Thinking about selling? Here is what it actually means.
Most owners build a business over decades without ever selling one. This guide walks through the fundamentals plainly and honestly. It is not a pitch. It is the primer we wish every operator had before talking to any buyer, including us.
If you have never sold a business, you are not behind.
You built your company through hard work, not financial engineering. So the language buyers use, EBITDA and multiples and LOIs and diligence, can feel foreign and a little intimidating. That is normal, and it is fixable.
Understanding how a sale works is one of the best things you can do for yourself. Informed owners ask better questions, make better decisions, and get better outcomes. Read this even if you never sell, and read it twice before you talk to anyone.
What is EBITDA, and why does everyone keep saying it?
EBITDA is earnings before interest, taxes, depreciation, and amortization. In plain terms: how much cash the business actually throws off in a year. Buyers apply a multiple to that number to reach a price.
Earnings × Multiple = What your business is worth
A simplified example
- Annual revenue
- $1,400,000
- Labor and payroll
- -$620,000
- Trucks, fuel, equipment
- -$180,000
- Chemicals and supplies
- -$95,000
- Insurance and admin
- -$140,000
- EBITDA
- $365,000
Illustrative only. Real valuations also account for add-backs, working capital, equipment condition, and deal structure. But this is the core logic.
What moves your multiple up, and what moves it down.
Your earnings tell a buyer what the business makes. Your multiple tells them how confident they are it will keep making it.
Increases your multiple
Recurring compliance work
Contracted cleanings on an NFPA 96 schedule are the most valuable revenue you have. Predictable beats big.
Runs without you
If the crews roll and the phone gets answered while you take two weeks off, your business is worth more. Owner dependency is the single biggest discount.
Clean books
Three years of organized financials. No surprises in diligence. This builds trust and speeds everything up.
Documented compliance
Photos, reports, certificates, service records. Proof of work protects your customers and proves your quality to a buyer.
Diversified customers
No single account carrying an outsized share of revenue. That said, landing large commercial and enterprise accounts is its own proof of quality.
Tenured crews
Techs who have been with you for years signal a business that survives a transition. Retention is worth real money.
Decreases your multiple
Heavy owner dependency
You hold every customer relationship, quote every job, handle every escalation. The most common reason multiples drop.
Messy or informal books
Cash jobs, missing invoices, unclear owner expenses. It slows diligence and gives buyers a reason to trim the price.
Aging trucks and equipment
Deferred maintenance shows up as capital a buyer has to spend after close, so they discount for it.
High tech turnover
Constant hiring means training cost, lower productivity, and culture risk.
Handshake agreements
Undocumented customer terms, informal employee arrangements. Buyers want paper. Formalize what you can.
The terms you will hear, in plain language.
Buyers and brokers speak in shorthand. Here is what it all means.
EBITDAEarnings Before Interest, Taxes, Depreciation & Amortization
Roughly the cash your business generates in a year before accountants and lenders get involved. Your valuation is built on this number.
SDESeller's Discretionary Earnings
Like EBITDA, but adds back your salary and the personal expenses run through the business. Common for smaller shops. Buyers shift to EBITDA as businesses grow.
MultipleValuation multiple
The number multiplied by your earnings to reach a price. A business earning $500K at a 4x multiple is worth $2M. Size, growth, recurring revenue, and owner dependency all move it.
Add-backsRecasting
Adjustments that show what the business really earns: your above-market salary, the personal truck, family on payroll, one-time expenses. Legitimate and expected. Be honest about what is in there.
LOILetter of Intent
The written offer after initial conversations. Price, structure, key terms. Mostly non-binding except exclusivity. It kicks off diligence.
Due diligenceDD
The buyer's homework: financials, contracts, employee records, equipment, legal history. Cleaner records mean a faster, calmer process.
Rollover equity
Instead of selling 100%, you keep a piece. You take cash now and stay an owner of your own business, sharing in what it earns and what it is worth later.
Seller note
Part of the price paid over time, with interest, usually funded by the business's own cash flow. Standard in deals this size.
Working capital
The cash needed to run day to day: receivables and inventory minus what you owe. Most deals set a target so the business is ready to operate at close.
Equity vs. asset sale
Buying your company entity, or buying its assets. It changes taxes, contracts, and how much has to be re-papered. Talk to a CPA before you sign.
Non-compete
You agree not to compete for a defined time and area. Standard in nearly every deal. Make sure the scope feels reasonable.
Exclusivity
After signing an LOI you typically pause conversations with other buyers while diligence runs. It protects the buyer's investment of time.
What actually happens when you sell.
Every deal differs, but the sequence is predictable.
Get curious, not committed
You do not need a decision to start learning. Most owners begin by quietly finding out what their business might be worth. Nothing moves until you say so.
Get your financials in order
Three years of tax returns and P&Ls. If bookkeeping has been loose, a few months with a good accountant pays for itself many times over.
Understand what it is worth
Calculate earnings, identify your add-backs, apply a reasonable multiple for the trade. Any serious buyer should walk you through this before paperwork.
Choose the right buyer
Private equity, strategic acquirers, individual buyers, and platforms all want different things. Interview them as hard as they interview you.
Negotiate the LOI
Price, structure, timeline, terms. Do not sign the first version. Ask questions. Have an attorney read it. This document shapes everything after it.
Diligence
Thirty to sixty days of information requests covering financials, operations, customers, employees, equipment. Stay organized and responsive.
Close and transition
Documents signed, funds wired. Then a transition period introducing relationships and making the handoff clean for your crew and customers.
Questions owners actually ask.
Will my employees find out before we close?
Almost never. Confidentiality is standard, buyers sign an NDA before seeing anything, and the deal stays private until closing. A good buyer wants your crew to hear it from you, in your words, at the right moment. Leaks usually come from the seller's side, so keep the circle small.
Do I have to sell the whole thing?
No. Many owners sell a majority stake, take real cash off the table, and keep meaningful ownership in their own business. You get liquidity now, distributions as the business earns, and a second payday if the larger platform is sold later.
Do I have to stay on after the sale?
Usually for a transition, but the length is negotiable. Some owners stay for years because they enjoy it. Others hand off in ninety days. Be honest with yourself about what you want and get it written into the agreement.
What happens to my brand and my crew?
Ask this of every buyer and listen carefully. Some buyers absorb your name into theirs. Others keep the local brand your community knows and keep the crew intact. The answer tells you what kind of partner they will be.
What if I run personal expenses through the business?
Extremely common and nothing to be embarrassed about. Preparing for a sale means recasting those: personal vehicle, phone, family on payroll, above-market owner pay, one-time costs. Any experienced buyer has seen it and handles it professionally.
How long does it take?
Plan for three to six months from first real conversation to closing. LOI is a few weeks, diligence is thirty to sixty days, final documents and funding a few weeks more. Clean books are the single biggest accelerator.
Do I need a broker?
Not necessarily. Brokers typically charge a percentage of the sale price. Selling directly to a buyer means no broker fee, but it also means you should educate yourself, which is exactly what this guide is for. If you want a competitive process with many bidders, a broker can run one.
What about taxes?
Talk to a CPA before signing anything. How the deal is structured changes your tax bill meaningfully, and there are legitimate ways to defer or reduce it. A good M&A accountant pays for themselves many times over.
What if I had a bad year recently?
It happens. Buyers look at two to three years and weight recent performance most heavily, but context matters. A one-time event with a clear explanation rarely kills a deal. Sustained decline with no explanation is harder.
Knowledge first. Conversation second.
Now that you know how this works, the best next step is a real conversation. No obligation, no pressure, and complete confidentiality. If we are not the right partner for you, we will say so.
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