How to Sell a Company in 2026: 7 Steps, Costs, Timeline, Tax

Last updated: October 2026

TL;DR: To sell a company, clear seven gates in order: set your net-proceeds number, evidence your earnings, build the data room, market under NDA, collect competing indications of interest, sign a letter of intent (LOI) with a short, dated exclusivity window, then close through confirmatory diligence and the purchase agreement. Main Street sales average six to 10 months from engagement to close and lower-middle-market deals 11 to 12 months, per the IBBA and M&A Source Market Pulse for Q2 2026. Across the 733 deals in Peony's State of M&A Data Rooms report, the average was about 7.9 months from start to closing.

I'm Deqian Jia, co-founder of Peony, a data room company used by 8,000+ customers in 60+ countries. Half of the 399 new M&A deals that started on Peony in Q3 2026 were sell-side processes (201 of 399), so I watch owners and their advisors run this sequence every week, inside the room where the documents, NDAs and buyer questions live. This guide is the order I would follow if I were selling my own company, checked against the IBBA, GF Data, the SBA and the IRS. It is written for three readers: a first-time founder or owner of a $1M to $100M revenue company deciding to sell in the next 6 to 24 months, a family-business or retiring owner who wants the step order, cost and timeline, and a PE- or VC-backed founder whose board has asked for a sale process.

Key takeaways

• The sequence is seven gates, not ten tasks. Each gate has a test you can check before moving on; skipping one moves the work into exclusivity, when the buyer has the leverage.
• Timeline: six to 10 months for Main Street sales and 11 to 12 months for the lower middle market, from engagement to close (IBBA, Q2 2026); about 7.9 months average from start to closing across 733 Peony deals.
• Cost: the advisor's success fee dominates. A classic Lehman formula on a $10M sale is $200,000 and a Double Lehman is $400,000; a sell-side QoE runs 10 to 30 percent above a $25,000 to $50,000 buy-side QoE at $5M to $15M of enterprise value (BD Emerson).
• Valuation: under about $2M of price, SDE multiples (2.0x to 3.1x SDE by size band in Q2 2026); above it, EBITDA multiples. The $5M to $50M segment sold at 5.8x EBITDA in Q2 2026 (IBBA).
• Cash at close: sellers received 83% to 92% of value in cash at closing on average (IBBA, Q2 2026).
• Tax: in an asset sale both sides generally file IRS Form 8594, and gain on depreciated equipment is ordinary income to the extent of depreciation (IRS Publication 544).
• Data room: open it before the first teaser. The median Peony room took 12.6 days from first opening to its first outside viewer, rooms had a median of 5.5 bidders, and 62% were NDA-gated.

Jump to your situation

• First-time founder, $1M to $100M revenue → the seven gates, costs, mistakes
• Family-business or retiring owner → cash at close and staying on, asset vs stock tax
• PE- or VC-backed founder with a board mandate → board-led process, after the LOI

How do you sell a company, step by step?

You sell a company by clearing seven gates in order, and each gate has a test you can check before you move on. I call it the Seven-Gate Sale Map. The gates are the same whether you are selling a $900,000 service business or a $90M manufacturer; what changes by size is who clears them and how hard each test is (next section).

The seven gates in plain step names, with typical timing

If you think of a sale as the familiar list of steps, here is where each step sits on the map and when it usually happens. The months are an illustrative planning calendar for a lower-middle-market sale, counted from the day you engage the advisor and fitted to the IBBA's 11-to-12-month engagement-to-close range; Main Street sales compress the same steps into six to 10 months (IBBA and M&A Source, Q2 2026).

Three gates are skipped more than the others, and each skip has a predictable cost.

Gate 1 gets skipped because the headline price feels like the answer. It isn't. The number that matters is what reaches your account after debt payoff, fees, escrow, any earnout and tax, and asset-versus-stock structure alone can move it by a large amount (see the tax section). If you have not written that number down, the first serious buyer will set it for you. Years-ahead exit choices, such as a sale versus a management buyout or an ESOP, belong in business exit planning; this guide starts once you have decided to sell.

