If you’re like most business owners, you’ve likely never sold a business before, which presents challenges to the sales process when you do.
In my opinion, the biggest challenge is having a clear understanding of what YOU want after the sale.
Outsiders think it’s all about the money, but 33 years in business tells me that’s rarely the only motivator.
What happens after you sell keeps you up at night, not the sale itself. Most small business owners want their legacy to live on, their employees to keep their jobs, and most importantly, they want to know that they’ll have enough money to be comfortable for the rest of their lives…
And that’s where the challenges come in.
If your business provides you with a comfortable lifestyle, the hard part is getting enough income from selling it to maintain your lifestyle after you sell.
Here’s what most business owners think will happen when they sell their business.
I’ll sell for x million dollars, pay my taxes, and hand my money to some retirement advisor or investment banker and live off the interest. But when you do the projections, you quickly realize that based on what you think your business is worth, you’ll need high returns of 15-20% from Wall Street to get the income you need to keep your lifestyle. That’s IF you get the price you are asking for on the business.
I’ll come back to this.
There are two components in every transaction, whether business, real estate, auto, boat, goods, or services…
You name it.
The two components are Price and Terms.
I will sell you this thing at a certain price in exchange for money, payments, barter, time…
The terms are infinite.
And the hardest pill to swallow is that you can’t control both.
I’ll give you some examples.
Car dealers are notorious for trying to control the price and the terms, generating profit from the sale of the vehicle and profiting from the financing. But if you don’t agree, they don’t sell a vehicle.
Recently, a friend purchased a brand new F150 Platinum with a final sticker price of over $105,000. When I asked him how he could get himself to agree to a high sticker price, he said his company is profitable, he needed the tax deduction, and he had more than enough cash flow to afford the nearly $2,000 monthly payment.
The dealership got the price they wanted, and he got the terms he needed to make the deal work.
Amazon’s entire business model is built on the premise that I will sell you this thing at this price in exchange for getting it to you fast, dropping it off on your front porch, and if you don’t like it, you can return it. All so you don’t have to leave the comfort of your home. In Amazon transactions, the consumer sets the price, and Amazon controls the terms. If the price is too high for the value received, the product won’t sell. Amazon delists items that sell at too high a price because these products take up space on their massive servers. Vendors on the platform that don’t offer free shipping or fast delivery have to lower their prices because they don’t provide the terms that Amazon shoppers demand.
When it’s time for you to sell your business, if you are firm on price, the buyer will need terms that work for both of you.
If you want to walk out of closing with cash, a lender will determine whether the price you’re selling for is worthy of an 80% loan. If not, the buyer will not be able to get the loan unless you let the buyer control the terms.
Look at it this way.
Let’s say you want $5 million cash from the sale of your debt-free company. You want $5 million because you’ll have about $3 million after paying your taxes. You plan to invest $3 million in mutual funds and live off 7% interest for the rest of your life, which equates to about $210,000 per year. The goal of the entire scenario is $210,000 per year, not the $5 million price tag.
So, if your real terms are that you need $210,000 per year, why not structure the sale to get as close to the $210,000 as possible? Often, the buyer is more than willing to agree to a long-term payment structure. I liken it to an annuity.
A common response I hear is, “I don’t want to finance my business because what happens if the buyer fails or doesn’t pay me on time or at all?”
What happens if…
The truth is you have just as much risk of losing a sizeable part of your investment in the stock market as you do of a buyer failing after the purchase.
But here’s the kicker.
When you build your company properly, you control the possibility of success or failure by how you build the business. Build your business so that a buyer with vision and experience can step in and take over with few hiccups.
Here’s a not-so-fun fact.
Most small business owners have less than $100K in retirement funds and will tell you it’s because they’ve invested their money into their business. For this to be true, they are telling themselves they trust their business more than they trust Wall Street. Then why do they move their trust to Wall Street when it comes time to sell?
Hang with me here, this next paragraph is critical to your mindset when selling your company.
Why would you suddenly trust Wall Street more than your company?
From the buyer’s perspective, you don’t believe anyone can run your business as good as you. If this is the case, you’re going to have a very tough time selling your business unless you make changes.
Make your company less about you and more about others performing the functions that make the company profitable.
When experienced investors buy a company that runs well without the owner, they do so because there’s a strong probability of calculable returns. I don’t invest in companies because I want to go to work running the business. I invest to bring a team that injects experience into building companies that manage themselves.
If your company is self-managing, I’m a cash buyer because a self-managing company is much easier to get lenders to agree to your valuation.
If you’re selling a company that doesn’t run all that well without you, you have to create systems that do or at least anticipate substantial involvement in training the new owner(s) post-closing.
Let’s be honest, if you want to control the price, the buyer’s lender controls the terms of the deal.
Why?
When the valuation you expect doesn’t meet the lender’s underwriting criteria, the deal is dead. This is also why thousands of great companies close their doors every single day. I’ve written often about how lenders assign value to a business; if you’d like a deeper dive on the subject, you can read about it here.
When you want all cash at closing, you rarely get your asking price without agreeing to some level of financing or earn-out. The SBA just changed the rules effective June 1st, 2025, making it much harder for buyers to qualify for SBA-backed financing. The new qualification requirements impose impossible terms on sellers who finance even a small portion of the equity, making selling a company and walking away with all of your cash highly unlikely.
This doesn’t mean you aren’t actively negotiating a deal that works for you and your buyer.
You don’t have to give your business away.
In the example I listed above, if you want $210K per year and your business can provide that income for the next 10, 20, or 30 years, this sounds a lot closer to what you desire in retirement. You’ll pay less tax at closing as well. In this scenario, all you need is a buyer who can run and grow your business as well as you and has a big enough down payment for you to feel comfortable with the transaction.
If you find the right buyer who can provide you with your ultimate goal of cash flow for years to come, from the company you built, the down payment often becomes less important. I’ve bought companies, properties, cars, and equipment with minimal down payment money and favorable terms, some with zero down.
Those sellers got precisely what they wanted in the transaction.
Price or Terms – The fastest way to sell your company is to pick one, you can’t have both.
As I’ve said many times, I’ll give you any price you want, provided you give me long enough to pay for it, and I have the cash flow to make it worthwhile.
Are you thinking about retirement?
I help business owners to exit their businesses on their terms and can close fast.
Let’s have a confidential conversation.
Book a confidential call today.
A comfortable retirement may be closer than you think.
About the Author: David Mulvaney moved to Florida from Wisconsin in 1987. In 1992, he acquired a home services company with 98% seller financing. By 1994, Dave converted the company to 75% commercial services and sold it in 1998 for over 10 times the original acquisition cost. Since then, Dave owns or has owned profitable companies in these sectors: manufacturing, engineering, global distribution, home services, commercial services, e-commerce, SAAS, residential, and commercial real estate. His companies have grossed over 250 million in top-line revenue over the past 33 years.
Dave buys and builds great companies and advises entrepreneurs on how to exit profitably on their terms. To Book A Call, Go Here.