Gain Insider Knowledge of the Private Equity and Small Business Worlds

Private Equity Buying Small Businesses Explained

For decades, institutional capital was reserved exclusively for multi-million dollar conglomerates and large-cap corporations. But over the past few years, private equity firms have increasingly turned their attention to profitable lower-middle-market businesses, creating new opportunities for small-business founders.

While a private equity acquisition can provide growth capital, operational expertise, and financial security, it’s not the right path for everyone. Some founders want a complete exit, while others prefer to stay involved and continue growing the company alongside new investors. Knowing how private equity works in different cases is important before you make any decisions.

In this guide, we’ll explain how private equity buying small businesses works, why more firms are investing in smaller companies, what the acquisition process looks like, and how to decide whether it’s a good idea to sell to private equity.

What is Private Equity?

Private equity (PE) is an investment asset class made up of capital pools that are not listed on public securities exchanges. Instead of purchasing shares in the open market, private equity firms invest directly in businesses with the goal of increasing their value over time, before eventually selling their stake for a return.

Private equity firms typically raise capital from institutional investors such as pension funds, insurance companies, endowments, and high-net-worth individuals. They then use that capital to acquire businesses they believe have strong growth potential and opportunities to expand through acquisitions.

Small business private equity follows the same model: buy a company and then grow it to prepare it for a later sale. The difference is that small-business private equity firms focus on acquiring smaller companies (typically with EBITDA in the $1 million to $4 million range or annual revenue in the $5 million to $20 million range).

While larger private equity firms wouldn’t consider a transaction this small, they might if they are using it to add on to a company they are already invested in.

Why is Private Equity Buying Small Businesses?

Not long ago, most private equity firms focused almost exclusively on large companies with established brands and significant market share. But things have changed. In recent years, the lower-middle market has become one of the most competitive corners of the financial world.

But what’s driving this shift?

As millions of baby boomer business owners retire, around six million small and medium-sized businesses in the US are expected to change ownership by 2035, representing up to $5 trillion in enterprise value.

Apart from this obvious monetary incentive, for many investors, small businesses offer something that’s becoming increasingly difficult to find in larger ventures: room to grow. Many small businesses operate in fragmented industries where no single company or a few companies dominate the market. That gives PE firms an opportunity to grow through acquisitions, expand into new regions, improve operations, and build larger, more valuable businesses over time.

Another reason is that many founder-led businesses have already proven they can generate solid revenue and healthy cash flow, but haven’t reached their full potential. With additional capital, experienced leadership, and expert guidance, these businesses can grow much faster than they could independently.

What Type of Small Businesses do Private Equity Firms Look For?

Private equity firms generally look for established businesses with a proven track record of revenue growth, healthy cash flow, and a capable management team. Companies that rely on repeat customers, recurring revenue, and long-term contracts are often viewed as lower-risk investments because they provide more predictable earnings.

Industry also plays its role. Many business services private equity firms actively invest in sectors such as accounting, IT services, engineering, logistics, healthcare, facility management, industrial services, and specialized manufacturing. As explained earlier, these businesses often operate in fragmented markets, offering better opportunities for growth.

At the crux of it is simple economics. Let’s say a private equity firm acquires a small business for $5. They then invest $10, helping the business grow and prosper, and end up selling it for $25. That’s too good an opportunity to pass up.

Private equity for small business investors seeks small companies with great growth potential, as they have a high chance of improving that company’s value and therefore selling it for a higher price later. This is the common private equity strategy.

What Does the Small Business Private Equity Process Look Like?

Each private equity transaction is different, but most follow a similar process. Understanding what happens at each stage can help you prepare your business, set realistic expectations, and avoid unpleasant surprises along the way.

This is how a private equity deal usually progresses.

Initial Contact and Business Assessment

When a PE firm is interested in a company, they’ll first reach out to the business. Sometimes, this introduction is made via an intermediary. From there, both parties will have a conversation, and if there’s mutual interest, move forward with preliminary discussions.

Confidentiality Agreement and Information Exchange

At this stage, the private equity firm will ask the company to jointly sign a confidentiality agreement before going over any sensitive information. The business owner will then share financial statements, operational data, customer information, and other documents that help the firm evaluate their business.

Indicative Valuation and Letter of Intent (LOI)

If the initial review is positive, the firm will follow it up with a business valuation to figure out whether acquiring the business would be a profitable venture or not. Once they are satisfied with the valuation, the sale process begins, and both parties voluntarily execute a letter of intent. The LOI outlines the proposed purchase price, deal structure, exclusivity period, and other key terms before formal due diligence begins.

Due Diligence

During due diligence, the small business private equity firm verifies the information provided by the business owner. It includes in-depth reviews of financial records, legal documents, customer contracts, operations, tax matters, and potential risks.

This due diligence process is certainly time-consuming, but it’s also a prerequisite for business acquisitions. It also provides an opportunity for the seller to showcase how valuable their company is.

Deal Structuring and Negotiation

Once the due diligence is complete, both parties negotiate the final purchase agreement. This includes the purchase price, payment terms, any rollover equity, earn-outs, transition responsibilities, and other conditions that will apply after closing.

Financing and Closing

Finally, after all the agreements have been finalized and financing secured, the transaction closes. Ownership officially transfers to the buyer, funds are distributed, and the post-closing transition begins. Depending on the deal structure, the former owner may or may not stay involved for a defined period of time to support the business under its new ownership.

The Pros and Cons of Private Equity Buying Small Businesses

Selling your business to private investors can be rewarding, but it’s not the right choice for everyone. The decision of whether or not to sell depends on your financial goals, your desired level of involvement after the sale, and your long-term vision for the business.

Why sell to private equity?

Access to significant growth capital
Opportunity to realize the value you’ve built with your business
Expert guidance and operational expertise
Ability to retain equity and benefit from future growth
Stronger resources for expansion and acquisitions

Why not sell to private equity?

You may give up partial or complete control of the business
Performance expectations and reporting become rigid
Strict timelines for exit
The firm may change the business culture and operations

Ultimately, there’s no universal right or wrong choice. If your goal is to accelerate growth, solve succession challenges, or realize the value of your business while staying involved, selling to private equity can be an excellent option.

However, if maintaining complete independence and preserving the business legacy and culture are your priorities, another exit strategy may work better for you.

Evaluation Criteria Used by Equity Investors for Small Businesses

A profitable business doesn’t automatically receive a premium valuation. Before making an offer, equity investors for small businesses assess several financial, legal, and operational factors to understand both the company’s current performance and its future potential, to value it properly.

The key metrics considered during business valuation include:

Revenue Growth

Consistent revenue growth demonstrates that the business is expanding and has a sustainable demand for its products or services. Investors generally favor companies with stable, predictable growth over those that experience sharp fluctuations from year to year.

EBITDA

A business’s earnings before interest, tax, depreciation, and amortization (EBITDA) is one of the most important metrics used for valuation, as it measures the company’s operating profitability before investing and financing gains. Many private equity firms apply an EBITDA multiple (the factor multiplied by the company’s EBITDA) to estimate enterprise value.

Cash Flow

Strong cash flow indicates that a business can fund its day-to-day operations, invest in growth, and meet other financial obligations. Healthy cash flow also reduces investment risk and benefits both the buyer and the business by supporting ongoing operations, hiring, expansion, and reducing reliance on external financing.

Management Team

When private equity firms invest in a business, they also invest in its people. An experienced leadership team and well-defined operational procedures give buyers the confidence that the company can continue performing well after the transaction.

Recurring Revenue

Businesses that generate recurring or contract-based revenue are generally seen in a more positive light because it’s easier to forecast their future income. Subscription models, service agreements, and long-term customer contracts all contribute to better revenue stability and are looked at by PE firms.

Earnings Quality

Investors tend to look beyond reported profits to understand how sustainable those earnings truly are. One-time gains, irregular expenses, and inconsistent accounting practices all affect a business’s valuation.

Market Conditions

Valuations do not exist in a vacuum. Broader market conditions, such as prevailing Federal Reserve interest rates, credit availability, industry-specific tailwinds, and competitive activity, can all influence how investors assess risk and determine valuation.

Comparative Sales

Private equity firms heavily analyze a business’s local and national competitive moat. They look at your pricing power, customer concentration risk (whether a single client accounts for more than 15% of your revenue), and historical transaction data from recent comparable sales in your sector. Comparison companies of similar size, industry, and performance help investors determine whether a proposed valuation aligns with current market conditions.

How to Structure a Deal When You Sell to Private Equity?

Small business private equity transactions are often owner-focused, so there’s an emphasis on ensuring that the previous owners’ personal and financial goals are met. This can look like the owner remaining more involved in the company than they would be in a transaction with a larger private equity deal.

The exact nature of the deal depends on who retains ownership, how the purchase price is paid, and the contractual terms that govern the transaction.

Ownership Structures

The ownership structure determines how much of the business changes hands and whether you’ll remain an owner in any sense of the word after closing. There are four most common types of ownership structures.

Full Buyout

The PE firm acquires 100% of the business. The former owner receives the agreed purchase price at closing, and promptly exits the company. In some cases, founders may stay on temporarily just to support the transition.

Majority Investment

The firm purchases more than 50% of the company, while the owner retains a minority stake. This structure allows the owner to realize a good portion of the business’s value while continuing to be involved in its future growth.

Minority Investment

The investor purchases a smaller ownership stake and puts in growth capital while the owner retains majority control of the business. This structure is considered the best to fund expansion, acquisitions, or other strategic initiatives.

Recapitalization

Recapitalization allows business owners to sell part of the business, continue to be a partial owner, and receive additional proceeds when the PE investor sells the company again. This option provides owners immediate liquidity without stepping away from the business entirely.