Gate 3 gets skipped because owners think the room is a diligence tool. In practice the room is the marketing infrastructure: it is how a buyer who signs the NDA gets the CIM and first-round numbers on day one, and how you see which buyers are actually reading. Building it after the LOI means chasing documents during exclusivity, which is the worst possible time to look disorganized.

Gate 5 gets skipped because an inbound offer feels like a gift. An unsolicited offer is a buyer setting the timetable. Without a second written indication you cannot tell whether it is a strong price or a cheap one. In the IBBA's Q2 2026 survey, 87% of deals over $5M attracted at least three offers and 33% attracted ten or more (IBBA and M&A Source). Running rounds and deadlines across several bidders is its own discipline, covered in our M&A auction process guide; the buyer-side view of the same lifecycle is in our M&A process guide.

What changes by deal size? The Seven-Gate Sale Map

The gates never change, but three things do at about $2M of price and again at about $50M: who runs the process, what earnings the buyer prices, and how the price is paid. The IBBA's Market Pulse draws the first line for you: purchase prices under $2M are reported as multiples of seller's discretionary earnings (SDE), and $2M to $50M as multiples of EBITDA (IBBA Q2 2026 highlights).

Sources for the table: BizBuySell Q3 2026 Insight Report release; IBBA and M&A Source Market Pulse Q2 2026; GF Data Q2 2026 via ACG; SBA SOP 50 10 8.1; SBA 7(a) loans; FTC 2026 HSR thresholds.

The SBA rules matter even if you never borrow a dollar, because they shape what a Main Street buyer can offer you. Under SOP 50 10 8.1, effective October 1, 2026, "Seller earnouts are prohibited," seller debt counts toward the buyer's equity only if it is "on full standby (no payments of principal or interest for the term of the 7(a) loan)," the minimum equity injection for an initial acquisition is 10%, and for an initial acquisition or business expansion with a business purchase price of $3 million or more, the lender must also obtain its own quality of earnings report (SBA SOP 50 10 8.1, Appendix 15). So an SBA buyer's offer is typically cash at closing plus, at most, a seller note, and never an earnout; only a note on full standby counts toward the buyer's equity.

How long does it take to sell a company?

Plan on six to 12 months from hiring an advisor to closing, plus any preparation your books need first. The IBBA's Q2 2026 Market Pulse, based on 255 brokers and advisors reporting 181 completed deals, puts Main Street sales at six to 10 months from engagement to close and lower-middle-market deals at 11 to 12 months, with the biggest slowdown in the $2M to $5M band, where the average rose from nine months to 11.5 (IBBA and M&A Source).

The two total-duration clocks start at different points: the IBBA's runs from advisor engagement, while ours measures deals from start to closing as tracked on the platform, so read them as complementary rather than competing. Our ~7.9-month average also has a known skew. Energy and infrastructure deals drive most of the activity on Peony and run through longer regulatory and technical reviews, which keeps the overall average close to eight months, while smaller deals, led by technology, closed faster in Q3 2026 (State of M&A Data Rooms).

Where does the time actually go? In the deals I see, it goes to three places, in this order:

1. Preparation that should have happened before the clock started. A sell-side QoE typically takes five to eight weeks (BD Emerson), and getting a room ready for buyers took a median 12.6 days on Peony. The software takes minutes; collecting, reviewing and redacting the documents is the two weeks.
2. Confirmatory diligence after the LOI. This is where questions arrive in volume and where any weak add-back gets found. Our due diligence timeline breaks this phase into its critical path.
3. Financing. Buyers that borrow are on their lender's clock. GF Data reported average total debt on platform deals falling to 2.9x trailing EBITDA in Q2 2026, from 3.4x in Q1, while average senior debt pricing rose to 7.8% from 7.2% (GF Data via ACG); tighter debt means more equity to raise and more lender diligence.

What does it cost to sell a company?

The advisor's success fee is usually the largest cost of selling a company, followed by tax, then the quality of earnings report and legal fees; the data room is the smallest line. The table shows each cost with the source of the number; the full fee worksheet by deal size is in our M&A advisor fees guide.

Two clauses move the advisor bill more than the percentage does. The first is the definition of "transaction value": if it includes assumed debt or the earnout, you pay a fee on money you may never receive. The second is the tail period, during which the advisor is paid if you sell to any buyer it introduced.

