Selling Your Business

What you are actually selling

A buyer is not purchasing your revenue. They are purchasing the cash flow they believe will continue after you leave, and the confidence they have in that belief. Everything about price follows from those two things.

This is why two businesses with identical revenue can be worth wildly different amounts. The one with maintenance agreements, a general manager, documented processes and clean books is buying a low-risk annuity. The one where the owner holds every customer relationship in their head is buying a job with uncertainty attached.

Key point. You are selling continuation without you. Every point of preparation is really about making that continuation credible.

How the price is built

Almost every trades transaction prices off adjusted EBITDA times a multiple. Both halves are negotiated, and owners consistently underestimate how much the first half is contested.

Adjusted EBITDA starts with operating profit and adds back genuinely non-recurring or owner-specific costs. The critical constraint: your own compensation is only an add-back to the extent it exceeds what it would cost to hire your replacement. Adding back the whole figure is the most common error in owner-prepared valuations, and it inflates the number by a market GM salary times the multiple — frequently over a million dollars of enterprise value that does not exist.

The six things that move your multiple

In roughly descending order of impact, and all of them improvable:

• Owner dependence. If the business needs you daily, expect a lower multiple, a longer earn-out, or both.
• Recurring revenue. Maintenance agreements convert project revenue into an annuity and are the single largest positive driver.
• Margin quality and trend. Stable or improving beats high-and-volatile. A buyer capitalizes the trend, not the peak.
• Customer concentration. Above roughly 10% of revenue from one customer, expect holdbacks.
• Technician retention and pipeline. In a labor-constrained trade the crew is the capacity, and capacity is the growth plan.
• Data quality. If the operating history cannot be verified, it gets discounted regardless of how good it was.

The structures you will be offered

Very few trades deals are all cash at close, and an owner who insists on it usually leaves money on the table.

• Cash at close — the headline figure, typically 60–80% of enterprise value.
• Rollover equity — you keep a minority stake in the combined business. This is where the second and third liquidity events come from, and it is frequently worth more than the cash portion.
• Seller note — deferred payment at interest. Bridges valuation gaps; carries your risk.
• Earn-out — contingent on future performance. Reasonable when tied to metrics you still control; dangerous when tied to metrics you do not.
• Escrow / holdback — retained against representations, usually 10% for 12–18 months.

Key point. Compare structures on total expected value and on who carries the risk, not on the size of the check at close.

The process, in order

Preparation, 12–36 months. Clean the books, reduce owner dependence, build recurring revenue, fix margin. This phase determines the outcome; everything after it is execution.

Materials and marketing, 4–8 weeks. A confidential information memorandum, a financial model, and a buyer list.

Outreach and indications, 4–8 weeks. Non-binding indications of interest arrive with a range, not a number.

Management meetings, 2–4 weeks. Buyers are assessing whether the business runs without you. They will ask your team, not just you.

Letter of intent, 1–2 weeks. Exclusivity begins here, and your leverage drops sharply the moment you sign it. Negotiate hard before, not after.

Diligence, 60–90 days. Financial, legal, operational, insurance, sometimes environmental. This is where unprepared businesses re-trade.

Close and transition, 30–90 days.

What goes wrong

Deals fail, or re-price late, for a small and predictable set of reasons: books that do not tie out under scrutiny; add-backs that cannot be evidenced; a customer concentration discovered in diligence rather than disclosed up front; key employees who resign when they learn of the sale; and deferred capital expenditure the buyer prices in with a calculator.

Every one of those is findable in advance. The Exit Readiness Score walks the same list a buyer's diligence will.

The question before all the others

Selling outright is one option, not the only one. A partnership with staged liquidity lets you take significant chips off the table now while keeping equity in something larger — and for owners with runway left, the second event is frequently bigger than the first would have been.

It is worth modeling both before you talk to anyone, because the two paths require different preparation and the decision is difficult to reverse.