Part 4: Sell Your Business
A. Sale Readiness — What Buyer Due Diligence Actually Looks For
The exit-readiness checklist that saves months when a strategic buyer, competitor, or private equity firm comes calling.
Diligence starts long before you list the business
Whether you're approached unexpectedly by a strategic buyer or you're planning a sale years in advance, the businesses that command better prices and close faster are the ones whose records were already in order before diligence began. Cleaning up loose ends during an active deal, under time pressure, almost always costs more — in price concessions, delayed closing, or deal fatigue — than maintaining them proactively.
The core diligence categories buyers review
Buyers and their counsel typically organize diligence requests into a handful of recurring categories, and gaps in any of them slow the process down or raise price-reducing concerns:
Corporate records — entity formation documents, ownership records, and minutes or written consents for major decisions, complete and consistent with each other
Financial statements — clean, consistent financials, ideally reviewed or audited, without significant unexplained variances year over year
Contracts — customer and vendor agreements, leases, and loan documents, particularly looking for change-of-control provisions that could be triggered by the sale itself
Employment matters — proper worker classification, up-to-date employment agreements, and no unresolved employment disputes or claims
Intellectual property — clear ownership of trademarks, proprietary processes, software, and content, with no gaps in assignment from founders, employees, or contractors
Litigation and compliance — any pending or past litigation, regulatory violations, or licensing lapses
Change-of-control clauses — the hidden deal-killer
One of the most common surprises in diligence is discovering that a key customer contract, lease, or loan agreement contains a change-of-control clause requiring the counterparty's consent before the business can be sold — or worse, allowing the counterparty to terminate the agreement outright upon a sale. Review your major contracts for these clauses well before starting a sale process, since obtaining consent (or negotiating around a termination right) can take significant time.
Building your own diligence checklist now
You don't need to be actively selling to benefit from organizing as if you were. Maintaining an up-to-date data room — corporate records, financials, key contracts, IP documentation — on an ongoing basis means that if a buyer approaches unexpectedly, or you decide the timing is right, you're not scrambling to reconstruct years of records under deadline pressure.
B. Succession Planning and Who Really Decides
Family succession, key-employee buyouts, and how much say co-owners actually retain when it's time to sell or hand off the business.
Succession is a decision, not an inevitability
Many SME owners assume succession will sort itself out — a child will take over, a key employee will step up, or the business will simply be sold when the time comes. Without a formal plan, none of these outcomes is guaranteed, and the absence of a plan often forces a rushed, worse-priced sale precisely at the moment (an owner's death, disability, or sudden decision to retire) when the business has the least ability to absorb disruption.
Family succession
Passing a business to a family member raises questions distinct from a typical sale: is the transfer a gift, a sale at fair value, or some blend of the two, and what are the tax consequences of each? Does the successor have the operational capability to run the business, separate from their family relationship to the current owner? And — often the most contentious question — how are non-involved family members treated, if the business represents a significant portion of the owner's estate and other children or heirs aren't part of the business?
Key-employee buyouts
A key-employee buyout — selling the business to a manager or long-tenured employee rather than an outside buyer — can preserve continuity for customers and staff, but it requires the employee to have (or obtain) financing, since few key employees have the personal capital to pay full value up front. Common structures include seller financing (the outgoing owner finances part of the purchase price, paid over time from the business's future profits) or an Employee Stock Ownership Plan (ESOP), a more complex but tax-advantaged structure for transitioning ownership to employees broadly.
Governance during the transition
Regardless of who the successor is, the transition period — where authority and decision-making shift gradually from the outgoing owner to the successor — is where succession plans most often break down. A written transition plan should specify a timeline for the handoff, which decisions the successor can make independently versus which still require the outgoing owner's sign-off during the transition, and a clear end date after which the outgoing owner's authority formally ends, so the transition doesn't drift indefinitely.
