Selling a company is not simply a transaction; it is the culmination of years of work. For business owners who care about their legacy, employees and community as much as the cheque at closing, preparation and buyer selection matter. Former operators and CEOs who now invest through long-term hold vehicles often see the entire process differently from traditional private equity investors. This guide outlines when to start preparing for a sale, the types of buyers you’ll encounter, how to position your business, and ways to ensure your legacy endures.

1) When to Start Thinking About Selling

Key signals and indicators

Deciding when to exit requires more than reading market trends. Owners should monitor three classes of signals:

• Business maturity – When revenue growth levels off and profitability stabilizes, the business may be at or near peak value. Financial advisors note that owners who recognize that their business has reached peak growth or maturity are often ready to begin exit planning[1].
• Personal motivations – Burnout, a desire to pursue a new venture or personal milestones such as retirement are common reasons to consider a sale. The decision is often personal; if running the business no longer energizes you, selling may provide the liquidity and freedom to pursue other interests[1].
• External conditions – Favorable market conditions can lead to higher sale prices. Conversely, unsolicited offers from competitors can signal that the timing is right[1].

Ideal timeline

Although many owners begin preparing only after receiving an offer, advisors consistently emphasise the importance of early planning. Preparation 24–18 months before your desired exit gives you time to understand why you are selling, clean up the business and assemble your team[13].

24–18 months out

• Clarify personal and business goals, including how much liquidity you need to fund retirement or other ventures, and the extent to which you want to remain involved post-sale[2].
• Start tax and estate planning. Early planning can reduce capital gains through tools such as trusts and installment sales[2].
• Clean up financial records and adopt standard accounting practices; buyers want clear, consistent books[2].
• Identify operational gaps: document procedures, verify financials (often through a quality-of-earnings assessment) and resolve legal issues[3].
• Shore up customer concentration; diversify the customer base and ensure contracts are transferable[3].

12 months out

• Engage an M&A advisor, attorney and accountant. Investment bankers surveyed by Axial recommend researching and shortlisting advisors about 18 months before your target exit and hiring one around 15 months out[3][10].
• Receive a preliminary valuation to understand potential value drivers and address weaknesses[3].
• Formalize succession and management continuity plans. Reduce key-person dependencies by building a team capable of running the business without you[3].

6 months out

• Begin marketing to buyers under the guidance of your advisor. Collect marketing materials (confidential information memorandum) and outreach lists.
• Prepare for due diligence by organizing financial statements, contracts, lease agreements and employee records.
• Be ready to negotiate terms and understand which elements matter to you most (price, continued ownership, employee security).

3 months out and closing

• Evaluate offers, negotiate deal structure and sign a letter of intent (LOI). According to Axial, business owners often aim to execute an LOI about six months before their desired closing, leaving time for detailed due diligence[3].
• Conduct confirmatory due diligence and finalise purchase agreements. Address items such as transition period, non-compete agreements and seller notes.

2) Who the Potential Buyers Are

A solid exit strategy requires understanding the motivations and processes of potential acquirers. Lower-middle market companies attract several buyer categories[14].

Strategic acquirers

• Who they are: Competitors, suppliers or large customers seeking synergies. They often operate in the same industry and plan to integrate your business into theirs[4].
• Motivations and priorities: Strategic buyers pursue acquisitions that provide cost savings, revenue expansion, market power or unique capabilities[4]. Because synergies can increase the combined entity’s value, strategic buyers are often willing to pay higher multiples[4]. However, integration can be complex and may lead to changes in culture or layoffs.

Financial buyers (private equity & independent sponsors)

• Who they are: Private equity firms, hedge funds, search funds and independent sponsors that buy companies to generate a return on invested capital[3]. They typically hold businesses for 5–7 years and resell at a higher valuation[4].
• Motivations and priorities: Financial buyers value predictable cash flows, scalable operations and growth potential. They pay close attention to EBITDA and may fund acquisitions through leverage. They often require the owner to continue in a leadership role for a period, and may structure deals with earn-outs, rolled equity or seller notes to align interests.

Family offices

• Who they are: Investment vehicles managing the wealth of high-net-worth families. They increasingly invest directly in private companies. A survey cited by Akoya Capital found that nearly half of family offices allocate more than 25 % of their portfolios to direct private investments[5].
• Motivations and priorities: Family offices often have a longer time horizon than private equity funds; they can hold investments for many years[5]. Families may invest in industries they know or diversify into new sectors[5]. Because they are operators at heart, some family offices enjoy being involved in the businesses they acquire, serving on boards and helping with growth[5]. Avoiding management fees is another priority[5].

