How to Sell a Small Business: Make the Books Pass First

The first person who reads your books when you sell a small business is not the buyer. It is the buyer’s lender. In BizBuySell’s Insight Report for the third quarter of 2026, 78 percent of surveyed buyers said they expect to use an SBA loan to complete a purchase, and brokers named SBA funding, not interest rates, as the most common financing obstacle of the quarter, cited by 38 percent. An underwriter does not care about your story. The underwriter cares whether the profit you claim can be proved from tax returns and bank statements, because that number sets how much the bank will lend, and therefore what the buyer can pay.

That reorders the whole job. Most owners start selling by picking a price. The sequence that actually closes starts two or three years earlier, with making the profit provable, and ends with a tax form both sides have to sign. Here is that sequence, from the earliest step to the closing table, with the figures the market is paying right now.

Two to three years out: make the profit provable

A small business is priced on a number called seller’s discretionary earnings, or SDE. BizBuySell’s definition is net profit before taxes, plus the expenses a new owner would not inherit: the owner’s salary and benefits, personal items the business paid for, one-time costs, interest, depreciation and amortization. Those additions are called add-backs, and the same page warns that buyers and lenders routinely dispute them. An add-back you cannot document with a receipt and a line on the tax return is an add-back the underwriter deletes.

So the first move is unglamorous: stop running personal expenses through the business, or if you keep doing it, keep a dated list of each one with the amount. Every undocumented add-back lowers the provable SDE, and SDE is the number that gets multiplied. The tax returns a buyer’s lender reviews are the ones you are filing now, which is why this step starts so early.

The second move is owner dependence. The Insight Report says plainly which businesses draw buyers in a tight market: those with “strong cash flow, clean financial records, and limited owner dependence.” If every customer calls your cell phone, the buyer is paying for a relationship that leaves with you, and will price it that way. Written procedures, a second person who can quote a job, and customers who deal with the business rather than with you are all worth more at closing than another year of revenue. If you have not already, a weekly habit of checking three cash flow numbers every Friday produces exactly the trail a lender wants.

Bookkeeping software is the cheap part. QuickBooks Online lists Simple Start at $38 a month and Essentials at $85 on its pricing page, with an introductory half-price offer for the first three months. Xero lists Early at $27 and Growing at $59 a month on its US pricing page, with a 90 percent discount for the first six months running until November 2, 2026. Either one, kept current for 36 months, is the whole requirement.

Twelve months out: value it three ways, then look at what sold

The SBA’s guide to selling or closing a business names three valuation approaches: the income approach, which projects earnings and discounts for risk; the market approach, which compares your business to similar ones that recently sold; and the assets approach, which subtracts liabilities from the value of what you own. For a business whose value is mostly its earnings, the market approach is the one buyers and lenders actually use, and it has public data behind it.

BizBuySell’s third-quarter report covers 2,132 closed sales. The table below gives the medians it reports for businesses that sold above and below $1 million.

Two things in that table matter more than the multiples. First, the market-wide median sale price was $350,000, up 17 percent in a year, and the report says that rise came mostly from a change in mix: a record 22 percent of sales were above $1 million, while sales below that line fell 10 percent year over year. Prices did not rise across the board; the bigger, cleaner businesses sold and the smaller ones sat. Second, the share-of-asking row is the one to take personally. Larger businesses have now sold at or above full asking for four straight quarters. Smaller ones give up more than six percent in negotiation, which is the cost of walking in with a number the books cannot defend.

To use the table, suppose, as a hypothetical, a two-truck plumbing company shows $90,000 of net profit on its return, pays the owner $70,000 in salary and payroll taxes, and carried a documented $15,000 one-time cost for a van engine last year. Its SDE is about $175,000. At the 2.30x average for sub-million sales, that is a working figure of roughly $402,000 before anything specific to the business, such as a lease with eight years left or a customer who is 40 percent of revenue, moves it. The point of the exercise is not the figure. It is to see that each $10,000 of add-back the owner cannot document costs about $23,000 at the closing table.

For a check on your own arithmetic, Flippa publishes a free valuation tool on its pricing page, built from its own closed-sale records, and BizBuySell includes its valuation report, which it describes as “normally a $179.95 value,” with any listing created on its sell page. Both are marketplace estimates, not appraisals. If a buyer’s lender wants an independent valuation, that is a separate purchase the deal will tell you about.

Six months out: decide who sells it

There are two routes and they cost different things. A business broker typically charges a commission on the sale price. BizBen’s guide to broker fees, by Chris Chi, puts Main Street commissions “between 8% and 10% of the sale price,” with minimum fees that typically run $10,000 to $15,000. On the plumbing example above, that is roughly $32,000 to $40,000 out of the proceeds. In exchange, the broker keeps the sale confidential, screens buyers for financing before they see your books, and runs the process while you keep running the business.

The other route is listing it yourself. BizBuySell’s sell page says a listing appears on BizBuySell, BizQuest and LoopNet; the page does not publish the listing price itself. Flippa, which specializes in online businesses, publishes its fees: a 10 percent success fee when the business sells, plus a listing fee that starts at $29 for a 60-day entry listing and $49 for three months, with a $199 six-month premium tier for smaller assets. Those are the prices on its pricing page today.