From headline price to cash in your account

The headline price in an LOI is not what you receive at closing. In the IBBA's Q2 2026 survey, sellers received 83% to 92% of deal value in cash at close on average, and seller financing accounted for less than 10% of most deals (IBBA highlights). Walk the bridge before you sign anything:

Do you need a business broker, an M&A advisor or an investment bank?

Hire by deal size: a business broker for Main Street sales under about $2M, an M&A advisor for roughly $2M to $50M, and an investment bank when the likely buyers are large sponsors or public strategics. The decision deserves more than a paragraph, so it has its own page: M&A advisor vs business broker vs investment bank compares buyer reach, licensing and fees, and best M&A advisors lists firms by city and sector.

Can you sell without one? Yes, when a single natural buyer has approached you and the price is clearly fair. You still need three things the intermediary would have provided: M&A counsel for the NDA, LOI and purchase agreement, a CPA to model tax and support diligence, and at least one competing written indication so you are not negotiating against yourself.

How is a company valued: on SDE or EBITDA?

Under about $2M of purchase price, buyers price a company on seller's discretionary earnings (SDE); above that, on adjusted EBITDA. SDE is pre-tax profit plus one owner's salary and benefits, interest, depreciation and genuine one-off costs, because the buyer usually replaces the owner. Adjusted EBITDA assumes a paid management team, so the owner's salary stays in as a cost at a market rate.

The 2026 markers, each from the source named in the sentence:

• Main Street: BizBuySell's Q3 2026 Insight Report put the median sale price at $350,000 across 2,132 closed transactions (BizBuySell release via Business Wire).
• Main Street multiples: the IBBA's Q2 2026 chart shows 2.0x SDE for sales under $500,000, 2.8x SDE at $500,000 to $1M and 3.1x SDE at $1M to $2M, then 4.0x EBITDA at $2M to $5M (IBBA highlights).
• $5M to $50M: the IBBA's EBITDA multiple rose from 5.5x in Q2 2025 to 5.8x in Q2 2026, the segment's highest since Q1 2022 (IBBA highlights).
• Middle market: GF Data reported an average of 7.0x trailing 12-month adjusted EBITDA across 85 completed deals in Q2 2026, down from 7.3x in Q1 (GF Data via ACG).
• Evidence premium: in GF Data's Fall 2025 study, sellers that commissioned a sell-side QoE saw TEV/EBITDA multiples of 7.4x on average against 7.0x for those that did not, with the benefit most notable above $50M of enterprise value (Middle Market Growth).

Your multiple moves inside those averages on customer concentration, recurring revenue, owner dependence and growth. Our M&A valuation methods guide covers DCF and comparables, and quality of earnings covers which add-backs survive a buyer's review.

Asset sale or stock sale: how will the sale be taxed?

In an asset sale, the IRS treats the deal as a sale of each asset, so part of your gain can be taxed as ordinary income; in a stock sale, you usually sell one capital asset, your shares. IRS Publication 544 says it directly: "The sale of a trade or business for a lump sum is considered a sale of each individual asset rather than of a single asset" (IRS Publication 544, 2025). Buyers usually prefer asset deals for the stepped-up basis and the ability to leave liabilities behind; sellers usually prefer stock deals for simpler, mostly capital-gain treatment.

Form 8594. "Generally, both the purchaser and seller must file Form 8594 and attach it to their income tax returns" for the year of the sale (IRS Instructions for Form 8594). The price is allocated by the residual method across seven classes, and the order is what decides your tax:

Depreciation recapture. Gain on section 1245 property, such as equipment, is "treated as ordinary income to the extent of depreciation allowed or allowable on the property" (IRS Publication 544). A buyer who wants more of the price on equipment, which it can depreciate quickly, is asking you to accept more ordinary income, so negotiate the allocation in the LOI, not after it. If part of the price is paid over time, IRS Publication 537 is blunt: you "must report any depreciation recapture income in the year of sale," "whether or not an installment payment was received that year" (IRS Publication 537).