Long-term hold / operator-led investors

• Who they are: Entrepreneurs or holding companies with committed capital vehicles designed to acquire and hold multiple businesses for 10–20 years[6]. Many search funds and permanent capital vehicles fall into this category.
• Motivations and priorities: They seek stable cash flow and sustainable growth, not quick flips. With a patient timeline and governance structure that emphasis efficient capital allocation[6], long-term hold investors prioritize culture and operational continuity. They often retain existing management and focus on consolidating niche industries through follow-on acquisitions. Because they do not rely on quick exits, they may pay slightly lower multiples but offer sellers the confidence that their legacy will be respected.

Individual or acquihire buyers

• Who they are: High-net-worth individuals, entrepreneur-operators or search funders looking to run a business themselves. They may compete with private equity for deals but typically acquire smaller companies.
• Motivations and priorities: These buyers want to become owner-operators. They may value your company’s culture and employees, but often have limited capital and may need seller financing. Deals can be quicker but may involve lower price and greater risk if the buyer lacks operating experience.

3) Pros and Cons for Each Buyer Type

The right buyer depends on your goals. Consider price, transition period, integration complexity and legacy.

Strategic buyer

• Pros: Highest potential valuation due to synergies[4]; immediate liquidity; potential stock component; ability to accelerate growth through combined resources.
• Cons: Integration often results in elimination of redundant roles and changes to culture[3]. Your brand may be absorbed, and your employees could face job uncertainty. Less emphasis on stewardship and long-term legacy.

Private equity / financial buyer

• Pros: Professionalized process; typically bring operational expertise and access to capital for growth. Will pay competitive valuations, especially if the business has recurring revenue and scalability.
• Cons: Short-term time horizon (often five to seven years)[4]; may require leveraged recapitalisations; expect aggressive growth and efficiency improvements. Governance structures can be more rigid. Earn-outs and rolled equity may defer part of the purchase price.

Family office

• Pros: Longer holding period and more flexible capital structure[5]; willingness to preserve culture and retain management; direct involvement can bring valuable industry experience[5].
• Cons: Each family office has unique priorities[5]; decision-making can be influenced by family dynamics; deal flow and capital deployment may be slower[5]; may be fee-averse and negotiate harder on price[5].

Long-term hold / operator-led investor

• Pros: Aligns with owners who want to protect their legacy. Holding periods of 10–20 years allow businesses to compound value[6]. Investors often keep existing management, invest in growth and preserve company culture.
• Cons: Because they focus on cash flow and patient growth, these buyers may not match the highest valuations offered by strategic buyers. Limited competition in some sectors can make exit negotiations slower.

Individual/acquihire buyer

• Pros: Deals can close quickly with minimal bureaucracy. The buyer may be highly committed to running the business day-to-day and preserving existing culture.
• Cons: Capital constraints often lead to lower purchase prices and reliance on seller financing or SBA loans. Buyers may lack experience or scale, increasing operational risk. Continuity can suffer if the buyer struggles to manage the business.

4) Preparing Your Business for Sale

Operational readiness

A sale requires rigorous preparation. Investment bankers surveyed by Axial found that only one in four sellers are properly prepared when they approach advisors[3].

• Verify financials: Ensure that your financial statements are accurate and prepared according to generally accepted accounting principles. A quality-of-earnings assessment identifies issues and validates earnings[3].
• Resolve legal issues: Confirm that contracts, licenses, trademarks and intellectual property are in order[3]. Clear outstanding litigation or regulatory matters.
• Reduce customer concentration: Diversify your client base and ensure key contracts are transferable[3].
• Plan for due diligence: Organize corporate documents, tax returns and HR records. Buyers will scrutinize every aspect of your business.

Leadership and team

Buyers pay a premium for businesses that operate independently of the owner. Sellers should:

• Build a management team that can run the company without your day-to-day involvement. Investment bankers emphasise that eliminating key-person dependencies is critical[3].

• Document processes and standard operating procedures so that knowledge is institutionalised rather than residing in the founder’s head.

• Communicate with employees about succession and secure retention agreements for key staff, reassuring buyers that the team will remain post-closing.

Value drivers

Creating a strong foundation increases valuation. Research from Farther outlines eight key drivers buyers consider[7]:

• Financial performance: Historic revenue growth, healthy margins and organised financial records are fundamental.

• Growth potential: Buyers pay more if they see clear paths to expand into new markets or products.

• “Switzerland structure”: Diversification across customers, suppliers and key employees reduces concentration risk.

• Valuation teeter-totter: Generate free cash flow while minimising working capital needs.

