Selling a business is a multi-faceted process. How do you determine what it's worth? How do you find a buyer? How do you keep your competitors, customers and employees from knowing it's for sale? What are all the steps involved?

Let's look at these questions and more with eight tips for maximizing the sale of your business.

1. Know the overall process before you start

The very first step is to learn about the mergers and acquisitions process and how businesses are valued.

When you understand the process, you also know to give yourself enough time. It can take anywhere from 1-2 months just to value the business and draft the Offering Memorandum properly. Once on the market, it is common to take 6-11 months to sell, according to BizBuySell's Insight Report.

Do some research on the process itself and understand the key steps, before you jump in. Here's a checklist of what to you'll want to get familiar with:

  • Valuation and Maximizing Value
  • Confidentiality
  • Engaging Buyers
  • The Offering Memorandum
  • Management Meetings
  • Negotiation and Deal Structure
  • Letter of Intent and Term Sheet
  • Due Diligence
  • Closing Documents and Process

2. Understand Valuation

Knowing how to value a business is not required, but an understanding of what buyers will look at, and how it impacts value is critical. For instance, many business owners assume the value of their company is based on revenue. In fact, cash flow and EBITDA (earnings before interest, taxes, depreciation and amortization) are the primary metrics for determining value. Growing revenue at the expense of cash flow, will often degrade the value of the business.

Also keep in mind that it's not all financial. Buyers look for things like scalable infrastructure, strong management that is not dependent on the owner, customer concentration, and growth capacity.

3. Don't waste money on a Fair Market Value report, but do invest in valuing the company

Fair Market Value reports have their place, but it's not in the sale of most small businesses. They attempt to give a hypothetical value based on a hypothetical buyer.

What you really need, is to understand the many different values that will be assigned to your business--under multiple scenarios and by multiple types of buyers. So, don't skip the valuation process--that will cost you in the end--but invest your money in an analysis and consultation on the value of your company, specifically in the context of a sale.

4. Skimping on the Offering Memorandum is like selling a house with no photos

The Offering Memorandum (which can go by many names) is the presentation of your business. Don't settle for a teaser and a short, template-based business profile. Be sure to have an Offering Memorandum that offers a substantial presentation of your operations, products/services, management, senior staff, major accomplishments, significant risks, detailed financials, and future outlook.

5. Don't blow it with the teaser

The teaser is the short, usually 1 or 2-page, anonymous profile of your business. It's the tool that is used to engage buyers without giving away the identity of your business. However, a simple copy/paste could blow it. All too often, Googling a few lines from the teaser will bring up the selling company's website. Don't copy/paste into your teaser, or your confidentiality could be blown too.

6. Maintain confidentiality

Two of the major ways to protect confidentiality are:

  1. Use a third-party to engage buyers. How can you engage a buyer on your own without them knowing who you are? There are hack methods, but they are ineffective. Most business owners hire a business broker or an M&A advisor. A business broker will help locate a buyer and protect confidentiality, while an M&A advisor will also help value your business, write the Offering Memorandum, help negotiate the price and terms, and manage due diligence and closing.
  2. Use an effective Non-Disclosure Agreement (NDA). An effective NDA will be specific and detailed, without unnecessary road blocks that don't belong there. For example, the NDA is not the place to protect a broker's commission, and non-standard NDAs can sometimes get in the way more than they protect.

7. Negotiate the deal, not the price

Business owners who focus on nothing but the purchase price get out-negotiated. If you ignore deal structure, tax treatments, non-price financial consideration, and intangibles, then you will end up leaving money on the table.

8. Due diligence is the road to closing, not the obstacle

The faster you respond, the more transparent you are, and the more you disclose, the more comfortable the buyer will be. That gets deals closed and reduces your own risk.