focus on price, terms (e.g., cash vs. earn-outs), and transition support. Buyers may request a 3-6 month handover to ensure continuity. Be transparent about risks, like churn spikes, to build trust. Our data shows 60% of deals include earn-outs for small businesses.
Use legal counsel to draft a purchase agreement, covering assets, liabilities, and warranties. Due diligence typically takes 30-60 days, verifying financials and contracts. SaaS Valuation App’s platform can generate reports to speed up this process. Once closed, plan for tax implications with an accountant.
Step 5: Transition and Exit
Support the buyer during the transition, training staff or transferring vendor relationships. Document all processes in a shared drive for clarity. A smooth handover boosts buyer satisfaction and reduces clawback risks. Our clients report 80% fewer disputes with detailed transition plans.
After exiting, explore new ventures or reinvest proceeds. SaaS Valuation App offers post-sale consulting to guide your next steps. Ready to sell? Contact us for a confidential valuation and expert advice to maximize your exit.
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