Selling to a Third Party: Pros and Cons

Miranda Kishel
Jun 3
2 min read

Why This Topic Matters

For many small business owners, selling to a third party is the most common and financially rewarding exit strategy—but it’s also one of the most complex. Whether you’re selling to an individual buyer, competitor, private equity firm, or strategic investor, this path comes with both opportunities and risks.

According to BizBuySell, the market for small business acquisitions remains strong, but sellers who are unprepared often receive lower offers or struggle to close a deal. That’s why understanding the pros, cons, and process is critical before you list your business.

Step-by-Step: How to Navigate Selling to a Third Party

1. Get a Business Valuation

Know what your business is worth before entertaining offers. This helps:

Set realistic expectations
Identify value drivers and risks
Strengthen your negotiation position

2. Prepare Financials and Documentation

Buyers will request 3–5 years of:

Profit and loss statements
Tax returns
Balance sheets
Operating procedures and contracts

Clean books = better buyer confidence.

3. Assess Your Ideal Buyer Type

Your buyer could be:

An individual entrepreneur
A competitor
A strategic investor
A private equity group

Each type has different goals, timelines, and deal structures.

4. Work With a Business Broker or M&A Advisor

A broker can help:

Market your business confidentially
Qualify buyers
Manage offers and negotiations

This is especially helpful if you’ve never sold a business before.

5. Structure the Deal Thoughtfully

A third-party sale might involve:

Cash at closing
Earnouts or performance-based payouts
Seller financing
Asset vs. stock sale structures (with tax implications)

Work with a CPA and attorney to protect your interests.

Real-World Example

A medical equipment supply company owner wanted to retire and sell to an outside buyer. With help from a valuation expert and broker, they prepared financials and found a strategic buyer willing to pay a premium due to cross-selling potential. The final deal included 70% cash up front and 30% paid over two years based on revenue targets.

Because the seller prepared early and understood buyer motivations, they exited on favorable terms.

Common Mistakes to Avoid

Overestimating value – Many owners use rules of thumb rather than getting a real valuation.
Waiting too long to plan – A rushed sale can reduce leverage.
Failing to clean up financials – Incomplete or inconsistent records turn off serious buyers.
Not qualifying buyers – Wasting time with unqualified buyers can kill momentum.
Ignoring tax consequences – Structure matters. Get professional advice before signing anything.

Summary of Best Practices

✅ Start planning 1–3 years in advance

✅ Get a certified business valuation

✅ Prepare clean, buyer-ready documentation

✅ Work with an experienced broker and advisory team

✅ Understand deal structures and tax impact

✅ Be clear about your ideal buyer and outcome

Selling to a third party can be the most profitable exit—but only if you prepare properly.

Want help getting ready? Book a Discovery Call to explore how we guide business owners through every step of the sale process.