Payment Structures

The payment structure determines when and how you will receive the proceeds from the sale once the transaction is closed.

Cash at Closing (Cash-Out)

This is the amount owners receive when the transaction closes. For those who seek liquidity, a higher cash component gives them better financial certainty because it isn’t tied to the future performance of the business.

Rollover Equity

Instead of cashing out completely, many founders reinvest a portion of their proceeds into the newly acquired business. If the private equity firm grows the company and sells it at a higher valuation in the future, your retained equity could generate a second payout (also called the “second bite of the apple”).

Earn-Outs

An earn-out is deferred compensation that’s only paid if the business achieves specific performance targets after the deal closing. These targets may be based on revenue, EBITDA, customer retention, or other agreed-upon milestones.

Seller Notes and Performance Notes

Instead of paying the entire purchase price upfront, the buyer firm may agree to pay a portion over time through a seller note. The seller effectively lends part of the purchase price to the buyer and receives scheduled payments, usually with interest.

Other Key Deal Terms

Beyond ownership and payment, most private equity transactions include additional terms that define how the deal is structured and what each party’s responsibilities are.

Non-Compete and Employment Agreements

Many transactions require sellers to sign a non-compete agreement. It means they can’t start or join a competing business for a specified period after the sale. On the other hand, if an owner chooses to remain involved after the sale, the deal may also include an employment or consulting agreement outlining their responsibilities, compensation, and expected transition period.

Debt and Leverage

Private equity acquisitions frequently involve a combination of equity and debt financing, commonly known as a leveraged buyout (LBO). In such a case, rather than funding the entire purchase price with investor capital, the acquiring firm may use borrowed funds to complete the transaction. This model can improve investment returns, but at the same time, it also increases the need to maintain healthy cash flow to service debt.

Should You Sell to Private Equity?

Selling to private equity can be a smart option if you’re looking for growth capital, a structured business transition, or a flexible ownership structure going forward. The right private equity partner can also preserve your company’s mission and culture, while helping you achieve your personal and financial goals.

For example, if you own a family business but don’t have a successor ready to take over, a PE firm can help build a new leadership team and ensure your business continues to thrive after your exit. On the other hand, if you’ve already identified a successor but they lack the capital to buy you out, a private equity partner can provide the financing needed to make the transition possible while supporting the next generation of leadership.

Private equity acquisition can also be an attractive option for businesses that have outgrown their current resources. Beyond capital, PE firms also bring operational expertise and industry relationships that can help the business reach its next stage.

You’re a strong candidate to sell to PE firms if:

You’re approaching retirement or planning an ownership transition
Your business has strong financial performance but needs capital to scale
You want to de-risk by taking some money off the table while retaining future upside
You’re looking for a strategic business partner with operational expertise
Your company operates in an industry that continues to attract strong private equity interest

On the other hand, selling may not be the best fit if maintaining complete control is your highest priority. Investors typically expect an active role in strategic decisions and focus on increasing the company’s value over a defined investment period.

If you’re not comfortable sharing decision-making or adapting to a more structured operating environment, another exit strategy may better align with your goals.

How to Choose the Right Firm?

It’s important to find a small business private equity firm that has the capital and expertise to make your goals a reality. Vetting the firm is the most important part of this process.

Start by evaluating the firm’s experience with businesses similar to yours. Ask about previous acquisitions, how they supported those companies, and what their investment strategy looks like. Also focus on whether they have completed many successful transactions in the past, and whether their acquired companies have performed well.

The intangible aspects are perhaps even more important. Will the firm preserve your company’s legacy and mission? Do you think your vision aligns with the PE firm’s own vision for the business? Will key employees be retained? Will current customers be taken care of? Will the facilities be maintained and reinvested in?

Remember, a successful private equity partnership is built on trust, transparency, and shared goals, not just the highest purchase price.

Conclusion

Private equity can offer the capital, expertise, and strategic support needed to help your business thrive. Whether you’re planning for retirement, pursuing growth, or just looking at your options, this is a partnership definitely worth exploring.

At 1719 Partners, we are proud to be committed to realizing company owners’ visions and carrying the torch after them. For us, investing in companies is about more than generating positive returns; it’s about making a positive impact.

If you’re interested in working with us, or simply want to know more about what we do, feel free to send us a message here.

Frequently Asked Questions (FAQs)

What is an equity investment small business?

An equity investment small business transaction involves an investor purchasing an ownership stake in a privately held company in exchange for capital, strategic guidance, or usually both.

Should I sell my business to private equity?

You should sell to a PE firm if you want growth capital, succession support, or a flexible exit strategy. Contrarily, if maintaining control over the business is your priority, another option may be a better fit.

What to do if a private equity firm contacts me?

Don’t accept or reject the offer impulsively. Understand why they’re interested, start an informal discussion, think about whether you’d be willing to sell, and consult an M&A advisor before deciding whether to participate in the further process.

Which industries attract business services private equity firms?

Business services private equity firms commonly invest in IT services, accounting, healthcare, logistics, engineering, industrial services, and other established businesses with recurring revenue and strong growth potential.

Will I retain any equity after selling to private equity?

Possibly, depending entirely on the deal structure. PE deals include rollover equity, and majority and minority acquisitions that allow owners to retain stake and benefit from future growth after the acquisition.

What’s the difference between private equity and angel investment?

Private equity firms typically invest in established and profitable businesses. The goal of equity investors for small businesses is increasing the business’s value and exiting at a return. Meanwhile, angel investors usually fund early-stage startups, accepting higher risk and longer investment horizons.

How long does the private equity acquisition process take?

Most transactions take four to six months to finalize, depending on the business size, due diligence, negotiations, and financing. Complex deals involving larger businesses and other variables may take longer.

16 May 2026/by Scott Dickes

Finance, Industry Insights

How to Increase Customer Lifetime Value

Customer lifetime value is a powerful metric. In general, the higher your customer lifetime value and the more customers you have, the more revenue you can expect to make from your business. In turn, this can lead to increased profit. So, it is helpful to know how to increase customer lifetime value.

This post discusses the importance of customer lifetime value, how to calculate customer lifetime value, and, ultimately, how to increase customer lifetime value.

What is Customer Lifetime Value?

Customer lifetime value is the total amount of revenue a business expects to earn from a single average customer, over the entire business relationship. What makes this metric so powerful is that it is predictive: it estimates future revenue, which helps inform current business plans.

In this blog we use revenue, but profit is another way to consider customer lifetime value. Revenue is the total amount of money a customer or customers brings into the company, without considering expenses. Profit is the amount of money a company makes per customer or customers, when expenses are subtracted. When looking to increase customer lifetime profit, one can consider how to lower business expenses in addition to increasing customer retention. We do not go into that aspect of customer lifetime profit in this post.

How to Calculate Customer Lifetime Value

There are multiple formulas one can use for how to calculate customer lifetime value. They vary in complexity, with some models incorporating discounts, fluctuating costs, or customer trends. The more long-term customer data you have, the more detailed your calculation can be. A high-level equation to calculate customer lifetime value (CLV) is as follows:

CLV= Average Customer Revenue x Retention Period

In this simple equation, retention period stands for the total time period in which the average customer remains a customer. To obtain a more accurate, detailed customer revenue, you might create a predictive model. Such a model may predict the average customer to bring in $5,000 of revenue in year one, but perhaps this customer is commonly upsold to $10,000 revenue in year two. Historical customer data allows such complexities to be incorporated into the customer lifetime value formula.

The Importance of Customer Lifetime Value

When running a business, it can be easy to focus on acquiring new customers. While closing new deals is important for revenue, so is maintaining existing customers. In other words, if business A has less customers than business B but business A’s customer lifetime value is much higher, business A could make more revenue. At the same time, it is often easier to upsell current customers by expanding their selected products or services than it is to acquire new customers. A customer who already has a relationship with a company is more likely to buy more products or services than someone who would be a new customer. In an ideal world, a business focuses on both customer acquisition and retention.

So, a higher customer lifetime value can pay off exceptionally well for a business. The next logical question is, how to increase customer lifetime value?

How to Increase Customer Lifetime Value

Overall, there are two aspects to increasing customer lifetime value. The first principle is to not lose customers. This means employing strategies to increase retention. The second is to increase the revenue that each existing customer brings in– or increasing customers’ products and services.

While exact strategies to increase customer lifetime value vary by industry and company, below are some general guidelines to follow.

Create a Content Stream

In the digital age, creating content consistently no longer just sets you apart– it is required to maintain a strong business presence. A solid content pipeline increases company authority, causing current and future customers to trust you. A customer who trusts you is vastly more likely to expand services or, at the very least, not change loyalty to a different company. Consistently posting new content also keeps your company top of mind for current customers, increasing the likelihood of expanding products or services.

Creating content that stands up to the test of time also gives value to your customers between sales. When creating content, focus on holding attention by delivering high-value, educational tips and insights. When customers see the free value you deliver, they are likely to believe in your product and purchase your services. So, where to post this content? Depending on the industry, Instagram, LinkedIn, and blog posts are all viable platforms.

Email Marketing

Like creating a content stream, email marketing is a great way to remain top of mind for customers. Unlike publicly available content, emails carry a personal touch, as they arrive directly to customers’ inboxes. This gives you a chance to deepen customer relationships, expanding trust and brand loyalty. Company news, educational content, and stories are all great content pillars to focus on in emails.

Gather Customer Feedback

Running quick, easy surveys helps your customers remain engaged online while giving you direct insight into their preferences. For example, run polls on Instagram around which type of content they prefer, what they want to hear more of, or even which product they like best. Then implement this feedback into your offerings. For example, if they love a certain feature in your software, see if you can expand upon it or focus on promoting it.