• Recurring revenue: Subscription or long-term contractual revenue streams command premium valuations.

• Monopoly control: A unique niche, proprietary product or intellectual property creates pricing power.

• Customer satisfaction: High Net Promoter Scores, retention rates and testimonials signal future stability.

• Hub-and-spoke dependency: Businesses that don’t rely on the owner (or one key employee) are more transferable and valuable.

5) Negotiation & Deal Structure

Negotiation goes beyond headline price. Understanding common structures helps you compare offers fairly.

Price vs multiples

Strategic buyers may offer higher multiples because of synergies[4], but sellers rarely receive the full synergy premium. Research cited by Boston Consulting Group suggests sellers capture only about 31 % of the synergy value[4]. Financial buyers typically value your business on a stand-alone basis, so price corresponds closely to earnings[4].

Earn-outs

An earn-out ties a portion of the purchase price to post-closing performance, bridging valuation gaps. Earn-outs usually run 1–3 years and are contingent on revenue, EBITDA or customer retention[8][11][12]. They can increase the total payout but expose the seller to performance risk and often require continued involvement[8][11].

Rolled equity

In rolled equity transactions, the seller reinvests part of their proceeds into the acquiring entity, retaining a minority stake[8]. This aligns interests and allows sellers to share in future upside[8], though the stake is illiquid and subject to new management.

Seller notes

A seller note is a loan from the seller to the buyer, repaid over time with interest[8]. Notes provide steady income and can improve deal terms but expose the seller to the buyer’s credit risk[8].

Other terms

• Non-compete agreements: Buyers often require sellers to sign a non-compete to protect their investment. These clauses restrict the seller from re-entering the market and help preserve value[9]. Key terms include geographic scope and duration (often 1–5 years)[9]. Properly drafted non-competes balance protection and fairness and can influence purchase price[9].
• Employment/transition agreements: Many transactions include consulting or employment agreements that keep the seller involved during the transition. Define your role, compensation and term to avoid misunderstandings.
• Rollover equity vs. cash: Consider your liquidity needs and risk tolerance. A higher cash component gives immediate liquidity, while rolled equity offers potential upside but delays full exit.

Tailoring deal terms to buyer type

Strategic buyers may prefer all-cash deals or stock swaps. Private equity firms often request rolled equity and an earn-out to align interests. Family offices and long-term hold investors might offer flexible structures and more generous transition periods, focusing on preserving management. Individual buyers frequently rely on seller notes or SBA loans. When evaluating offers, compare the effective purchase price under each structure and the risk of deferred payments.

6) Maintaining Your Legacy

For many founders, legacy – employees, culture and community relationships – is as important as valuation. Strategic buyers might pay top dollar but may integrate the business into existing operations, potentially eliminating redundant roles[3]. Financial buyers often impose new governance structures and aggressive growth plans that can disrupt culture.

Long-term hold investors and family offices offer an alternative. Their long holding periods and operator-centric approach allow them to preserve the company’s identity and gradually professionalise the business. Akoya Capital notes that family offices frequently involve family members in portfolio companies and prioritise industries they know[5]. The long-term perspective also encourages patient growth and allows the business to compound value without the pressure of a quick exit[5].

A notable example is a case highlighted by Axial where SunPro Motorized Awnings & Screens’s owner, Bob Falahee, wanted to both fund his retirement and allow his daughters (who worked at the associated retail business) to retain ownership[3]. By working with a trusted advisor, he targeted a strategic buyer that was willing to pay a competitive price and, crucially, allowed his family to maintain partial ownership[3]. The deal balanced valuation with stewardship, illustrating that it is possible to align financial goals and legacy when you clearly define your priorities.

7) Summary & Actionable Steps

Exiting a business is a strategic process that demands preparation, clarity and the right partners. To maximize value and preserve your legacy:

• Define your goals early (24–18 months out): Understand your personal motivations, financial needs and desired legacy. Conduct preliminary tax and estate planning and clean up financials[2].

• Build a professional team (12 months out): Engage a qualified M&A advisor, attorney and accountant. Obtain a realistic valuation and prepare succession and management continuity plans[3][10].

• Optimize operations and value drivers: Diversify customers, reduce key-person risks and document processes. Focus on drivers such as recurring revenue, growth potential, customer satisfaction and strong margins[7].

• Be ready for negotiation: Learn how different deal structures – earn-outs, rolled equity, seller notes, non-competes and employment agreements – affect risk and payout[8][9][11][12]. Work with your advisor to model the effective purchase price under different scenarios.