Our view: the broker question is really a time question. The IBBA and M&A Source Market Pulse release for the second quarter of 2026, based on 255 brokers and advisors surveyed in July, says Main Street deals averaged six to ten months from engagement to close. Most owners cannot run a business well and field buyer calls for eight months at the same time, and a business whose numbers slip during the sale loses more than a commission. If you do list it yourself, the compromise that works is to pay a broker or an attorney by the hour for the two pieces that are hardest to do alone: qualifying the buyer’s financing and negotiating the purchase agreement. The same release notes that retirement was the stated reason for 45 percent of sales under $500,000, with burnout, health and a new opportunity each accounting for 14 to 17 percent. Whichever of those is yours, a sale run from exhaustion is the one that gives up the six percent.

Either way, before the first conversation, assemble a data room: three years of tax returns, year-to-date statements, the lease, major customer and supplier contracts, equipment lists and an organization chart. A shared folder with view-only links is enough at this size. Google Workspace Business Starter is $7 per user per month and Business Standard $14 on Google’s pricing page; Dropbox Standard is $15 per user per month on its plans page. Share nothing until a buyer has signed a non-disclosure agreement and shown proof of funds or a lender pre-qualification. Brokers in the Insight Report say buyers now push for “due diligence like Q&A ahead of an offer,” in the words of John Inzilla of Murphy Business Sales, quoted in the report. Answer the questions; do not hand over the folder.

At the offer: what the price actually means

An offer for a small business is usually not one number. It is a price, an allocation of that price across assets, a payment schedule and a tax outcome, and the last three decide what you keep.

The allocation comes first because federal law forces it. The IRS page on the sale of a business says the sale of a business is generally a sale of each asset separately, that inventory produces ordinary income, and that “both the buyer and seller of a business must use the residual method” to divide the price among the assets. The instructions for Form 8594 sort every asset into seven classes, from cash in Class I through equipment and buildings in Class V, other intangibles such as a non-compete in Class VI, and goodwill in Class VII. Both sides file that form with their returns for the year of the sale, and the allocations have to match. The buyer generally wants more of the price on equipment, which depreciates quickly; the seller generally wants more on goodwill, which is taxed as capital gain. That tension is negotiated, not discovered afterward, so the allocation belongs in the letter of intent, not the closing documents.

The payment schedule is the second number. The SBA’s guide names three transfer structures: an outright sale paid at closing, a gradual sale paid over time, and a lease arrangement. Seller financing, where you carry a note for part of the price, was under 10 percent of deals in the Market Pulse quarter, and sellers received 83 to 92 percent of the price in cash at close on average. A note can bridge a buyer whose SBA loan falls short; the 7(a) program, the SBA’s main loan program, lists “changes of ownership (complete or partial)” as an eligible use with a $5 million cap, and the lender’s cash flow test is what sets how much of your price it will cover. If you do carry a note, IRS Publication 537 covers the installment method, which lets the gain be reported as payments come in rather than all in the year of sale. Ask your accountant to run the sale both ways before you sign.

Then the people. A purchase agreement for a business, the SBA page notes, should list every asset and liability, the inventory, the parties, pre-closing operations, the buyer’s access to information and the fees, and “an attorney should review it.” That attorney is the second professional the deal needs after the accountant. A third is optional but cheap: someone who has sold a business of your size before, found the way you would find a business mentor for any other step, or seated on the personal advisory board you consult before big decisions. The deal has a dozen moments where a buyer’s silence means something, and a person who has heard that silence before is worth a dinner.

Where AI fits, and where it does not

Two parts of this job are writing tasks, and a general assistant handles both well. The first is the description of the business a buyer sees: what it does, who its customers are, why it runs without you, what a new owner could do next. Paste in your real figures and the facts above and ask for a one-page summary written for a buyer’s lender, then cut every adjective it adds. The second is the question list. Give it the data room’s table of contents and ask what a cautious buyer would ask about each document, then write your answers before anyone asks. Claude Pro is $20 a month billed monthly, or $17 billed annually, on its pricing page; Google AI Pro is $19.99 a month on Google’s plans page. Either is enough; the work is in your inputs.

For the structure of the whole exit, the Merger & Acquisition Evaluator on BusinessPrompter.com, a Strategy and Planning prompt in the Pro library, is built to produce an exit strategy document: possible pathways, valuation approaches and the steps between. Its page describes it for startup founders and early-stage investors planning a liquidity event; the structure is the same one a Main Street owner needs, with the SDE figures above standing in for a startup’s revenue projections. Use it to organize the plan, not to price the business.

What AI does not do is any of the four things that move the price: make an add-back documentable, reduce how much the business depends on you, qualify a buyer’s financing, or negotiate the allocation on Form 8594. Those are owner work, and the earlier they start, the more of the asking price survives.

The number to write down tonight is your SDE from last year’s return, with only the add-backs you could prove to a stranger, multiplied by 2.3. If that figure is not the one you had in mind, you have found the gap while there is still time to close it, and that is the whole reason to start three years early.