Focus on Customer Service

Give customers as much support after they invest in your offerings as when trying to make the original sale. Could you expand your customer service team? Increase response time online? Inadequate customer service is a quick way to lose customers to a competitor. Today, users expect a fast online response time to any issues.

Improve Customer Lifetime Value: Business Growth

While these strategies are not always easy to implement, focusing on customer retention is essential to business growth. The more customers you have, the more stable your business is. In addition, happy customers are likely to spread the word about your business– giving you another customer acquisition stream.

Have questions about these strategies, or are wondering what makes the most sense for your business? We are happy to have a conversation. Simply reach out.

26 April 2026/by Scott Dickes

Industry Insights

The Ultimate Selling a Small Business Checklist: A Step-by-Step Guide for Owners

Selling a business can feel as overwhelming as it feels exciting. Once you have decided to sell, you’ll likely deal with many questions: how to receive a business valuation, what documents to prepare, whether to use a broker or not, and more.

While every transaction is unique, most successful business sales follow the same core steps. It all starts with preparation. From emotional preparation to sorting out the legal and financial documentation, the right preparation sets the groundwork for a successful exit. Next, a business valuation readies you to enter negotiations with prospective buyers so you can sell your business for what it’s worth. Finally, you move on to the due diligence and how to successfully close the deal.

This selling a small business checklist will walk you through all these steps, highlight common mistakes that can sabotage the sale, and explain how to prepare for a smooth transition.

Selling a Small Business Checklist: 8 Essential Steps

Successfully selling a company requires more than just finding a buyer. It needs careful planning, financial and legal documentation, and a clear business exit strategy. Use the following steps to ensure you are fully prepared before going to market.

Are You Really Ready to Sell?

Before preparing documents or speaking with potential buyers, internal readiness is the first step in selling your business. Whether you are planning the sale to pursue a new venture, secure retirement, or pass on the business to a family member, fully understanding the rationale behind your own decision is important. Your reason for selling will influence everything from your preferred buyer to the negotiation strategy to the transition timeline.

Ask yourself:

Do I have a good reason to sell?
Am I emotionally prepared to step away from the business?
Is the business performing at its full potential?
Have I considered timing and market conditions for the sale?
What are my goals after the sale is done?

Apart from this introspection, there are also external factors to consider. Times of widespread economic decline would be a bad time to set up a business for sale. It can be helpful to examine the environment around your business and the industry to get an idea of whether it’s a fruitful time to sell.

Clarifying these priorities early helps shape the rest of your selling process and prevent any uncertainty from creeping up down the line.

Obtain a Professional Business Valuation

One of the biggest mistakes business owners make is estimating their company’s value based on emotion rather than objective financial data. Getting a professional estimate of what your business is worth can help you decide whether to sell it or hit pause and make some improvements first. It also gives prospective buyers the assurance that your asking price is fair.

Data you need for a proper business valuation:

EBITDA: Measures the business’s operating profitability by excluding financing, taxes, depreciation, and amortization from the calculation.

Historical financial performance: Demonstrates the consistency of revenue, profit, and cash flow, helping buyers assess long-term business stability.

Revenue growth trends: Shows whether the business is thriving, stagnating, or declining, influencing both buyer confidence and valuation potential.

Adjustments for owner-related expenses: Removes discretionary or non-recurring owner expenses to reflect the business’s true operating value.

Benchmarking against comparable sales: Compares your business with similar, recently sold companies to determine a realistic market valuation.

Business assets and liabilities: Evaluates tangible and intangible assets, debts, and other obligations to reflect the company’s overall financial position.

Multiplying the EBITDA by your company’s enterprise multiple will give a rough estimate of your business valuation. For a more accurate estimate, it’s best to consult a trustworthy advisor or use a business valuation calculator.

Knowing your business’s valuation allows you to only entertain prospective buyers who are willing to pay that market value, reducing the chances of you selling for less than you should have or wasting time with irrelevant offers.

Organize Your Financial and Legal Documentation

A buyer’s confidence heavily relies on the quality of your business records. Incomplete or inaccurate business information can delay negotiations, reduce your business’s perceived value, or even cause a deal to fall apart during due diligence.

Before listing your business for sale, gather and review key information and documents including:

3+ years of financial statements
Tax returns
Accounts receivable and payable summaries
Fixed asset depreciation schedule
Customer contracts
Supplier agreements
Employment contracts and employee organization chart
Licenses and permits
Lease agreements
Appraisal or valuation (if any)
Environmental studies (if any)
Corporate formation documents

This sounds like a lot, but it’s important to have these documents ready for buyer scrutiny. You may also want to keep documents on your recent business successes, like positive customer reviews and future marketing plans, at hand.

All of this gives prospective buyers a snapshot of your growth potential, which directly impacts your company’s value. Getting a head start on this paperwork boosts buyer confidence and can accelerate the sale process.

Clarify Your Exit Strategy

Selling your business doesn’t mean you just accept the highest offer. Your exit strategy determines the type of buyer you pursue, how the transaction is structured, and what your involvement will look like after the closing.

Start by defining your priorities:

Are you seeking a full exit or partial sale?
Is your priority the maximum sale price or preserving the company’s legacy?
Are family members involved?
Have you considered the tax implications?
Are you comfortable with an earn-out or seller financing?

Your answers to these questions will influence the negotiations and help you evaluate competing offers beyond their headline value. For example, selling to a family member is very different from a buyer who wants to absorb your company and rebrand it.

There’s also the financial aspect of your decision. Asset sales, stock sales, installment payments, and recapitalizations can each have different tax consequences and risk profiles. For these reasons, it’s best to consult with experienced financial, legal, and tax advisors before marketing your business to structure the transaction in a way that aligns with your long-term financial goals.

Preparing Business for Sale Checklist

This is the stage to finally prepare your business for sale. The buyer will conduct due diligence before the deal closes, so it’s important that the business looks good both on-site and on paper.

Follow this preparing business for sale checklist at this stage:

Resolve any outstanding legal issues
Clean and organize facilities
Repair or replace faulty equipment
Reduce owner dependency
Document standard operating procedures (SOPs)
Review customer and supplier agreements
Strengthen recurring revenue and operational efficiency
Strengthen the management team
Lock in key contracts if possible
Consider obtaining a sell-side QofE (quality of earnings report)

This stage of your selling a small business checklist helps position your company as a low-risk, high-reward investment, increasing buyer interest and giving you better leverage during negotiations.

Decide How to Sell the Business

Now is the time to choose how you want to sell the business. The approach you take will directly impact your sale price and timeline. While some owners prefer to manage the process independently, others choose to work with professionals who can identify qualified buyers, maintain confidentiality, and negotiate favorable deal terms.

The most common options include:

Selling independently: Gives you complete control over the process and can reduce advisory fees. However, you’ll also be responsible for marketing the business, qualifying buyers, negotiating, and coordinating legal and financial documentation.

Working with a broker: Brokers help market your business confidentially, screen potential buyers, coordinate meetings, and handle negotiations, all for a brokerage fee.

Hiring an M&A advisor: For larger transactions, mergers and acquisitions advisors provide expert guidance, prepare marketing materials, approach qualified buyers, and manage competitive bidding to maximize your business’s value.

If you want to handle the process on your own, you can learn more about selling a small business without a broker in our detailed guide.

Prepare for Due Diligence

Due diligence is an essential part of the selling a business checklist. While it can be a headache, without due diligence, your business cannot be sold properly. Here’s what proper due diligence typically entails:

Financial Audit Readiness

Buyers will carefully examine your financial performance to verify that your reported earnings correctly reflect the actual health of your business. Be prepared to provide income statements, balance sheets, cash flow statements, tax returns, and revenue forecasts and budgets for validation.

Data Room Preparation

A virtual data room allows buyers and their advisors to securely review confidential business information throughout the transaction. Your data room should typically include:

Corporate formation documents
Customer and supplier contracts
Employment agreements
Intellectual property documentation
Insurance policies
Licenses and permits
Lease agreements
Litigation history
Compliance records
Operational policies and procedures

Keeping these documents organized and up-to-date helps buyers find information quickly, demonstrates your professionalism, and speeds up the review process.

Operational Review

Buyer due diligence extends beyond financial statements. They also evaluate how efficiently your business operates and whether it can continue performing after ownership changes. They may assess your customer and supplier relationships, operational workflows, sales pipeline, and business risks.

Businesses with documented systems, reliable management, and efficient operations inspire confidence in the buyers and make for fewer complications during due diligence.

Successfully Close the Deal

After the due diligence is complete and both parties have agreed on the transaction terms, the focus shifts to completing the sale. This will be the final part of the selling your business checklist. It involves:

Selecting a buyer and negotiating a letter of intent
Completing the due diligence
Negotiating the purchase agreement and all ancillary legal documents
Securing the required financing by the buyer
Planning employee and customer retention and communication
Closing the transaction and executing the transition plan

These points may look easy to implement, but in reality, closing a transaction is an arduous process that’ll take around 90 days of your undivided attention. Depending on the agreement and the nature of the transition, you may remain involved for several weeks or months to introduce customers, support employees, transfer knowledge, and help the new owner maintain business continuity.

Common Mistakes to Avoid When Selling a Business

Even the most profitable businesses can lose value if owners make avoidable mistakes during the sales process. Following a structured selling a business checklist helps reduce these risks.

The common pitfalls to avoid during this entire process include:

Overpricing the business: An unrealistic asking price discourages qualified buyers, increases time on the market, and often results in lowball final offers.

Poor record-keeping: Disorganized legal and financial records create uncertainty for the buyers, slow down the due diligence, and undermine your business’s reported performance.

Delaying preparation: Waiting until you’ve listed the business for sale leaves little to no time to improve its operations, organize records, or resolve any other issues.

Hiding issues from the buyers: Concealing financial, legal, or operational issues can damage trust, derail due diligence, and jeopardize the entire transaction. If the concealment is discovered after the sale, you may be staring down an expensive lawsuit.