• Assess buyers carefully: Consider not only price but also cultural fit and stewardship. Strategic buyers may pay a premium but integrate your company quickly. Financial buyers might offer fair value but impose growth pressure. Family offices and long-term hold investors often provide a patient capital solution that aligns with preserving your culture[5].

• Ask the right questions: During buyer meetings, inquire about their post-acquisition plans for employees, brand and operations; their expected hold period and growth strategies; and the flexibility of deal structures. Clarify your ongoing role and compensation.

The sale of your business should reflect both the value you’ve built and the legacy you wish to leave. By preparing early, understanding buyer motivations and negotiating deliberately, you can achieve an outcome that honours both.

References / Footnotes

1. Brighton Jones (n.d.) ‘Signs it’s time to sell your business’. Available at: https://www.brightonjones.com/ (Accessed: 11 September 2025).

2. MBA M&D CPAs (n.d.) ‘Exit planning: tax, estate and financial readiness checklist’. Available at: mbamdcpas.com (Accessed: 11 September 2025).

3. Kapoor, T. (2025) ‘Selling a Business Checklist: 6 Steps to Sell Your Business’, Axial, 20 June. Available at: https://www.axial.net/forum/selling-a-business-checklist/ (Accessed: 11 September 2025).

4. Rosendahl, M. (2020) ‘How Synergies Impact What a Strategic Buyer Will Pay’, PCE Investment Bankers, 7 August. Available at: https://www.pcecompanies.com/resources/how-synergies-impact-what-buyers-pay (Accessed: 11 September 2025).

5. Akoya Capital (2021) ‘Seven Ways Family Offices are Different from Other Buyers of Lower Middle Market Companies’, 30 November (reposted; original from Axial). Available at: https://akoyacapital.com/articles/seven-ways-family-offices-are-different-from-other-buyers-of-lower-middle-market-companies/ (Accessed: 11 September 2025).

6. ‘Long Term Hold: A new approach in company acquisition and ownership’ (2024) Search Funds News, 13 September. Available at: https://searchfundsnews.com/long-term-hold-a-new-approach-in-company-acquisition-and-ownership/ (Accessed: 11 September 2025).

7. Kyles, H. (2025) ‘Unlocking Business Value: 8 Essential Drivers for Owners, Buyers, and Sellers’, The Farther Outlook, 26 June. Available at: https://www.farther.com/post/unlocking-business-value-8-essential-drivers-for-owners-buyers-and-sellers (Accessed: 11 September 2025).

8. Founder M&A (2025) ‘Understanding Earn-Outs, Rolled Equity, and Seller Notes in M&A Transactions’, 3 April. Available at: https://www.founderma.com/blogs/understanding-earn-outs-rolled-equity-and-seller-notes-in-m-a-transactions (Accessed: 11 September 2025).

9. Hall, A. (n.d.) ‘The Role of Non-Compete Clauses in Business Sale Transactions’. Available at: https://aaronhall.com/the-role-of-non-compete-clauses-in-business-sale-transactions/ (Accessed: 11 September 2025).

10. Agrawal, A., Cooper, T., Lian, Q. and Wang, Q. (2023) ‘Does Hiring M&A Advisers Matter for Private Sellers?’, Quarterly Journal of Finance (forthcoming). Working paper, SSRN. Available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4369966 (Accessed: 11 September 2025).

11. de Martino, F.D., O’Brien, C. and Goodman, M. (2025) ‘The Art and Science of Earn-Outs in M&A’, Harvard Law School Forum on Corporate Governance, 11 July. Available at: https://corpgov.law.harvard.edu/2025/07/11/the-art-and-science-of-earn-outs-in-ma/ (Accessed: 11 September 2025).

12. Juvan, J. and McClain, D. (2025) ‘Navigating tariffs and M&A transactions: bridging the valuation gap with contingent consideration’, Reuters (Westlaw Today Commentary), 2 May. Available at: https://www.reuters.com/legal/transactional/navigating-tariffs-ma-transactions-bridging-valuation-gap-with-contingent-2025-05-02/ (Accessed: 11 September 2025).

13. Rosendahl, M. (2025) ‘Sell-Side M&A Advisory for Middle-Market Business Owners — How to Sell a Business & Exit on Your Terms’, PCE Companies, 12 August. Available at: https://www.pcecompanies.com/resources/how-to-sell-your-business-sell-side-ma-advisory (Accessed: 11 September 2025).

14. Thatcher, K. (2024) ‘The 25 Most Active Holding Companies on Axial’, Axial, 24 May (Last updated). Available at: https://www.axial.net/forum/the-25-most-active-holding-companies-on-axial/ (Accessed: 11 September 2025).