Step-by-Step Selling Process

Key Tips for Sellers

• Don't tell employees until closing is imminent
• Keep running the business at full effort throughout the process
• Be responsive to due diligence requests — delays kill deals
• Consider seller financing to attract more buyers and maximize price
• Engage a CPA and business attorney early

Step-by-Step Buying Process

Red Flags to Watch For

• One customer represents 30%+ of total revenue
• Short lease term remaining or non-transferable lease
• Revenue not reflected in tax returns
• Business only works because of the owner personally
• Declining revenue trend over 3 years

Key Valuation Methods

• SDE Multiple — Most common for businesses under $5M. SDE = Net profit + owner salary + add-backs. Multiplied by industry multiple (2x–5x).
• EBITDA Multiple — Used for larger businesses ($2M+ revenue). Earnings before interest, taxes, depreciation, and amortization.
• Asset-Based — Used for asset-heavy businesses. Value = fair market value of all tangible assets.
• Revenue Multiple — Common in SaaS/tech. Usually 0.5x–2x annual revenue depending on margins.

What Increases Value

• Consistent or growing revenue over 3+ years
• Documented, transferable systems and processes
• Diversified customer base (no customer >20% of revenue)
• Experienced staff that will stay post-sale
• Favorable long-term lease with options
• Strong online reviews and brand reputation
• Recurring revenue or long-term contracts

What Decreases Value

• Owner-dependent operations
• Declining revenue trends
• Short lease term or difficult landlord
• Undisclosed liabilities or pending litigation
• Revenue not reflected in tax returns

Industry SDE Multiple Ranges

Why Confidentiality Matters

• Employee retention — Staff may seek other jobs, disrupting operations and reducing value
• Customer confidence — Customers may switch to competitors fearing instability
• Supplier relationships — Vendors may tighten credit terms or require deposits
• Competitor advantage — Competitors can poach clients or hire your staff
• Negotiating leverage — A known motivated seller receives lower offers

How We Protect Confidentiality

• Blind teasers — marketing describes the business without identifying it
• NDA required before any details are shared with buyers
• Buyer financial pre-qualification before any meetings are scheduled
• Seller controls all timing of employee and supplier notification
• No public listings with identifying details or addresses

When to Tell Employees

Generally, wait until the Purchase Agreement is signed and closing is imminent — typically 1–2 weeks before the close date. Your broker will help you plan this communication carefully to ensure a smooth transition.

SBA 7(a) Loan Basics

• Loan amounts up to $5 million
• Down payment: typically 10–15% of purchase price
• Loan term: up to 10 years (25 years with real estate)
• Interest rates: prime + 2.25% to 4.75%

Basic Buyer Eligibility

• Good personal credit (680+ preferred)
• U.S. citizen or permanent resident
• Relevant industry experience or management background
• Ability to inject 10–15% equity
• Clean personal financial history

SBA Loan Timeline

Financial Documents

• 3 years of federal business tax returns
• 3 years of profit & loss statements (monthly preferred)
• Current balance sheet
• Accounts receivable and payable aging reports
• Bank statements (last 12 months)
• Merchant processing statements (if applicable)
• Inventory list with current values

Legal & Compliance

• Business licenses and permits — verify transferability
• Articles of incorporation / LLC operating agreement
• Any pending or threatened litigation
• Health department, liquor license, professional licenses

Lease & Real Estate

• Current lease — term, rent, options, transferability
• Landlord consent to assignment
• CAM charges and upcoming rent escalations

Operations

• Employee roster, salaries, tenure, and roles
• Key employee agreements and non-competes
• Vendor and supplier contracts
• Top customer list and concentration analysis
• Equipment list — age, condition, owned vs. leased

Online & Reputation

• Google, Yelp, and social media reviews
• Website traffic and analytics
• Online ordering accounts and revenue (if applicable)

Asset Sale vs. Stock Sale

• Asset Sale (most common) — Buyer purchases specific assets and assumes selected liabilities. Cleaner for buyer; seller may have higher tax exposure.
• Stock / Membership Interest Sale — Buyer acquires the entire entity including all liabilities. Simpler for license transfers but buyer assumes unknown risks.

License & Permit Transfers in Arizona

• General business licenses — typically re-applied by new owner
• Liquor licenses — DLLC approval required for transfer (60–90 days)
• Professional licenses (medical, dental) — typically non-transferable
• ROC contractor licenses — non-transferable; new owner applies independently

Non-Compete Agreements

Arizona enforces reasonable non-compete agreements in business sale contexts. A seller non-compete of 2–5 years within a defined geographic area is standard and generally enforceable when tied to a business sale.

Key Documents in an AZ Business Sale

• Non-Disclosure Agreement (NDA)
• Letter of Intent (LOI)
• Asset Purchase Agreement (APA)
• Bill of Sale and Seller Non-Compete
• Training & Transition Agreement
• Lease Assignment or New Lease

Standard Transition Elements

• Training period — Typically 2–4 weeks full-time, negotiated in the purchase agreement
• Seller availability — Often 30–90 days post-close for questions by phone
• Customer introductions — Seller personally introduces new owner to key accounts
• Vendor introductions — Seller introduces new owner to key suppliers
• Employee retention — Seller recommends staff remain; new owner maintains stability

Document Your Systems Before Sale

Businesses with documented SOPs (Standard Operating Procedures) sell faster and at higher multiples. Before listing, document your daily procedures, vendor contacts, employee roles, customer service scripts, and financial reporting processes.

Exit Timeline Planning