Not understanding the tax implications: Ignoring tax planning may increase your tax liability and reduce the net proceeds from the business sale.

Failing to qualify buyers: Engaging with unqualified buyers wastes valuable time and increases the risk of exposing confidential information unnecessarily.

Taking care to avoid these mistakes and being fully transparent with buyers from the start helps build trust and minimize transaction issues down the road.

Treating Selling a Business Checklist as a Process

Selling a business isn’t a single event, but a process that unfolds over several months, with every step building on the previous one.

Rushing the process often leads to unnecessary concessions, lower valuations, and preventable delays. On the other hand, business owners who prepare early have more time to strengthen financial performance, organize documentation, and address any issues before buyers discover them.

As your business evolves and negotiations progress, revisit each step of the selling your business checklist to ensure nothing has been overlooked. Regularly updating your checklist allows you to respond confidently to buyer requests and avoid unpleasant surprises during the entire process.

Conclusion

No two business sales are identical. Market conditions, buyer expectations, industry trends, and your personal goals will all influence the transaction. However, owners who prepare early and follow a set plan are better positioned to negotiate favorable terms.

If you’re considering selling your business, have any questions on preparation, or are simply curious about the value of your business, contact us at 1719 Partners. Let’s plan the next chapter for your business together.

Frequently Asked Questions (FAQs)

How do I prepare my business for sale?

Follow the preparation guidelines in this selling a small business checklist by organizing financial records, obtaining a professional valuation, resolving legal issues, and preparing for due diligence before approaching potential buyers.

What factors influence the sale value of a business?

The sale value of a business depends on its profitability, EBITDA, revenue growth, customer concentration, market conditions, assets, liabilities, industry outlook, operational efficiency, and future growth potential.

How long does selling a business take?

Following the selling a business checklist, most small business sales take six to twelve months to finalize, depending on the valuation, buyer demand, due diligence, financing, negotiations, and transaction complexity.

Can the same selling a business checklist work for small and enterprise businesses?

Yes. The core steps of the checklist remain the same. The only major difference is that enterprise businesses typically require more extensive due diligence, regulatory compliance, financial reporting, and transaction planning.

How to prepare my employees for a business transition?

A major part of the selling your business checklist is preparing your employees. The way to do it is communicating at the appropriate time, documenting responsibilities, retaining key employees, maintaining business continuity, and creating a clear transition plan with the new owner.

How do I know if it’s the right time to sell my business?

Some tell-tale signs include your business performing well, favorable market conditions, and alignment of the sale with your personal, financial, and retirement goals. Most importantly, the right time to sell is when you’re fully ready to do so.

Should I include tax planning in my selling a small business checklist?

Absolutely. Early tax planning helps you minimize liabilities, decide on the best deal structure, and maximize the after-tax proceeds you’ll receive from the business sale.

Do I need to update the selling a business checklist during the sale process?

Yes. The business environment doesn’t stay the same for long. There are always new developments in the negotiation process, buyers request changes, and due diligence, legal, and financial requirements keep changing. So, it’s always a good idea to keep your checklist updated according to these changes.

26 February 2026/by Scott Dickes

Finance, Industry Insights

What is a Finder’s Fee?

What is a finder’s fee? When used correctly, finder’s fees benefit all parties involved. Often, without an intermediary earning a finder’s fee, a transaction between two parties would not occur. This post explains what a finder’s fee is, how it works, and includes a finder’s fee agreement sample.

Finder’s Fee Meaning

A finder’s fee, also known as a “referral fee” is a way for one party to compensate another for a referral. The earner of the fee, or “finder,” typically provides an introduction of two parties (often a buyer and a seller) who did not previously know each other. Because the introduction is potentially valuable to at least one party, one or both of the parties are willing to pay a fee for the introduction. Hence the term Finder’s Fee.

Most finders’ fees are contingent upon some event or transaction actually occurring. In other words, the finder is not compensated until/unless the parties find the introduction valuable and complete a transaction. Upon the official transaction, the finder earns the fee.

Finder’s Fee Agreement

While it is possible that a finder could have a verbal arrangement with another party, they are usually documented in a written contract. For example, if you have a friend who would like to sell his mint condition 1972 Chevrolet Corvette, he might agree to give you a $5,000 finders fee if you bring him a qualified buyer and the transaction closes. A transaction like this might be a handshake agreement and there is no need for a written contract. On the other hand, if your neighbor wants to sell his $100 million company, and you know a potential buyer, finalizing the terms of your engagement in a written contract is an important step in the process.

Who Pays the Finders Fee? The Buyer or the Seller?

Either one! The Finder typically enters into a contract (“Finders Fee Agreement”) with either the buyer or the seller. In rare cases, the Finder might enter into a contract with both the buyer and the seller.

What Is Included in A finder’s Fee Contract?

Please see the sample Finder’s Fee agreement at the end of this post. A finder’s fee contract includes key provisions including but not limited to:

Names of all parties involved

Length of the contract

What services are being provided and what has to occur for the fee to be earned

Confidentiality and non-circumvention

How is the fee calculated and paid

How are Finders Fees Calculated

Finders Fees are negotiated between the parties in the agreement. The fee is generally aligned with the value of the introduction and the value of the transaction. When selling a business, the Finder’s Fee is frequently based on the Lehman Formula. See the example below for a Fee Agreement that utilizes the Lehman Formula.

Does Private Equity Pay Finders Fees

Yes! Private equity firms regularly enter into buyer paid fee agreements that are are paid upon a successful transaction closing.

Finder’s Fee Agreement Sample

Note: This is an example of a Finder’s Fee, and it is not intended for your use. 1719 Partners is not providing legal advice. This sample agreement uses a Lehman formula.

This Fee Agreement (“Agreement”), dated as of [insert date here], sets forth the terms and conditions upon which [insert finder name or legal entity here] (“Finder”) shall act as non-exclusive finder for [insert buyer or client name here](“Client”) and/or its assigns for two (2) years from the date hereof (“Term”). In such capacity, Finder shall introduce representatives of the Client to the owners and senior executive officers of [insert target company name here] (“Target”)and shall obtain and provide information regarding the business affairs and prospects of Target, including detailed financial statements and any other information reasonably requested by the Client, in connection with any due diligence investigation Client may undertake (the “Services”).

Client hereby engages and agrees to cause Finder to be compensated if Finder’s introduction to Target during the Term results in Client purchasing 25% or more of the capital stock of Target, or all or substantially all of the assets of such candidate, within 24 months of the date Finder introduced such qualified investment candidate to Client (a “Transaction”).

In consideration of Finder’s provision of the Services, if a Transaction is consummated, a finder’s fee (the “Fee”) shall be paid, or caused to be paid, by Client to Finder on the day of the closing of the Transaction, such Fee to be based on the Purchase Price (as defined below) paid by Client in connection with the Transaction. Such fee shall be computed as follows:

5% of the first $1,000,000 of the Purchase Price, plus

4% of the next $1,000,000 of the Purchase Price, plus

3% of the next $1,000,000 of the Purchase Price, plus

2% of the next $1,000,000 of the Purchase Price, plus

1% of the balance of the Purchase Price.

The “Purchase Price” is defined as the aggregate consideration (whether in the form of cash, assumed debt or other non-contingent or non-deferred contribution of value) paid by Client to acquire its equity, debt or other interest in Target. In the event that any portion of the consideration paid by Client to acquire its equity, debt or other interest in Target is contingent or deferred, such consideration will be included in the Purchase Price.

For purposes of this Agreement, the term “qualified investment” shall mean an investment (i) in which Client or its affiliates obtains control of a corporation, limited liability company, partnership or other entity over which it did not have previously have control; and (ii) with respect to which Client has made no contacts with any parties related to such investment, has taken no steps to consider or pursue, has not learned of through any source other than Finder, and about which Client has no information. For purposes hereof, “control” of an entity shall mean the ownership of more than 25% of the equity securities of such entity, or the power to direct or cause the direction of the management and policies of such entity. In the event that Finder discloses to Client the name and address of Target that Client determines is not a qualified investment candidate, or if Client is already aware of Target, Client shall so notify Finder within five (5) business days of such introduction.

During the Term, the relation between Finder and Client is that of unaffiliated third parties. Finder and its officers, directors, employees and agents shall, under no circumstances, be deemed agents, employees, partners or representatives of Client.

Each party shall bear its own costs and expenses incurred in connection with the undertakings contemplated by this Agreement.

This Agreement shall be construed under the laws in the State of [insert state here].

This Agreement may be signed in counterparts, each of which shall be an original, but all of which together shall constitute one agreement.

IN WITNESS WHEREOF, the undersigned have executed this agreement on the day and year first above written.

Client: Finder:

What is a Finder’s Fee: In Short

In summary, a finder’s fee is a way to reward an intermediary for linking together two parties who otherwise likely would not have met. It incentivizes the “finder” to forge rewarding connections, as the finder is not compensated until the deal closes. If you have any questions on how finder’s fees work in private equity, 1719 Partners is happy to answer them. Simply contact us here.

15 February 2026/by Scott Dickes

Finance, Industry Insights

Financial Reporting in Due Diligence

Most business owners have a good grasp on their internal financial statements and ask their outside accountant to prepare the company tax returns. As a result, most business owners are less familiar with the nuances of their tax return, and may not be aware that the information in the tax return might be different than their internal financial statements.

A business owner recently asked me, “Why do you need to meet with my accountant and review the tax returns?” It’s a good question. Why review both the financial statements and the tax returns? Isn’t this a duplication of effort?

The answer is that the reconciliation between the two is a material aspect of due diligence. Tax returns are often more reliable than internal financial statements. They are prepared with an eye towards being audited by the IRS instead of just for internal use. The exercise sometimes brings to light useful information.

