How to sell a small business without a broker

Selling without a broker means you do five jobs yourself: pricing the business, finding and screening buyers, keeping the sale confidential, assembling the documents a buyer will demand, and running the deal from letter of intent to closing. The broker fee on a small deal often runs ten percent, so on a $500,000 sale you are keeping around $50,000 to do that work. It makes the most sense when the buyer is already known to you: an employee, a competitor, a customer, a supplier or a family member. You still hire two people. A transaction attorney drafts the purchase agreement, and a CPA handles the tax side.

Price it before you talk to anyone

The SBA puts valuation first, before marketing, and names three approaches: income, which looks at projected revenue and the risks against it; market, which compares your company against similar businesses recently sold; and assets, which subtracts total liabilities from total asset value. For an owner-operated service company the working method is seller’s discretionary earnings times a multiple, and our post on how a small service business is valued walks through the add-backs. Our SDE calculator runs it with your figures.

Naming a number you cannot support is the most common way an owner-run sale stalls. A buyer will test your figure against three years of tax returns within the first month, and a price built on earnings that never reached the books cannot survive that.

Assemble the file first

Every buyer asks for roughly the same things, so build the package once rather than scrambling for each inquiry. Three years of tax returns and financial statements. A current profit and loss and balance sheet. A revenue breakdown by customer. The customer and job list. The equipment and vehicle schedule with titles and loan balances. The lease. Payroll records and the roster with pay rates and tenure. Licenses, permits, bonds and insurance. Every contract: customer agreements, maintenance agreements, supplier terms, and any non-compete or employment agreements.

The SBA’s guidance on the sales agreement is blunt about what happens when this is incomplete: list all inventory, identify every party, document the adjustments and fees, and leave out no assets or liabilities, because omissions create problems after the sale is finalized. Read your own lease early. A lease that cannot be assigned without the landlord’s consent is a deal term, and finding it in week six is worse than finding it in week one.

Finding a buyer without a listing

The likeliest buyer is someone already in your orbit: a key employee, a competitor who wants your route density, a supplier moving downstream, or a customer who wants the capability in house. Approach those individually and in confidence rather than posting the business. Where that list runs out, business-for-sale marketplaces and industry contacts are the next layer, at the cost of a wider circle knowing.

Confidentiality is the reason to be deliberate. Crews leave when they hear the company is for sale, customers start taking calls from competitors, and both of those reduce the thing you are selling. Use a signed non-disclosure agreement before releasing financials, share the detailed customer list at the diligence stage rather than the inquiry stage, and tell your crew on your own schedule. Our page on selling a service business covers how to run a sale without your crew hearing about it early.

Screen for the ability to close

A broker’s real service is filtering out buyers who cannot close, and doing it yourself means asking uncomfortable questions early. Ask how the purchase will be funded, and ask for proof. Ask whether the buyer has run a company of this kind before. Ask whether a trade license the work requires is one the buyer holds or can obtain.

Many small acquisitions run on SBA financing. The SBA says 7(a) loans may be used for changes of ownership, complete or partial, and that borrowers must be creditworthy and demonstrate a reasonable ability to repay, with documentation that varies by loan size and the lender’s processing method. A lender will underwrite your business as well as your buyer, which means your books get a second review by someone who does this for a living. That adds weeks, and it also adds the discipline that makes the closing real.

Structure, price and taxes

Most small deals are asset sales. The IRS treats the sale of a business as a sale of each asset separately, sorting them into capital assets, depreciable and real property held more than a year producing Section 1231 gain or loss, inventory producing ordinary income, and interests in a partnership or corporation. The IRS requires the residual method for allocating the consideration across the assets, which fixes both your gain and the buyer’s basis.

Where goodwill or going concern value attaches, Form 8594 must be filed by both the seller and the purchaser. Agree the allocation in the purchase agreement so the two forms match, because buyer and seller have opposite incentives on it and a disagreement surfacing at tax time is worse than one settled in the contract.

Price and payment terms are separate questions. A deal can be cash at closing, a seller note paid over time, an amount tied to future results, or a mix. Carrying a note usually raises the total you receive and hands you the risk of collecting it, and our page on owner financing explains that trade.

Where these deals fall apart

• The books do not match the returns. A buyer reconciles the profit and loss against the tax returns and the bank deposits. Gaps kill either the price or the deal.
• The business is the owner. When customers call your cell and you write every estimate, a buyer is buying a job. Document the processes and move relationships to the team before you sell, not during.
• Something cannot transfer. A trade license held in your name, a lease needing landlord consent, or a customer contract with an anti-assignment clause each has to be solved before closing.
• Tax and liability surprises. Unpaid taxes follow the business. Tennessee Code Ann. § 67-6-513 requires a purchaser to withhold enough of the purchase money to cover unpaid sales tax, interest and penalties until the seller produces a receipt or a certificate from the commissioner, and makes a purchaser who fails to withhold personally liable up to the purchase money paid. Get current and get the certificate. A buyer who discovers that problem alone will re-trade the price.

Running the closing

The sequence is a letter of intent setting price, structure and an exclusivity period, then diligence, then the purchase agreement, then closing. Have your attorney draft or review the agreement; the SBA’s guidance says the same. Expect the buyer to ask for a transition period and some form of non-compete, and decide in advance what you will agree to on both, because those are the terms owners concede late and regret.

The other route

Selling to a direct buyer skips the listing and the marketplace entirely, and it trades some price for a shorter process and a known counterparty. We buy small service businesses for our own account. Our record so far: 20+ real estate transactions and 16 business acquisitions across Tennessee, North Carolina, Georgia and South Carolina. Our post on what a buyer checks in due diligence shows the questions before they arrive.

This is general information, not legal or tax advice. Talk to an attorney or CPA about your situation.