VC-backed C corporations and QSBS. Section 1202 can exclude much of the gain on qualified small business stock. For stock acquired after July 4, 2025, the exclusion is 50% after three years, 75% after four and 100% after five or more, with a $15,000,000 per-issuer limit ($10,000,000 for earlier stock) and a $75,000,000 aggregate gross assets test (26 U.S.C. § 1202). Eligibility has more conditions than these, so have your tax adviser confirm it before the LOI fixes the structure. This section is general information, not tax advice.

What documents do you need to sell a business?

You need four sets of documents, gathered in the order buyers ask for them: a preparation set before marketing, the teaser and CIM, the confirmatory diligence set after the LOI, and the closing set. Collect the first set before you hire anyone, because it feeds your valuation, the CIM and the data room's first-round folder. The full request list by workstream is in our due diligence data room checklist.

Before marketing (the preparation set)

• Three years of financial statements and federal tax returns, reconciled to each other
• Monthly management accounts for the trailing 12 months
• An add-back schedule (the SDE or adjusted EBITDA bridge) with a source document behind every line
• Revenue by customer and a customer concentration summary
• A debt schedule, plus liens, equipment leases and other debt-like items
• An organization chart, key employee list and compensation summary
• Ownership records: cap table or membership ledger, operating agreement or bylaws
• A list of material contracts, with change-of-control and assignment clauses flagged
• Real estate leases, licenses and permits, an IP register and a litigation summary

For the teaser and CIM

• A blind one-page teaser: sector, region, revenue and earnings bands, reason for sale
• The CIM: history, products and services, customers and markets, team, financial summary and earnings bridge, growth plan (see how to write a CIM)
• The sell-side QoE report, if you commissioned one, and a short management presentation for buyer meetings

After the LOI (confirmatory diligence)

• Full material contracts: customers, suppliers, leases, licenses
• Employee agreements, payroll records, benefit plans and contractor agreements
• Federal, state, sales and payroll tax filings
• Corporate records: minutes, written consents, formation documents
• IP assignments from founders, employees and contractors
• Insurance policies and claims history, litigation files, and environmental, IT and data-privacy documents
• Monthly net working capital history, which sets the peg
• For an SBA-financed buyer: the lender verifies your tax returns against IRS transcripts, and at a business purchase price of $3 million or more its QoE must include a cash proof that reconciles bank statements to the income statement and tax returns on a trailing 12-month basis and for the last two fiscal years (SBA SOP 50 10 8.1), so have those bank statements ready

At closing

• The purchase agreement and disclosure schedules
• The agreed Form 8594 allocation, in an asset sale
• Third-party consents and any landlord estoppel certificates
• Payoff letters and lien releases
• The escrow agreement and the funds-flow memo
• A bill of sale and assignment agreements (asset sale) or stock powers (stock sale)
• Your consulting, employment or transition services agreement, and restrictive covenants
• Board and shareholder approvals and officer's certificates

In a Peony room, give each set its own top-level folder and let Index documents number every folder and file, so a buyer's request list can point to 2.3 instead of a file name.

When should you open the data room? Before the first teaser goes out

Open the data room before buyer outreach, so the first buyer who signs an NDA can start reading the same day and every buyer gets the same controlled view. Across Peony's Q3 2026 dataset, the median room took 12.6 days from first opening to its first outside viewer, rooms had a median of 5.5 bidders, and 62% of rooms required an NDA before anyone saw a document. A typical sub-$50M room held about 1,206 files, 29 users and 79 Q&A questions (State of M&A Data Rooms). Those numbers are why the room has to exist before the teaser: five or six parties reading at once, behind a gate, with questions arriving from day one.

Here is how I would set up a sell-side room in Peony, and what each piece costs. Prices are per admin per month, billed annually, and viewers are unlimited and free on every plan.

