Preparing a Small Business for Sale When More Than Money Matters

I recently spoke with a business owner who was considering selling his company.

From the beginning, his goal was clear: he wanted to find a path to transition out of the business, but who took over mattered deeply to him.

He wanted the next owner to understand the community and the farmers and ranchers his company had served for years.

He didn't want his customers treated like dollar signs.

Then we got into the numbers.

A profitable business isn't always an easy business to sell

This was an asset-heavy business, but the SDE wasn't particularly strong.

That's an important issue when preparing a small business for sale because buyers aren't simply evaluating the assets they're acquiring. They also need enough cash flow to support the purchase.

In this case, the cash flow would barely cover the likely debt service for a buyer.

That made the business difficult to sell at the price the owner hoped to achieve.

During our conversation, the owner mentioned something else.

There were a few people on payroll who weren't really needed.

Putting on my business broker hat, I pointed out the obvious financial opportunity: reducing unnecessary payroll would increase SDE, potentially improve the valuation, and make the business easier for a buyer to finance.

His answer was immediate.

No.

Economic times were hard, he told me. He wasn't going to put people out of work just to make his bottom line look better.

It wasn't even a consideration.

Not every business owner wants to maximize valuation at any cost

I respected him immensely for that.

His commitment to his employees and community wasn't something he was willing to compromise for a higher valuation.

He was a man of integrity—the kind of person whose existence in the world renews your faith in humanity. We spent a long time discussing other possibilities, and I left the conversation thinking about something much bigger than valuation.

When we value a business, we measure cash flow, assets, debt service, multiples, risk, customer concentration and countless other factors.

But there are things a spreadsheet doesn't capture very well.

The employee who has depended on that company for a paycheck for 15 years.

The farmer who has done business with the same owner for decades.

The relationships, trust and community impact that developed while the business was being built.

Those things may not appear as an asset on the balance sheet, but they can matter tremendously to the person selling the company.

Planning your business exit requires deciding what actually matters to you

This is one reason I encourage owners to start preparing for a business sale long before they're ready to list.

Exit planning isn't only about increasing the value of your business.

It's also about determining what you want the transition to accomplish.

Is maximizing the sale price your priority?

Keeping employees?

Finding a local buyer?

Protecting the company's reputation?

Preserving your legacy?

Taking care of longtime customers?

There isn't necessarily a wrong answer.

But those priorities can dramatically change what a successful exit looks like—and what options are realistically available.

Sometimes the highest offer and the right buyer aren't the same thing.

And sometimes preparing a business for sale starts with a much more personal question than “What's my business worth?”

What do you want to still be true about this business after it isn't yours anymore? Talk to a broker and learn about your options and how to best strategize for your desired outcome.