Seller FAQ.
20 answers, no fluff.

For most Main Street businesses (sub-$5M revenue), yes. IBBA practitioner data consistently shows broker-marketed businesses close at higher multiples and with more competitive terms than owner-run sales. The broker handles buyer outreach, keeps the process confidential, and quarterbacks the deal team so you can keep running the business — which itself protects the valuation.

Success fees on Main Street engagements typically run 8–12% of the transaction value, often on a Modified Lehman scale that steps down at higher deal sizes. Minimum fees ($15K–$50K) are common. A few brokers charge an up-front engagement retainer (usually $2K–$10K) that credits against the success fee.

Three filters: (1) actually closed deals in your industry and state, not just represented them — ask for the last 5, (2) holds current credentials such as the IBBA's CBI (Certified Business Intermediary) or M&A Source's M&AMI, and (3) matches your deal-size band. A broker who closes $10M+ LMM deals is usually the wrong fit for a $1.5M-revenue Main Street shop and vice versa.

The contract you sign with the broker to represent your business for sale. Standard terms: 12-month exclusive listing period, success-fee schedule, minimum fee, and — importantly — a tail period (typically 12–24 months) during which the fee is still owed if you close with a buyer the broker introduced. Read the tail carefully.

Main Street businesses are valued on a multiple of Seller's Discretionary Earnings (SDE) below $1M in earnings, and a multiple of EBITDA above. The multiple depends on industry, recurring-revenue mix, customer concentration, and management depth. The valuation-report methodology follows the IRS's classic guidance in Revenue Ruling 59-60 — market approach anchored by comparable transactions.

Main Street SDE multiples for solid operators typically run 2.5×–4.5×, depending on industry and quality. HVAC, restoration, and IT/MSP with strong recurring revenue can reach 4.0×–4.5× SDE and 6.0×–8.0× EBITDA. Restaurants, retail, and single-location service businesses without recurring revenue typically trade lower. See our sold-businesses benchmark table for industry-specific ranges.

SDE (Seller's Discretionary Earnings) is EBITDA plus the owner's compensation, benefits, and discretionary personal expenses. It's the standard metric for sub-$1M-earnings Main Street businesses where the owner runs the show. EBITDA is the standard above $1M because the buyer typically hires a professional operator, so the owner's compensation is a real cost.

Add-backs are non-recurring or personal expenses that get added back to reported earnings to show what a new owner would actually inherit. Common ones: owner salary above market, health insurance for family, personal auto, business meals, one-time legal fees. Every add-back needs documentary support — buyers reject undocumented add-backs during Quality of Earnings review, which drops the price.

9–12 months is typical from engagement-letter signing to closing. The transaction itself (from LOI to close) is 60–120 days. Well-prepped businesses close faster; deals with financials cleanup mid-process routinely stretch past 12 months. LMM deals (>$5M revenue) generally take 12–18 months.

Every serious exit plan starts 2–3 years before the target sale date. That's the window needed to clean up financials, reduce customer concentration, build a management layer, and get the recurring-revenue mix where the market wants it. The Exit Planning Institute's State of Owner Readiness survey consistently finds that owners who plan 2+ years ahead clear 20–35% higher net proceeds.

Not until you have a signed LOI and diligence is well underway. Premature disclosure creates flight risk in your key staff — which itself devalues the business. Most Main Street owners tell only their spouse and their advisory team until 30–45 days before close. There are exceptions when employees are also being asked to sign new agreements as part of the sale.

Everything goes out under NDA. Buyers see a blind teaser first (no company name, no location, no customer detail); only after signing the NDA do they receive the CIM. Management presentations happen off-hours or off-site. Site visits use unmarked vehicles. Employees, customers, and vendors are not told until the deal is essentially closed.

For most Main Street sellers, a stock sale is better tax-wise (long-term capital gains on the whole gain, and potentially QSBS if you qualify), but buyers typically prefer asset sales (step-up in basis, cleaner liability). The purchase-price allocation across asset classes drives the tax outcome — your CPA should model both structures before you sign the LOI.

A seller note is financing you extend to the buyer for a portion of the purchase price — typically 5–15% at 6–8% interest over 3–7 years. It's not optional in SBA-financed deals where the SBA requires the seller note to be on standby (no principal payments) for the first 24 months. A well-structured seller note broadens your buyer pool substantially.

Federal long-term capital gains at 15% or 20% depending on income, potentially plus 3.8% Net Investment Income Tax, plus state tax where applicable (0% in Florida, Texas, Nevada, Tennessee, and Washington; 5–13% in most other states). Deal-structure choices (installment sale, QSBS, F reorganization) can materially move the after-tax number. Run this analysis before you sign the LOI, not after.

A Quality of Earnings (QoE) study is the buyer's accountants' deep dive into your reported earnings — testing add-backs, revenue recognition, working-capital patterns, and one-time items. On Main Street deals, buyers typically commission a QoE after signing the LOI. Sellers who have their books reviewed by their own accountants first (a seller-side QoE) close 30–60 days faster because there are no surprises.

Customer concentration is the share of revenue from your top customers. Any single customer above 20% starts pulling the multiple down. Above 30% and most institutional buyers walk. Below 15% across the top-5 is what a top-decile deal looks like. Fixing concentration takes 12–24 months — start before you engage a broker.

Cash-basis books need to be converted to accrual for the CIM and for buyer diligence. Small businesses rarely have full audits, but three years of reviewed or compiled financials with clean bank-statement reconciliations is a realistic minimum. Get your bookkeeper or a fractional CFO on this 6–12 months before going to market.

Any contract with an assignment restriction (real-estate lease, franchise agreement, exclusive supply contract) needs the counterparty's consent to transfer. This is one of the most-overlooked deal killers — a landlord who withholds consent can either kill the deal or extract a fee. Identify every consent requirement in the first month of prep, and engage counterparties before you sign a letter of intent.

The LOI itself is typically non-binding on price/terms but binding on exclusivity and confidentiality. Once you sign the definitive purchase agreement, backing out becomes materially expensive — often with a break-up fee and possible damages. If you're not sure you want to sell, do the emotional-readiness work in step 1 of the sales process before starting.