1. Generate the structure. AI room generation proposes a folder structure from a one-line description of the deal, and Index documents numbers every folder and file (1, 1.1, 1.2) so a buyer can say "open 2.3" (Data Room plan, $52). If your advisor sends a request list, map it onto that numbering; Peony has no separate request-tracker module.
2. Stage the folders. A first-round folder (CIM, summary financials, customer concentration summary) for every NDA signer; finalist folders (contracts, payroll, tax, IP) locked until the shortlist. Granular folder and file permissions are on Data Room.
3. Gate and separate the buyers. Turn on the NDA gate: a simple acknowledgment on Business ($30) or a signed NDA with an audit record on Data Room. Give each bidder its own visitor group, so promoting a buyer to the final round is a permission change, not a new upload.
4. Mark every page. Dynamic watermarks stamp the viewer's identity on every page (Data Room), which matters most when a competitor is in the buyer pool.
5. Read the room. Page-level analytics, on every plan, show which bidders spent time on the financials and which only skimmed the teaser. Our guide to spotting serious buyers with data room analytics shows how advisors use this before choosing who gets management meetings.
6. Answer questions with citations. In Q&A, AI drafts a cited first answer to each bidder question from the room's own documents; your team reviews and edits it, and nothing reaches the bidder until you publish it. Question teams keep each bidder's questions separate. Visitor Q&A starts on Data Room; the expert and approver routing workflow is Deal Team ($64, minimum 4 admins). You can also switch on AI document Q&A per visitor group (Business and above), so a bidder can interrogate the documents inside the room and get page-level citations. Document content is not used to train any model.
7. Keep versions straight. Upload new version replaces a file in place, keeping its position, link and version history, so a corrected forecast never becomes a second, conflicting file.

Where Peony is not the answer. Peony is a data room, not a broker: it does not find buyers or run your auction. On deals above $500M, or where the bank or the buyer requires Datasite or Intralinks, use the platform the process requires. Work involving ITAR, CUI, DFARS or CMMC requirements goes to Peony Enterprise, not a standard plan. And the full audit trail is kept on Data Room, with a full copy of a visitor's trail provided on request rather than self-serve; the analytics CSV export is self-serve from Business.

For a seller under $50M, the arithmetic is short: Peony rooms averaged $219 a month on sub-$50M deals in our dataset, against about $68,000 a year for an average Datasite contract according to Vendr. The 7-day Data Room trial needs no credit card and never auto-charges. Start now

How do you approach buyers without the sale leaking?

Approach buyers through a blind teaser, release your name and the CIM only after an NDA, and stage what each round can see. Confidentiality in a sale is not one control; it is a ladder, and each rung releases a little more to fewer people.

Three practical rules:

• Competitor buyers get the sensitive data last. A strategic that loses the process keeps what it read. Hold customer-level pricing and named contracts until a signed LOI, and consider releasing them through counsel only. Our multiple-bidder data room guide covers keeping bidders walled off from each other in one room.
• Write the no-contact rule into the NDA. Buyers should not call your employees, customers or suppliers without your advisor's permission.
• Tell people in order. Key managers usually need to know once management meetings start, because buyers want to meet them; most staff should hear at signing or closing, from you, with a plan.

What happens between the LOI and closing?

After the LOI, the buyer runs confirmatory diligence while the lawyers draft the purchase agreement and disclosure schedules, and this is where price gets retraded if the earnings were not evidenced. The LOI itself sets the terms you will live with, so read our seller's LOI checklist before you sign one.

The sequence after signing:

1. Exclusivity starts. You stop talking to other buyers. In US deals exclusivity "will commonly span the period of 30-60 days after the parties sign the letter of intent" (Baker McKenzie). Keep yours short and dated, with milestones the buyer must hit and a rule for extensions.
2. Confirmatory diligence. Financial (the buyer's QoE), legal, tax, HR, IT and commercial. Our due diligence data room checklist lists the documents by workstream, and how to prepare for due diligence covers getting ahead of it.
3. Financing. An SBA buyer's lender needs its own business valuation, and for an acquisition with a business purchase price of $3 million or more, its own QoE, which "must not be prepared by or for the seller" (SBA SOP 50 10 8.1). Sponsor buyers need their debt committed.
4. Purchase agreement and disclosure schedules. Reps and warranties, indemnity, escrow or insurance, the working-capital mechanism and the earnout terms. Tie each schedule item to the room's numbered index so the disclosure record is unambiguous.
5. Regulatory steps. In 2026, transactions valued above $133.9 million can require a Hart-Scott-Rodino premerger filing, and the statutory waiting period ends "on the thirtieth day after the date of such receipt" of the filing (15 U.S.C. § 18a; FTC); licensed sectors add their own approvals.
6. Third-party consents. Landlord, key customers, lenders, licensors, as the contracts require.
7. Signing, funds flow and closing. Often simultaneous on smaller deals; separated by a regulatory gap on larger ones.
8. Transition. Announcements, customer introductions and the handover your consulting or employment agreement defines.