In addition, tax regulations and accounting regulations often differ on certain aspects. For example, the tax return may use accelerated depreciation whereas the financial statements may use a straight line depreciation method. This will create a book/tax difference. Also, many business owners are not accounting experts and might not fully understand the differences between the two statements.

I’ll give you a recent example:

During negotiations, the owner of a business said his salary was $150,000 and that he wanted to continue that going forward as an employee of Newco. This made sense to us and we agreed. We entered into a letter of intent based upon the company’s income statements which we assumed included the $150,000 salary. But what we learned after reviewing the tax returns was that the owner’s $150,000 salary was in fact a distribution and as a result, the $150,000 cost was not included in the income statements. So our understanding of the cash flow of this business was overstated by $150,000. Said another way, the $150,000 salary lowers EBITDA by $150,000. Using a 5X multiple, this equates to $750,000 of enterprise value. Not a small number. The owner wasn’t intentionally trying to mislead us, but without digging in and comparing the income statements to the tax returns this may have slipped through.

1719 Partners is an experienced buyer and understands the importance of thorough due diligence. If you are interested in selling your business and want to better understand the diligence process, or if you are a management team seeking to purchase a business, please contact us. We would be happy to share our thoughts with you.

15 October 2025/by Scott Dickes

Finance, Industry Insights

What Is an Earnout in M&A?

If you are considering selling your company, it is important to know an earnout is an option. An earnout can be the bridge between your asking price and what the buyer is willing to pay, allowing you both to accomplish your goals. Understanding how an earnout works allows you, as the seller, to consider all your options.

This guide explains what an earnout is, when it is used, how it is structured, and common pitfalls.

What Is an Earnout?

An earnout allows both buyer and seller to settle on a purchase price. In short, an earnout divides up the total purchase price into an immediate payment and a deferred payment. For example, if the seller believes his company to be worth $120 million and the buyer thinks its value is $90 million, an earnout can cover the difference. In this case, the buyer would pay $90 million upfront and structure an earnout for the remaining $30 million.

An earnout is also contingent upon the performance of the newly purchased company. In other words, there are strings attached. This motivates the seller to increase company performance post acquisition, which reduces the risk on the buyer. Company performance is objectively measured by key metrics that both parties determine beforehand. For example, these metrics can look like meeting a certain revenue or EBITDA margin, or retaining key customers.

Earnouts in M&A: When Are They Used?

There are many situations where using an earnout makes sense. For example, perhaps the seller has just acquired a big customer or launched a marketing campaign, and expects the business to exceed past performance. The seller believes the purchase price should reflect this advantage, while the buyer is skeptical. After all, from the buyer’s perspective, his or her concerns are valid: what if the big customer falls through, or the marketing initiative fails?

With an earnout, the seller receives down-the-road payments when the business does, in fact, meet expected performance goals. If the business does not, then the buyer does not have to make the corresponding payment to the seller. Below are some specific situations where an earnout makes sense.

Bridge a Valuation Gap

If the buyer and seller want to work together but do not see eye to eye on the purchase price, an earnout allows them to move past this hurdle. Another common way to bridge a valuation gap is using a seller note. However, a seller note is not contingent on company performance. While a seller note is nice because it gives the seller guaranteed later payouts, it does not allow the payments to increase based on company performance. Effectively, the payment cap is lower. This may be undesirable if the seller believes his or her company will perform highly in the near future.

Improve Ownership Transition

Passing the baton is not without risk. To reduce risk of company harm during the ownership transition, the buyer may want to include an earnout. This works because a later earnout payment motivates the seller to set up the company for continued success. In other words, the seller is financially motivated to see the company continue to perform, rather than simply wanting to “get paid and get out.” When the buyer and seller’s interests are aligned in this way, the company has more support to succeed.

Sell to the Right Buyer

Sellers often want to hand the business off to someone who will continue the business legacy. If the seller finds a buyer with a shared vision for the company, but the parties do not agree on purchase price, this can be disappointing. An earnout allows the seller to “have their cake and eat it too”— not having to sacrifice either purchase price or the ideal buyer.

If you are struggling to find a buyer who sees eye to eye on your business legacy and also has the capital to help you reach your goals, check out 1719 Partners. Our legacy is supporting your legacy.

Sell at the Right Time

There are many reasons why it may be the right time for the owner to sell. Maybe he or she is facing health obstacles or burnout, or it is time for retirement. Without an earnout, the seller would have to decide between selling immediately, and receiving a lower purchase price, or waiting a few years until the purchase price can reflect company growth. In fast-growing or newer companies, this issue is extra relevant. An earnout allows the seller to sell at the right time without sacrificing on future business gains.

Earnout Structures

There are many ways to structure an earnout. Earnouts should have a defined term, typically lasting one to three years. In addition to the term, performance metrics are also clearly defined. This reduces confusion between the buyer and seller. For example, the chosen metrics may be related to revenue, EBITDA, or customer retention.

Earnouts are also structured through percentages. For example, an earnout might be a percentage of revenue, revenue associated with key customers, or profits or EBITDA.

Earnout Calculation Examples

Exact earnout payouts are calculated based on the terms. In addition to the percentages mentioned above, earnouts have more detailed terms as well. These specific details limit the earnout’s maximum payments. For example, an earnout might have a lifetime cap of $1 million. This means throughout the earnout’s entire term the payments cannot exceed $1 million. Another structure might be 10% of revenue annually if the agreed-upon metrics are met that year, as well as a yearly maximum payout of $500,000, and a lifetime maximum of $1.5 million. This earnout may also end in four years. In addition, if metrics are not met one year, that year’s payment could be $0.

Common Pitfalls

As with any legal agreement, there are potential problems. In general, pitfalls are caused by nonspecific terms. Vague terms can look like an open-ended time horizon, no annual or lifetime payment caps, and more.

Typically, earnouts include a dispute resolution section. This provides instructions for handling disagreements, such as deferring to a third-party accountant or auditor.

Considering an Earnout?

Are you wondering if an earnout makes sense for you and your company? 1719 Partners has helped structure many successful transactions. We have seen earnouts play a crucial role in meeting both the buyer and seller’s goals. We understand that selling a business is a very personal process and situations can vary widely.

If you are considering a sale or have general questions about earnouts, don’t hesitate to reach out.

17 September 2025/by Scott Dickes

Industry Insights

Family Business Exit Strategy: Tips to Make the Right Choice

Developing a family business exit strategy is more than just a financial decision. Your strategy not only secures your financial future, but also secures your loved ones’ livelihoods. This is an important personal and financial decision that deserves your undivided attention.

In this post, we cover everything you need to know about exiting a family business, from timing to choosing the right action plan. While no two business situations are identical, this guide can help you make an informed choice.

Why a Family Business Exit Strategy Matters

As the owner of a family business, who knows how much your company means to you and those around you better than yourself? Your business has brought opportunities for your family and employees, positive experiences to your customers, and a sense of purpose to your work. Without a clear exit plan, however, ownership transitions can become complicated, creating uncertainty for all the parties involved.

Developing a family business exit strategy gives you the opportunity to prepare for the future on your own terms while preserving the value and legacy you’ve worked so hard to build.

Some reasons why exit strategies for family businesses are important include:

Major Life Transitions

Unexpected events such as illness, disability, divorce, or the loss of a business owner can quickly force difficult decisions. Planning ahead provides clarity about who will assume what responsibilities, how ownership will transfer, and what steps should be taken to protect the business.

Retirement Planning

After dedicating decades to building a successful business, you deserve a transition that secures your financial future while allowing the business to continue thriving. Starting the planning process well before retirement allows you to train successors, optimize tax planning, and improve the business’s long-term performance.

Wealth Diversification

Many family business owners have a significant portion of their personal wealth tied directly to the company, which can create unnecessary financial risk. A carefully planned exit allows owners to diversify their assets and strengthen financial security.

Attracting and Retaining Talent

Leadership continuity matters not only to owners but also to employees. Senior managers and key personnel are more likely to remain committed when they understand the company’s long-term direction and have confidence in its future leadership. Clearly defined transition plans make this confidence possible.

Preparing for the Future

Even if you have no immediate plans to step away from the business, developing an exit strategy is simply good business planning. Markets evolve, industries change, and priorities shift. The earlier you plan, the more flexibility you’ll have to adapt to changing circumstances.

What is the Right Time to Plan a Family Business Exit Strategy?

Eventually, it comes time for every business owner to pass on the torch. The reasons can vary, but deciding it’s time to move on is the first step of the process. If you’re unsure, it’s important to reflect and ask yourself, “Should I step away and sell my business?”

While every business owner’s timeline is different, it’s recommended that you initiate the planning process at least three to five years before an anticipated transition. This allows enough time to prepare successors, address operational issues, optimize financial performance, and set your business up for the best possible future.

It is often helpful to conduct a business valuation to get a rough idea of your company’s value and then make decisions accordingly. If your business valuation indicates that a sale could be especially lucrative, you may consider selling soon. On the other hand, if a valuation identifies areas to improve your business’s value, waiting may make sense if possible.

Curious what your business value could be today? Try out our free business valuation calculator.

Should Family Carry on the Torch?

For many owners of a family business, passing the business to the next generation feels like the natural choice. Your child continuing your legacy can be rewarding, but that doesn’t make it the default option.

The question to ask yourself here is: “Is my child fit to run the business?” It can be hard to set emotions aside and answer this question logically, but the answer will determine the business exit strategy that’s best for you.

There are really two pieces to this question. The first is, does your child want to run the business? If your potential successor has no desire to step up to the plate, then their capability is irrelevant. If the family member in question does want to run the business, then you must consider if they are capable.

