Selling a business is one of the most complex and nerve-wracking processes in any entrepreneur's life. Structured preparation and professional guidance throughout the sales process are essential for a successful transaction.
As a seller, you need to be aware of certain unwritten "rules of the game" to achieve the optimal purchase price for your business. Investors often have a significant advantage in experience when it comes to acquisitions and typically know exactly what they are looking for.
In our guide, you will learn about the key success factors that matter most when selling a business.
#01 Three Key Reasons to Sell Your Business
→ Reason 1: Selling the company to a successor
→ Reason 2: Selling the company to initiate a new growth phase
→ Reason 3: Selling the company due to attractive purchase offers
#02 Determining the Value of Your Business
#03 The Most Important Factors That Influence Your Business Value
→ How much is your company worth?
→ Determining business value using the multiplier method
→ Determining business value using the discounted cash flow (DCF) method
#04 The Purchase Price Is Not the Only Important Factor
#05 The 5 Crucial Steps in Selling Your Business
→ Step 1: Bringing a professional M&A advisor on board for the sales process
→ Step 2: Thorough preparation, financial analysis, and financial planning
→ Step 3: Creating a business sales memorandum (Exposé)
→ Step 4: Approaching potential buyers for your business
→ Step 5: Due diligence, negotiation, signing, and closing
#06 Finding the Right Buyer for Your Business
→ a) Passive search for a buyer
→ b) Active search for a buyer
#07 Business Sale: How to Choose the Right Advisor
→ What to look for in your M&A advisor
#08 Conclusion
Before selling a company, owners often ask themselves why they should sell in the first place. So what are the most common reasons for a business sale? Here, we present three frequent motives.
Owners who have invested many intensive years in building their company often seek a more sustainable and balanced lifestyle. They want to enjoy the rewards of their work with family and pursue alternative, fulfilling projects. As a result, they attempt to sell their business to a successor who can unlock untapped potential and honor that value in the purchase price—at least partially. Not all business owners sell at an advanced age; increasingly, successful entrepreneurs between the ages of 35 and 45 opt for an early succession solution through a business sale.
At a certain point, entrepreneurs must inevitably delegate full responsibility to employees in order to take the next step in revenue scaling. However, many business owners enjoy having full oversight of their company and being able to react independently whenever necessary. In the e-commerce sector, these “growing pains” typically occur once annual revenue reaches around €5 million. At this stage, business valuations are often highly attractive, leading many entrepreneurs to a crossroads: either invest significant effort into scaling further or sell the company at an appealing price to a suitable buyer.
In some cases, potential buyers proactively approach business owners regarding a possible sale, sparking consideration of selling the company. Even if a sale was not originally planned, an attractive initial offer can persuade many owners to reconsider their options.
"How much is my company worth?" is one of the first questions that should be answered when considering selling a business. In the following chapter, we will explain how to determine this value.
You may be wondering how to determine the value of your business. Before we explore the methods for business valuation, you should first understand the key factors that influence its worth.
Knowing these factors gives you the opportunity to address weaknesses before making initial contact with potential investors and to enter negotiations with realistic price expectations.
A key factor is the overall market environment. This can be roughly assessed through stock market trends. During a recession, finding a successor or buyer will be significantly more challenging. In times of economic growth, when investors have positive expectations for the future, it is easier to achieve an attractive selling price.
If an investor is interested in acquiring your company, they will evaluate both its past business performance over the last few years and its future growth potential.
If you are considering selling your business, you should start analyzing your revenues, costs, financial results, and key performance indicators (KPIs) early on—because a potential buyer will do the same later. The clearer and more reliable your company’s financial history is presented, the more likely buyers are to trust your figures.
Many entrepreneurs fail to present their company's growth potential quantitatively before selling and instead describe it only in qualitative terms. However, the key growth levers that drive increases in revenue and earnings are often already in place but are insufficiently analyzed. A general rule applies: only with reliable assumptions can a buyer reflect the potential of your company in the purchase price.
External risks also play an important role in valuation. If your company's success depends on factors such as your personal presence, regulatory frameworks, seasonality, or a few major customers, this can reduce its value.
If a direct competitor is interested in acquiring your company or an investor expects synergy effects from the purchase, this can increase the valuation.
These factors and more influence your business’s value. An M&A advisor, such as Venture Advisory Partners, can assist in conducting a detailed valuation. In the next chapter, we will discuss which methods are primarily used.
To establish a solid basis for deciding whether to sell your business, you should determine the realizable market price.
This assessment also helps you determine whether selling your company is currently worthwhile. A valuation report provides insights into factors that increase or decrease value, allowing you to highlight or address them to improve your company's worth.
There are various methods for determining a company’s value. In practice, the multiplier method (also known as "multiples") and the discounted cash flow (DCF) method have become standard approaches, especially for valuing growth companies.
The multiplier method is the fastest way to determine a realistic market price for your business, as it closely aligns with the valuation of comparable companies.
This method uses actual market prices based on previous transactions of similar businesses as well as the valuation of publicly traded companies. The multiplier relates the company’s value to revenue or operating profit (EBIT), allowing the current market value to be determined quickly and in real-time.
A simple analogy: You can think of the multiplier as the "price per square meter" of a property. If a comparable property in the same district costs around €5,000 per square meter, you can apply this price per square meter to your own property to estimate its approximate value.
The key to an accurate multiplier-based valuation lies in selecting suitable comparable publicly traded companies and transactions. Additionally, the derived multiplier must be adjusted for risk, size, and liquidity factors to prevent distortions.