In the deals I see, a price moves after the LOI for two recurring reasons: add-backs that do not survive the buyer's QoE, and a working-capital peg that was never agreed precisely. Both are Gate 2 and Gate 6 problems, which is why the gates are in that order.

What should a VC- or PE-backed founder do when the board asks for a sale?

Agree the process with the board before anyone calls a buyer: who runs it, who approves each step, the minimum outcome and how proceeds flow through the preference stack. A board-led sale has the same seven gates, but Gate 1 is collective: the net number is a waterfall, not a single figure.

• Mandate. A board resolution or a small transaction committee that can approve the advisor, the buyer list, the IOI shortlist and the LOI without convening the full board each time.
• Banker. Ask how many deals they closed at your size and in your sector, who does the day-to-day work, and the retainer, success fee, minimum fee and tail. Confirm the definition of transaction value.
• Waterfall. Model proceeds at several prices through liquidation preferences, participation, option pools and any management carve-out. A price that clears the preferences by little can leave common holders and employees with almost nothing, which changes who supports the deal.
• Rights. Check drag-along, investor consents and information rights before outreach, not after an LOI.
• QSBS. If you hold C-corporation stock, ask your tax adviser whether it qualifies under Section 1202 and when each tranche crosses its holding period.
• Room permissions. Investors, board members and bidders are different audiences. Give each its own visitor group with its own folders, so a board observer who also works at a fund never sees bidder Q&A, and each bidder sees only its own questions.

What should a family-business or retiring owner plan for?

Plan for three decisions: how long you will stay after closing, how much of the price you need in cash at closing, and whether the real estate sells with the business or stays with you. Retirement is the most common reason owners sell: in the IBBA's Q2 2026 survey it accounted for nearly two-thirds or more of sales between $500,000 and $50M, peaking at 72% in the $1M to $2M market (IBBA and M&A Source).

• Staying on. If your buyer finances a full acquisition with an SBA 7(a) loan, you "may not remain as an officer, director, stockholder, or employee," but the business "may contract with the seller as a consultant for a period not to exceed 24 months" (SBA SOP 50 10 8.1). In a partial change of ownership, the seller "may stay on as an owner." Private equity buyers usually want the opposite: a longer transition, sometimes with rollover equity.
• Seller notes. An SBA buyer can count your note toward its equity only if it is on full standby for the life of the loan, so price a standby note as long-dated money.
• Family on the payroll. Normalize family members' salaries to market rates in the add-back schedule, with a document for each, or a buyer's QoE will do it for you at a worse number.
• Real estate. Selling the building separately or leasing it to the buyer can change both price and tax; decide before the LOI.
• Next-generation managers. If a key manager is family or long-tenured, a retention plan makes the business less owner-dependent, which supports the multiple.

If you are still choosing between selling, passing the business on or an ESOP, start with business exit planning and come back here when the decision is made.

What mistakes do first-time founders make when selling a company?

The costly mistakes are sequencing mistakes: doing a gate late, or skipping it. Each one moves leverage to the buyer at the point where it is hardest to win back.

Selling in your sector

The seven gates hold everywhere, but buyers, multiples and diligence differ by sector. These guides go deeper:

• How to sell a SaaS company: ARR multiples, who buys SaaS in 2026, and the metrics buyers test.
• How to sell an ecommerce business: SDE multiples, marketplace vs broker vs direct sale, and Amazon and Shopify account transfers.
• How to sell a food and beverage brand: what acquirers pay for, recasting a deduction-heavy P&L, and license-transfer traps.
• How to sell a beauty brand: valuation, the strategic buyer set and brand diligence.
• How to sell a dental practice: DSO vs private buyers, valuation and associate buyouts.
• Selling a dental practice by state: state ownership rules, non-competes and tax.

FAQ

How do I sell my company step by step?