Choosing the Right Family Business Exit Strategy

There’s no universal approach to exiting a family business; there are a number of options available to choose from. The right strategy will depend on your personal goals, financial needs, family dynamics, business performance, and long-term vision for the company.

To help you explore your options, we have listed the most popular exit strategies chosen by business owners during periods of transition.

Management Buyout

A management buyout is when existing management purchases the business from the previous owner. This can be a good option when there’s no family successor to inherit the business.

A management buyout allows you to personally select a buyer or buyers you know, giving you the confidence that your company will be in good hands. Because managers already understand the company’s operations, culture, customers, and employees, this approach often provides one of the smoothest ownership transitions.

Pros

Provides continuity for employees, customers, and suppliers
Managers already understand the business, reducing transition risks
Allows owners to step away knowing the business is in capable hands
The process can be completed with less disruption than selling to an outside buyer

Cons

Management may require outside financing to complete the purchase
Negotiating the sale structure may take longer than expected
The purchase price may be less than what the owner would’ve received in a competitive auction
Owners may need to provide seller financing or remain involved during the transition

Sell to a Family Successor

Passing ownership to the next generation is often the first option family business owners consider. When planned properly, this strategy allows the company to remain family-owned while preserving its legacy and relationships.

This option accomplishes both goals of the previous owner: secure funds for retirement and allow the next-generation leader to own the business.

However, selling the company to a family member may put financial strain on the new owner, creating tension in the family. The successor will also likely need to repay their parents through issuing a seller note, rather than a lump sum, which isn’t ideal for the sellers.

Pros

Preserves the family’s legacy and long-term vision
Maintains continuity in company culture and customer relationships
Allows experienced owners to mentor the next generation during the transition
Can provide a gradual ownership transfer over several years

Cons

Not every successor may have the interest or capability to lead the business
Leadership decisions can create conflict in the family
Family dynamic may complicate business decisions if boundaries aren’t clearly defined

Gift the Company

Rather than selling the business, some owners choose to transfer ownership by gifting shares or interests to family members over time. However, gifting the business doesn’t provide the previous owners with the financing they need for the next stage of life. There are also various legal and tax implications involved in the process, which require owners to work closely with legal and financial advisors before proceeding.

Pros

Supports long-term succession planning within the family
Allows for a gradual transfer of ownership and responsibilities
Can simplify estate planning

Cons

May have gift and estate tax consequences
Doesn’t provide immediate liquidity to the current owner
Can create perceptions of unequal treatment among family members

Sell to a Competitor

Strategic buyers often see opportunities to expand their market share, acquire skilled employees, and enter new markets, making them willing to pay a premium for the right business.

This option is lucrative, but can be problematic if you’d like your family members to remain employed. While you may be able to retire with good earnings, there’s no telling what changes the new owner might make, such as firing key employees and family members. Owners need to carefully evaluate how such a sale would affect their employees, customers, and the company’s legacy.

Pros

Higher value purchase offers
Provides immediate liquidity to business owners
Strategic buyers usually have the resources to help the business continue growing
Transactions can often be completed more quickly

Cons

The company’s identity or brand may change after acquisition
Employees may experience major changes or restructuring
Confidential information needs to be carefully protected during negotiations
Previous owners have less influence over the company’s direction after closing

Employee Stock Ownership Plan (ESOP)

ESOP allows employees to gradually acquire ownership in the company through a qualified retirement plan. This way, rather than selling to an outside buyer, ownership is transferred to the company’s employees, helping preserve the company’s legacy while rewarding the people who contributed to its success.

ESOPs can also improve employee participation by giving them a direct financial interest in the company’s performance. However, these are complex transactions that require legal, financial, and administrative experts to be involved.

Pros

Rewards employees with an ownership stake in the business
Helps preserve company culture and independence
Improves employee participation and retention
May offer tax advantages depending on the structure

Cons

Establishing and maintaining an ESOP is expensive and complex
Not every business is financially suited for an ESOP
The transaction requires expert advice and involvement
Owners may not receive full liquidity immediately

Initial Public Offering (IPO)

For a small percentage of family businesses, taking the company public through an IPO may be a viable exit strategy. An IPO allows shares of the business to be sold on a public stock exchange, providing access to significant capital and creating liquidity for shareholders. However, IPOs involve strict regulatory requirements, reporting obligations, and high costs. As a result, this option is generally reserved for larger companies with substantial revenue and market potential.

Pros

Provides access to public capital investment
Can significantly increase the company’s visibility and market profile
Creates liquidity for the owners
Supports future business expansion

Cons

Expensive and time-consuming process
Strict regulatory oversight and reporting requirements
Public shareholders influence future business decisions
Greater scrutiny from investors and the financial markets

Regardless of which option you choose, successful exit strategies for family businesses begin with careful planning. Evaluating each strategy based on your objectives and circumstances will help you build a transition plan that protects both your personal and business interests.

How to Create a Business Exit Strategy

Choosing an option for exiting a family business is only the beginning. The next step is turning that decision into a transition roadmap. Here’s how you can plan all aspects of your exit from the family business.

Assess the Current State of the Business

Take a good look at your company’s financial performance, operations, leadership team, and market position. A professional business evaluation can help you establish realistic expectations for the exit and identify opportunities to improve the value and the operations before the transition.

Set Key Goals and Objectives

Define what you want to achieve through your exit. Your priority could be anything from maximizing the deal’s value to preserving your family legacy, but laying it down clearly will help you choose the right way to achieve those goals.

Identify Potential Buyers and Successors

The next step is identifying who is best suited to take ownership of the business after you. This could be a family member, management team, or an outside buyer. Each option comes with different pros and cons, and the right choice depends on your priorities.

Create a Transition Roadmap

A detailed transition roadmap outlines the actions, responsibilities, and timeline needed to move from the current ownership structure to the new one. Your transition plan should include:

A target timeline for the exit
Leadership succession and training plans
Ownership transfer structure
Tax and estate planning considerations
Legal documentation and compliance requirements
Communication plans for employees, customers, suppliers, and other stakeholders

Execute the Plan

The final part of the process is putting your strategy into action while regularly reviewing it as your business and personal circumstances change. As you move through the transition, communicate openly with your family members, employees, and advisors to maintain confidence and minimize uncertainty. Track progress against your roadmap and make adjustments before small issues become bigger challenges.

Sell Without Compromise: Meet 1719 Partners

As the above guide demonstrates, it’s difficult to hand the reins of your business to the next generation while securing retirement. But there is one way to tick all the boxes:

Selling to an investor who has your best interests at heart.

When you sell to 1719 Partners, you gain a partner who is dedicated to continuing your company’s legacy. That includes supporting the next-generation family member as they run the company. Our approach is to build upon the foundation you laid; that means not firing employees, consolidating operations, or changing your company’s name.

With us as your partner, you receive the necessary financing to retire, while your chosen successor takes over the leadership role. We have helped dozens of companies turn transitions into success stories; we can help you too.

Interested in partnering with us? Contact us and let’s have a chat about your goals and your business.

Frequently Asked Questions (FAQs)

How to gracefully exit a family business?

A successful family business exit strategy starts with early planning, open communication, and a clear transition timeline. Preparing successors, documenting responsibilities, and working with experienced advisors to ensure ownership transfer with minimal disruption helps you with gracefully exiting a family business.

What is a business exit strategy?

A business exit strategy is a plan for transferring ownership of a business through a sale, succession, or another transition method. It generally outlines the timeline, successor or buyer, financial objectives, and the steps of the transition.

What makes a good family business exit strategy?

A good exit strategy aligns with your personal and business goals, succession plans, and long-term vision. A good strategy includes a clear timeline, business valuation, leadership transition, legal planning, and open communication with all parties involved.

How to prepare a business for an ownership transition?

Preparing your business for an ownership transition starts with assessing business performance and fixing any problems in operations, developing future leaders, and documenting key processes. Well-planned exit strategies also address all the legal, financial, and communication requirements.

Which is the best exit strategy for multi-generational family businesses?

For most multi-generational businesses, transferring ownership to a capable family successor is the best strategy because it preserves the company’s legacy and continuity. If no suitable successor exists, then the owner may explore other options like a management buyout. Exit options like selling to a competitor should be avoided in such cases.

What should be included in exit strategies for family businesses?

Exit strategies for family businesses should include a business valuation, succession plan, ownership transfer method, financial objectives, tax considerations, legal documentation, communication strategy, and a realistic transition timeline.

26 August 2025/by Scott Dickes

Finance, Industry Insights

Letter of Intent to Buy a Business: Protect Your Transaction

Entering into a letter of intent to buy a business is typically the first formal step in the process of buying or selling a company. Understanding a letter of intent, how it works, and what it includes is especially important if you are a first-time buyer or seller. This post will discuss several aspects of a letter of intent to buy a business, including why an LOI is helpful, key components of a letter of intent, and a few common pitfalls.

What Is a Letter of Intent?

A letter of intent to buy a business (“LOI”) is a legal document that buyers and sellers commonly voluntarily execute when they reach an agreement to purchase/sell a company. An executed letter of intent to purchase a business does not mean the transaction has “closed” but rather that the transaction process is “starting” and heading toward a closing.

In other words, the LOI serves as the bridge between a handshake-level interest and a definitive purchase agreement. For many first-time sellers, this is the moment when casual conversations turn into a formal process.

Why Is a Letter of Intent to Buy a Business Helpful?

A well-crafted LOI is a roadmap for all participants to get from “let’s do this” to a closing. The due diligence process and legal documentation can be stressful, especially for participants who are unfamiliar with them. The letter of intent helps outline the diligence process, key legal terms, transaction details, and other important components to ensure that all parties are on the same page and to minimize surprises.