The discounted cash flow (DCF) method incorporates future expectations into the valuation by discounting the projected cash flows the business will generate with an appropriate weighted cost of capital.
This method typically requires a professional financial model with well-founded assumptions.
Compared to the multiplier method, the DCF method is better suited for determining a company's maximum potential value rather than its current realistic market price. Nonetheless, incorporating the DCF method is useful for narrowing down the range of potential business values.
Once the value of your company has been determined and a buyer has been found who is willing to pay a price that you consider fair, there are still a few additional factors to keep in mind. The purchase price alone is not everything.
In many cases, buyers split the purchase price into multiple components. The fixed purchase price component is paid immediately, while other components depend on future performance (so-called "earn-outs").
These additional payments are only made if the company achieves certain pre-agreed financial performance goals after the sale. Buyers use earn-outs to minimize their risk when acquiring a business.
In some cases, buyers may also request a seller loan to finance the purchase. This portion of the purchase price is contractually agreed but is only paid over a period of 2–3 years after the sale.
By now, you have likely considered selling your business and have conducted a valuation to ensure you are making a well-informed decision. Now, it’s time to look at the exact steps involved in the sale process.
In the next section, we will summarize the five essential steps to successfully selling your business.
Selling a business independently is a complex challenge. Therefore, it is common to seek help from an advisor who supports you throughout the sales process. A professional advisor has market knowledge, transaction experience, and buyer contacts, allowing you to negotiate with potential buyers on equal footing.
Most buyers also prefer participating in a professionally managed sales process.
It is beneficial to gather all relevant information about the business sale early on to ensure a smooth start to the sales process.
The first step involves compiling all financial statements (BWA) and annual financial reports from the past five years, as well as existing information about competitors, products and services, organizational structure, and customer base. To ensure no important details are overlooked, your advisor will assist in compiling key information and provide valuable insights.
All important documents are carefully filtered and uploaded to a virtual data room, where pre-qualified buyers can later access them to conduct due diligence.
Together with your advisor, the historical performance of your business should be clearly presented and thoroughly analyzed. Often, adjustments to existing financial figures can be made to enhance valuation, and target buyers can be identified.
Additionally, a comprehensive financial plan is created in close coordination with your advisor, ensuring that key growth drivers are considered quantitatively.
Once all relevant information has been collected, it should be presented clearly and attractively in an exposé that encourages potential buyers to submit offers.
Based on the exposé, your advisor will create an anonymized short version, also known as a “teaser”, which is used to initiate first conversations with potential buyers in a structured and professional manner.
The exposé is one of the most important documents in the sales process and plays a significant role in increasing buyer interest.
Once the preparation is complete, the active search for buyers can begin. Your advisor should leverage their existing network and conduct extensive research to build a comprehensive pipeline of potential buyers.
The initial outreach should be conducted discreetly to ensure confidentiality in the sales process. Only after signing a non-disclosure agreement (NDA) should potential buyers receive the company’s name and more detailed information.
Maintaining discretion is crucial to avoiding disruptions within the company and preventing uncertainty among employees, customers, and suppliers. Publicly announcing an intended sale prematurely can create unnecessary uncertainty and unrest.
After receiving initial indicative offers, you decide which buyers will gain access to your data room to conduct a detailed review of your business before a potential acquisition (Due Diligence). Your advisor assists you during this phase in responding to inquiries and coordinating buyer questions.
Once all buyer inquiries have been clarified, the final negotiation of the purchase price, payment structure, and contract terms takes place. The signing of the contract before a notary is known as “Signing”, followed by the proper completion of the transaction (“Closing”).
There are many types of potential buyers for your company, with the most common being strategic investors, such as direct competitors, financial investors like private equity funds, private entrepreneurs, and investment companies. To successfully sell your business, it is important to identify and engage with the full range of potential buyers. This process can be approached in two different ways.
Listings on reputable business marketplaces, such as nexxt change or the Deutsche Unternehmerbörse (DUB), are particularly suitable for smaller businesses. These platforms feature hundreds of sale listings from companies in various industries. Active buyers regularly screen these markets for attractive acquisition targets.
A key advantage of passive buyer searches is the low effort involved—once an anonymous teaser of your business is created, it serves as a solid foundation for attracting inquiries. However, a drawback is that some unqualified buyers may express interest, making it essential to filter serious inquiries early.
While posting on business marketplaces helps generate visibility, it should not be your only method of finding buyers.
A skilled M&A advisor identifies potential buyers both within their existing network and through extensive research. A strong reputation and a good sense of discretion are crucial in this process, ensuring that only serious buyers are approached.
Direct outreach to potential buyers—such as strategic investors, financial investors, family offices, and aggregators—allows for personalized negotiations and better control over the sales process.
A successful business sale almost always requires the support of an M&A advisor. To ensure you receive the best possible guidance, we will provide you with a comprehensive guide to selecting the right M&A advisor.
Venture Advisory Partners is a Frankfurt-based M&A advisory firm. We specialize in guiding business acquisitions, sales, and financing for mid-sized companies and growth enterprises.
Our dynamic team combines expertise from the fields of M&A, Venture Capital, and Finance.
At the heart of our work is freedom—operational, financial, and personal.
We leverage the latest sales strategies and methods to execute business transactions efficiently and profitably for all parties involved.
We support our clients from initial financing to a successful business sale. Through business acquisitions, we enable individuals to enter entrepreneurship under secure conditions.
Find out how we can accelerate your financing and optimize your company sale.