Work through seven gates in order. First, set the net amount you would accept after tax, fees and debt. Second, evidence your earnings with reconciled statements and documented add-backs. Third, build the data room before outreach. Fourth, market with a blind teaser and release your name only after an NDA. Fifth, collect competing indications of interest. Sixth, sign an LOI with a dated exclusivity window. Seventh, close through confirmatory diligence, the purchase agreement and disclosure schedules. Skipping a gate usually moves the work into exclusivity, when the buyer holds the leverage.

How long does it take to sell a company?

Usually six to 12 months from hiring an advisor to closing. The IBBA and M&A Source Market Pulse for Q2 2026 put Main Street sales at six to 10 months from engagement to close and lower-middle-market deals at 11 to 12 months. Across 733 M&A deals from $1M to $500M on Peony, the average was about 7.9 months from start to closing, pulled up by energy and infrastructure deals with longer regulatory and technical reviews. Add preparation time if your books need cleaning or a sell-side quality of earnings report, which typically takes five to eight weeks.

How much does it cost to sell a company, including the advisor, QoE, legal and data room?

The advisor's success fee is the largest cost. Lehman-style formulas are common: a classic 5-4-3-2-1 Lehman on a $10M sale is $200,000 and a Double Lehman is $400,000, and most advisors also charge some upfront fee, though nearly a third of the 331 surveyed for Axial's 2026 fee guide now charge none. BD Emerson prices a buy-side quality of earnings report at $25,000 to $50,000 for a $5M to $15M company and says sell-side work runs 10 to 30 percent more. Legal fees vary, so ask for a cap per phase. The data room is the smallest line: Peony rooms averaged $219 a month on sub-$50M deals, and plans start at $30 per admin per month.

Do I need a business broker, an M&A advisor or an investment bank to sell my company?

Match the intermediary to the deal size. A business broker fits Main Street sales under about $2M, where buyers are mostly individuals and often SBA-financed. An M&A advisor fits roughly $2M to $50M, where buyers are private equity funds, search funds and strategic acquirers. An investment bank fits larger processes whose buyers are big sponsors or public companies. You can sell without one when a single natural buyer has approached you, but you still need M&A counsel and a CPA, and a second written offer to test the first.

Is my business valued on SDE or EBITDA, and what multiple should I expect?

Below about $2M of purchase price, buyers usually price on seller's discretionary earnings (SDE), which adds the owner's pay and perks back to profit; above that, on adjusted EBITDA. The IBBA's Q2 2026 Market Pulse uses exactly that split: Main Street multiples ran from 2.0x SDE under $500,000 to 3.1x SDE at $1M to $2M, and $5M to $50M deals reached 5.8x EBITDA, up from 5.5x a year earlier. GF Data reported an average 7.0x trailing 12-month adjusted EBITDA across 85 middle-market deals in Q2 2026, and a separate GF Data study published in December 2025 found that sellers with a sell-side quality of earnings report averaged 7.4x against 7.0x without one, mostly on deals above $50M.

Asset sale or stock sale: which is better for the seller, and what is IRS Form 8594?

A stock sale is usually better for the seller, because you sell one capital asset, your shares, and the buyer takes the entity with its history. In an asset sale, the IRS treats the deal as a sale of each individual asset, so gain on equipment is ordinary income to the extent of depreciation, and a C corporation can be taxed twice. Form 8594 is the asset acquisition statement: in an asset sale, buyer and seller generally both attach it to their returns for the year of sale, allocating the price across seven asset classes, with goodwill last. This is general information, not tax advice.

What documents do I need to sell my business?

Gather them in four sets. Before marketing: three years of financial statements and tax returns reconciled to each other, trailing 12-month management accounts, an add-back schedule with a document behind each line, revenue by customer, a debt schedule, an org chart, ownership records and a list of material contracts. For marketing: a blind teaser and a CIM. After the LOI: full contracts, payroll and benefit records, tax filings, corporate records, IP assignments, insurance and monthly working-capital history. At closing: the purchase agreement and disclosure schedules, third-party consents, payoff letters, the escrow agreement and, in an asset sale, the agreed Form 8594 allocation.

How do I sell my business confidentially so employees, customers and competitors don't find out?