A letter of intent to purchase a business does not need to be a 15-page mini purchase agreement, but at the same time, the LOI is unlikely clearly define the transaction if it is only a page or two and is silent on important topics. An appropriately drafted letter of intent is typically around four or five pages.

Think of it as a roadmap: the clearer and more specific it is, the easier the journey will be for both buyer and seller.

What Are the Key Components of a Letter of Intent to Buy a Business?

Confidentiality

Business owners are often very concerned about confidentiality and the reaction of customers and employees. LOIs usually reference that the terms of the transaction and the discussions themselves are confidential. There is also usually a several–year tail on the confidentiality period.

Exclusivity

Buyers will have to expend significant resources on conducting due diligence, preparing legal documents, and so on. As such, buyers commonly require exclusivity to invest this time, effort, and money in a transaction. Exclusivity typically means that the seller, once they have signed a letter of intent to sell their business, will not entertain offers or speak to other potential suitors while the existing letter of intent is in place. Exclusivity typically lasts between 90 and 120 days.

Timeline

The LOI typically includes a schedule outlining the timeline between the execution of the LOI and closing, as well as a timetable for achieving major milestones or hurdles, such as securing debt financing.

Transaction Terms

The LOI contains all key transaction details and financial terms, including but not limited to:

Valuation and Structure
- Cash
- Seller note
- Earnout
- Rollover Equity
Asset vs. Stock Purchase
Real Estate
Key Employee Agreements
Non-Compete Terms
Escrow
Any Excluded Assets
Etc.

The letter of intent might also address other topics, such as representations and warranties, indemnification limits, and the indemnification period. While these topics will be negotiated and finalized in the actual asset purchase agreement or stock purchase agreement, it is helpful to have some consensus on major deal points in the letter of intent. This is so that the legal documentation process goes more smoothly.

Binding Vs. Non-Binding Letters of Intent to Purchase a Business

Most LOIs to purchase a business have some provisions that are binding and others that are not. For example, exclusivity and confidentiality are typically binding, meaning that both parties are obligated to fulfill these commitments. Other provisions – such as the target closing date – are usually non-binding.

Fees and Expenses

Most LOIs include a discussion of which parties are responsible for paying transaction fees and expenses. This is particularly relevant in cases where a transaction fails to close for any reason. It is most common for buyers and sellers to each pay their own expenses; however, there are situations where certain parties may agree to cover specific aspects of the deal costs. For example, perhaps the buyer will pay the investment banking fees earned at closing.

Who Signs a Letter of Intent to Purchase a Business?

Both the buyer and the seller, as legal entities, execute the letter of intent to purchase a business. In many cases, especially with smaller private companies, the shareholders of the selling business may also sign as individuals. This is because they may agree to specific key provisions – such as a non-compete agreement – on an individual, personal basis.

What Are Common Pitfalls in a Letter of Intent?

Open-Ended Exclusivity

A LOI must have a termination date that expires at whichever comes earlier: (a) the transaction closing, or (b) a specified date. Failure to include a termination provision can result in a seller being locked in indefinitely.

Vague Key Terms

Key transaction details, such as valuation, the amortization schedule on a seller’s note, or how the earnout is defined and calculated, need to be clearly described and defined in the letter of intent. A letter of intent to buy a business that includes a provision stating “final purchase price will be determined at closing” is problematic.

Summary

A letter of intent to buy a business is a detailed roadmap that ensures all parties are on the same page as they head toward successful due diligence, legal documentation, and closing. It creates structure and trust, while minimizing surprises that could derail a transaction.

At 1719 Partners, we’ve helped business owners navigate this process many times. Whether you are preparing to sell your company or evaluating a potential acquisition, the right LOI sets the tone for the deal.

Thinking About Buying or Selling a Business?

A well-written letter of intent protects your interests and drives your transaction toward a successful close. At 1719 Partners, we have ample experience structuring letters of intent— if you have questions or would like advice on yours, feel free to contact us.

26 August 2025/by Scott Dickes

Industry Insights

Underestimated Industries: The Tortoise Beats the Hare

If you ask someone how to become a successful entrepreneur, chances are they will mention Silicon Valley. After all, those are the stories that make headlines. In the fast-paced world of tech startups, success happens quickly— and what sounds more exciting than growing by 50% year after year? It is no wonder other paths to success remain hidden in the shadows. But in reality, Silicon Valley makes up only a small portion of wealthy entrepreneurs…so what about the rest of them?

There are opportunities hiding in every corner of the world. There are businesses all around us for the goods and services we take for granted. The Wall Street Journal article “Meet the ‘Stealthy Wealthy’ Who Make Their Money the Boring Way” mentions an owner who built an entire business on elementary school carpeting. There is an industry out there for schools that need their carpeting redone almost every year— as making messes is something young children are talented at. In 2022, that business owner made over half a million dollars (excluding capital gains).

The article mentions another business owner who found success through car floor mats. Upon realizing floor mats abroad were much higher quality than those in the U.S., he began importing and selling the English-manufactured mats locally. As the business grew, he added to the product line and manufactured more and more goods in the U.S. This year, he predicts around $800 million in business revenue.

Making money in ways like these is more common than you would think. 1719 Partners has worked with business owners in industries like metal fabrication, value-added distribution, and flexographic printing. In the flexographic printing industry, we helped Custom Label transition ownership to a talented management team, and then worked together to create significant wealth. Indeed, we built this success the “boring” way: with a compound annual revenue growth rate (CAGR) of around 12%, a far cry from the exciting 50% some tech startups boast. However, after 20 years of ownership, the long-term growth has been notable.

As this story demonstrates, slow and steady often wins the race. While tech companies can hit the ground running, they can also become outdated just as fast. Short of elementary schools becoming 100% remote (doubtful), school carpeting will always be a need— as will car floor mats. Regardless of what new technology is emerging in Silicon Valley, the need for certain “boring” goods and services never changes.

Indeed, if you invest in companies that will always be a staple to society, growth is virtually unlimited. While the growth may happen at a slower rate than a Silicon Valley startup in its infancy, it may well outlast the flash in the pan. Long-term growth also enables returns to compound. When comparing closed-end fund structures of a typical private equity firm with long-term holds, we found that longer investments far outperform the shorter ones. Click here to see how much.

With all this in mind, more entrepreneurship dreams should focus on industries like manufacturing or value-added business services. If you and your management team are ready to step into ownership and just need a partner, reach out. 1719 Partners is as passionate about business ownership as you are.

29 July 2025/by Scott Dickes

Finance, Industry Insights

How Much do Brokers Charge to Sell a Business?

Selling your business is one of the most important financial decisions you’ll ever make. While many owners hire a business broker to guide them through the process, it’s important to understand how much do brokers charge to sell a business, what services are included in that amount, and how brokers actually work.

Understanding these variables before signing an engagement agreement helps you compare advisors, negotiate better, and decide whether the value provided by a broker justifies their cost.

For a broader look at whether using a broker is right for you, check out our guide to selling a small business.

Who is a Business Broker?

A business broker is a professional intermediary who assists business owners in selling their businesses. They evaluate your business, provide guidance on selling price, market the business, and vet prospective buyers. They act as the bridge between sellers and prospective buyers while managing much of the work involved in bringing a transaction to a successful close.

A business broker’s responsibilities often include:

Performing an initial business valuation
Recommending an appropriate asking price
Preparing confidential marketing materials
Marketing the business to qualified buyers
Screening buyers and verifying their financial capability
Coordinating meetings and due diligence
Assisting with negotiations
Helping manage the closing process

Typically, business brokers help small- and lower-middle-market business owners who may not have the time, experience, or network needed to run a competitive sale process themselves.

The goal of a business broker is to get a deal done, often by packaging the business attractively and creating a competitive bidding process. However, neither does every business require a broker, nor are all brokers created equal. So, the value they provide should always be weighed against the fees they charge.

How is a Business Broker Different from an Investment Banker?

Business brokers and investment bankers both provide advisory and consulting services, helping business owners navigate the sale process, but they generally serve different segments of the market.

While largely semantics, most people would say that business brokers tend to focus on privately held small businesses and lower-middle-market companies, while investment bankers handle larger enterprise transactions (i.e., enterprise value in excess of $50 million).

While both of their services often overlap, investment bankers generally provide a broader range of services, including:

Extensive buyer outreach
Sophisticated financial modeling
Valuation analyses
Investor relationships
Complex deal structuring
Capital raising and strategic advisory services

How Much Do Brokers Charge to Sell a Business?

One of the most common questions business owners have to ask is, “How much do business brokers charge?” The answer is subject to several variables, including the anticipated sale price, industry, the scale and complexity of the business, and the scope of services included in the arrangement.

Business brokers typically enter into a formal contract, or an engagement letter, with the clients that outlines the compensation structure, services provided, exclusivity terms, length of engagement, success fee calculation, and reimbursable expenses.

For a very limited scope of work, for example, preparing an offering memorandum or a valuation, the engagement might be a flat fee. If the service provider is an accountant or an attorney, they might prefer to charge by the hour. Most brokers prefer a success fee arrangement.

Business Broker Fees Breakdown

Broker fees can vary significantly depending on the size, type, and complexity of the business sale. The fee structures commonly used by brokers include:

Success Fee

Most brokers charge a success fee between 5% and 15% of the final sale price for small businesses. For larger transactions, brokers often use the Lehman Formula, or the Modern Lehman Scale, which tiers fees by price range.

The table below shows a standard (not double) Lehman success fee calculation.

Lehman Commission Structure: Example showing $12,500,000 sale price

5%	0	$1,000,000	$50,000
4%	$1,000,001	$2,000,000	$40,000
3%	$2,000,001	$3,000,000	$30,000
2%	$3,000,001	$4,000,000	$20,000
1%	$4,000,001	And above	$85,000
Total Commission			$225,000

Retainer or Upfront Fee

Some brokers require an upfront retainer before beginning work on the engagement. This initial fee usually ranges from $5,000 to $15,000 or more. This covers preparation, marketing, and administrative costs. Some brokers credit the retainer toward the final success fee, while others treat it as a separate, non-refundable charge.