Market with a blind teaser that describes the business without naming it, and release the name, the CIM and the data room only after a buyer signs an NDA. Then stage disclosure: summary financials to every NDA signer, contracts and customer detail only to finalists, and customer-level pricing last, often redacted for competitor buyers. In Peony, each bidder gets its own visitor group behind an NDA gate, folder permissions stage what each group sees, and dynamic watermarks put the viewer's identity on every page, on the Data Room plan at $52 per admin per month. Brief key managers once management meetings start.

When should I set up a data room to sell my company, and what should it cost?

Set it up before the first teaser goes out, so a buyer who signs the NDA can start reading the same day. Preparation, not software, is the slow part: on Peony the median room took 12.6 days from first opening to its first outside viewer. Rooms on deals under $50M averaged $219 a month in the Q3 2026 State of M&A Data Rooms report, against about $68,000 a year for an average Datasite contract according to Vendr. Peony Data Room costs $52 per admin per month billed annually, with unlimited rooms and free, unlimited viewers.

What happens after I sign the LOI, and how long until the deal closes?

After the LOI you are exclusive with one buyer, who runs confirmatory diligence: a quality of earnings review, legal and tax diligence and, on larger deals, insurance and antitrust work, while lawyers draft the purchase agreement and disclosure schedules. Expect questions in volume; sub-$50M rooms on Peony averaged about 79 Q&A questions. Exclusivity commonly spans 30 to 60 days after signing, per Baker McKenzie's US private M&A guide, and closing follows once diligence, financing and third-party consents are done. Price is most often retraded here when add-backs or working capital do not hold up, so keep exclusivity short and dated. In 2026, deals valued above $133.9M can also require an HSR premerger filing, whose statutory waiting period ends on the thirtieth day after the filing is received.

I'm retiring and selling our family business. How much of the price will I get in cash at closing, and can I stay on?

Most of it. Sellers received 83% to 92% of value in cash at closing on average in the IBBA's Q2 2026 Market Pulse, with seller financing under 10% of most deals; the rest came as seller notes, earnouts or retained equity. Escrow, debt payoff, fees and tax then come out of that cash. Whether you can stay depends on the buyer's financing: if the buyer uses an SBA 7(a) loan for a full acquisition, SOP 50 10 8.1 bars you from staying as an officer or employee but allows a consulting contract of up to 24 months, while a partial sale lets you stay as an owner.

My VC-backed company's board wants to run a sale process. What should I do first as the founder?

Agree the process before anyone calls a buyer: which banker runs it, which directors approve each step, the minimum outcome, and how proceeds flow through the preference stack to common, management and option holders. Model the waterfall at several prices, check drag-along and investor-consent rights, and ask your tax adviser whether your shares qualify for the Section 1202 exclusion, which can remove much of the gain on qualifying C-corporation stock. Then set up the data room with separate visitor groups for the board, your investors and each bidder, so every party sees only its own folders and questions.

What are the biggest mistakes first-time founders make when selling a company?

Five recur. Negotiating one inbound offer alone instead of collecting competing indications of interest. Signing an LOI with open-ended exclusivity. Claiming add-backs without documents, which a buyer's quality of earnings review then strips out at the multiple. Sending financials by email before an NDA, with no record of who read what. And not modeling net proceeds after tax, escrow and fees before agreeing to an asset or stock structure. Each one moves leverage to the buyer at the point where it is hardest to win back.

Related Resources

• Business Exit Planning: choosing the exit route and the years-ahead plan before a sale.
• M&A Advisor vs Business Broker vs Investment Bank: which intermediary fits your deal size.
• M&A Advisor Fees: Lehman, Double Lehman, retainers and the clauses that inflate the bill.
• How to Write a CIM: the document buyers read after the NDA.
• M&A Auction Process: running rounds, deadlines and bid comparison.
• LOI Checklist for Sellers: the LOI terms to settle before exclusivity.
• Due Diligence Data Room Checklist: the document list by workstream.
• Quality of Earnings: which add-backs survive a buyer's review.
• State of M&A Data Rooms, Q3 2026: 733-deal benchmarks for time to close, bidders and room cost.
• Visitor Groups: one permission group per bidder, with its own folders.