Minimum Fee

Some brokers ask for a minimum fee to ensure they are fairly compensated even when selling smaller businesses. This fee commonly falls between $25,000 and $50,000, regardless of the sale price. Let’s say that in a sale, a percentage-based commission would result in only $15,000, but the engagement specifies a $35,000 minimum fee; the seller would pay the minimum amount to the small business broker.

What Do Business Broker Fees Include?

It is important for business owners to understand exactly what they are paying for in a business broker engagement.

Depending on the engagement, broker fees often include services such as:

Business valuation: Settling on a realistic market value using financial analysis, comparable transactions, industry trends, and growth potential.

Marketing strategy: Creating a confidential marketing plan designed to attract qualified buyers without disrupting employees, customers, or suppliers.

Listing and advertising: Preparing confidential information memorandums (CMIs), teaser documents, online listings, and running targeted outreach campaigns.

Buyer qualification: Screening prospective buyers to verify financial capability, strategy fit, and seriousness before any meetings commence.

Negotiation support: Assisting with offers, letters of intent (LOIs), purchase price negotiations, deal terms, working capital adjustments, and transaction structuring.

Due diligence coordination: Helping organize key financial documentation, responding to buyer requests, and keeping the transaction moving toward closing.

Closing management: Coordinating with attorneys, accountants, lenders, escrow providers, and other advisors.

How Much Do Business Brokers Charge: Contributing Factors

Not every business pays the same brokerage fees. In the question of how much do brokers charge to sell a business, the answer depends on many factors. Understanding these factors well can help you evaluate proposals and negotiate a fair engagement more easily.

Size of the Business

This is perhaps the biggest factor affecting brokerage fees and commissions. Generally speaking, small and lower-middle-market businesses command higher commission percentages. This is because they require a similar amount of work as larger transactions, while generating lower overall fees.

As the value of the deal goes up, percentage-based commissions come down through tiered fee structures.

Business Type	Annual Revenue	Typical Fee Structure
Small/Main Street Business	Up to $2,000,000	Flat 10% commission (minimum applies)
Upper Main Street Business	$2 million to $10 million	8% to 10% commission
Lower-Middle-Market	$10 million to $100 million	10% → 6%
Mid-Market Business	$100 million to $500 million	10% → 2%; or flat 4%
Upper-Mid-Market	$500 million to $1 billion	Negotiated (often 2% to 4%)
Enterprise/Large Business	$1 billion and above	Customer negotiated fees (often 1% to 2%)

Every transaction is unique, but larger deals benefit from lower commission percentages because of their higher overall transaction values.

Industry Type

Businesses operating in attractive sectors with strong buyer demand, such as manufacturing, healthcare, industrial services, software, or business services, may be easier to market than businesses operating in declining or highly regulated industries. The need for additional marketing efforts, buyer education, and due diligence can all influence the overall fee structure of the broker.

The Broker’s Experience

An experienced advisor with a strong track record, industry expertise, and an established buyer network may charge higher fees than a less experienced broker. The experienced brokers justify their fees by attracting more qualified buyers, creating competitive bidding environments, and negotiating stronger purchase terms.

Negotiability of the Fees

Most business broker commissions are negotiable to some degree. Owners of businesses with strong financial performance, recurring revenue, or significant buyer interest may have greater leverage when negotiating fee structures.

While the exact negotiability varies from transaction to transaction, sellers may be able to negotiate lower success fee percentages, reduced upfront retainers, lower minimum fees, tiered commission structures, and other performance-based incentives.

What is the Business Broker Commission?

The business broker commission rate is a percentage of the transaction value paid to the broker after the successful sale of a business. The rate often depends on both the anticipated transaction proceeds and a successful sale process. If the total proceeds in a successful business sale are less than $1,000,000, the commission could be 10% or more of the total sale price. Unlike retainers or minimum fees, the commission is typically contingent upon closing, meaning the broker will be compensated only if the transaction is completed.

Alternative to Using a Business Broker

Not all businesses need a broker to find the right buyer. If you have a strong network, a desirable business model, or have interest from strategic acquirers, you can sell your business without hiring a broker.

If you want to sell your business on your own, here are a few tips to help you with the process:

Leverage your personal and industry connections
Quietly test interest with suppliers, customers, or even competitors
List the business on curated M&A platforms
Reach out directly to private investment firms or buyer groups aligned with your industry
Work directly with legal and financial advisors to structure and negotiate the transaction

While selling your business independently can reduce transaction costs, it also requires significant time, planning, and negotiation experience. Without a structured sale process, you may end up receiving fewer offers, having less negotiation leverage, or even overlooking important legal and financial details.

Should You Hire a Broker If a Buyer Reaches Out to You?

Getting an unsolicited offer is great, but it doesn’t automatically mean you should or shouldn’t hire a broker. Hiring a sell-side advisor in response to such an offer could facilitate a smooth exit, or it could just muddy the waters.

If you’ve already found a serious buyer, paying a brokerage commission simply to facilitate the transaction may not provide enough value. On the other hand, if you’ve never dealt in these matters before, proper guidance can help you avoid costly mistakes during negotiations, due diligence, and closing.

Before deciding whether to engage a broker, ask yourself these questions:

Do you understand the current market value of your business?
Are you comfortable negotiating the deal yourself?
Can you manage due diligence requests without disrupting daily operations?
Do you have experienced legal and tax advisors to help you?

For more insights on how to sell a business yourself, check out our detailed guide on the topic.

Business Brokers vs M&A Advisors

Although the terms are often used interchangeably, business brokers and M&A advisors typically serve different types of businesses and transactions.

Business Broker	M&A Advisor
Serves small businesses and lower middle-market companies	Advises larger lower middle-market and middle-market businesses
Focuses on connecting buyers and sellers	Provides comprehensive transaction strategy and execution
Generally uses standardized commission structures	Frequently negotiates customized fee arrangements
Markets businesses to individual buyers, entrepreneurs, and smaller investment groups	Targets higher-value buyers, private equity firms, and even the government.
Best suited for less complex transactions	Better suited for larger and more sophisticated transactions

Understanding these differences helps ensure you’re working with the right advisor according to the needs of your business, rather than making a choice based on cost alone.

The Third Option: A Private Investor

Many business owners assume they only have two choices: hire a broker or sell directly to the buyer. There is also a third option that often flies under the radar: a private investment firm.

Private investors can provide the financial resources and transactional expertise of institutional buyers, while taking a more collaborative, long-term approach to acquisitions.

For owners who value their company’s legacy, employees, and continued survival and growth, joining hands with a private equity firm can offer advantages beyond simply closing the highest purchase bid.

Private equity buyers like 1719 Partners offer an attractive alternative to both traditional brokers and strategic buyers. We partner with owners of specialized manufacturing, value-added distribution, and industrial services businesses.

What makes us different?

We have the capital and experience of private equity, without the sharp elbows
We prioritize legacy, employees, and long-term success, not quick flips
We can work directly with owners, streamlining the deal process and eliminating the need for a broker.

Let’s Talk

Interested in seeing if 1719 Partners is the right fit for you and your business? We’d be happy to discuss your business, your goals, and how we fit into the next chapter of your growth journey.

Send us a message here.

Frequently Asked Questions (FAQs)

Who pays the business broker fees?

In most transactions, the seller pays the broker fees. The fee is usually deducted from the sales proceeds at closing, although the exact payment terms are enforced as per the broker agreement.

What is the average fee for a business broker?

The average brokerage ranges from 5% to 15% for smaller businesses. Large transactions often require tiered commission structures, such as the Lehman Formula, resulting in lower percentage-based fees.

How can I tell whether a broker’s fee is reasonable for my business?

Compare the fee with the broker’s experience, services, transaction history, and buyer network. A reasonable broker fee should reflect the value they can deliver through the sales process.

What do small business brokers charge?

Small business broker fees typically range from 8% to 15% of the final sale price. Some brokers may also charge an upfront retainer or minimum fee depending on the engagement.

Is a success fee better than a fixed-fee arrangement when selling a business?

A success fee aligns the broker’s compensation with successfully closing the transaction, making it the preferred option for most sellers. Fixed fees are better suited for standalone services like valuations or consulting.

What should I look for in a broker agreement before committing to a fee structure?

Review the commission structure, retainer, minimum fees, exclusivity period, contract length, termination terms, and included services before signing on the dotted line. Understanding the agreement properly upfront helps avoid unexpected costs later.

Can a broker still earn a commission if I find the buyer myself?

It depends. If you don’t involve a broker in the process from the beginning, there’s no question of a commission. However, if you’ve signed with a broker and then make the sale yourself, many agreements include protection clauses that allow the broker to earn a commission if the sale closes during the engagement period, even if you introduced the buyer.

Are broker fees calculated on the total transaction value or only the cash received at closing?

It depends on the agreement. Some broker fees are based on the total transaction value, while others are calculated only on the cash received at closing.

What happens if my business doesn’t sell after paying a retainer or marketing fee?

Most retainers are non-refundable because they cover the work that has already been completed (valuation, listing, negotiations). Before hiring a broker, ask whether the retainer is credited towards the final commission if the sale closes.

How do I find business brokers near me?

A quick Google search can help you discover business brokers near you. Why may a business broker near me be preferred over a non-local one? Local business brokers have expertise that may help find the perfect local buyer and a higher closing price. And for a buyer that’s not local, a local business broker is able to explain to a non-local buyer what makes the area so marketable, ultimately making your business more appealing.

13 July 2025/by Rich Nicolaides