WEB-STIL

After years as a B2B SaaS content consultant, I’ve learned that while starting a business is exciting, setting up the right structure is so important. Different business structures offer various benefits, but choosing the wrong one can hurt you legally and financially in the long run.

Let me share what I‘ve learned about choosing the right business legal structure based on my own journey and the experiences I’ve had working with other consultants in our industry.

Table of Contents

• What is a business legal structure?
• Four Types of Business Structures
• Think Bigger Than Your Current Situation

What is a business legal structure?

A business legal structure, or business entity, is a classification of a company and how it operates. It also regulates your federal and state tax obligations.

There are four primary categories:

1. Sole proprietorship.
2. Partnership.
3. Limited liability company (LLC).
4. Corporation.

When I first started, I carefully considered whether I‘d want to bring on partners or scale my business later. I’ve discovered how expensive and time-consuming it can be to change your business structure down the road, so I always advise thinking about your future plans when choosing a business structure.

Four Types of Business Structures

1. Sole Proprietorship

A sole proprietorship is the easiest business structure to start. In fact, when I first began freelancing, I discovered there‘s no setup involved — you’re automatically considered a sole proprietor.

This means you own and operate the business as one individual — there’s no difference between the owner and the business. You file taxes under your legal name or the name of the business you registered with the Division of Corporations.

Here’s a snapshot of the pros and cons of sole proprietorships.

The only way around this is to purchase business insurance and include liability waivers in contracts. Another option is to transfer or share personal assets with someone else.

For taxes, sole proprietors must pay federal and state income taxes, depending on where they operate. Some states don’t charge income taxes for sole proprietorships, such as Florida.

It’s free to establish a sole proprietorship, but if you register a Doing Business As (DBA) name, you’ll pay between $10 and $100.

Examples of sole proprietors include freelancers, gig workers, and small business owners like writers, web developers, hair stylists, and online store owners.

Example: Content Writing Services

I started my B2B SaaS content consulting business as a sole proprietorship, which was the simplest way to begin. I wrote blog posts, whitepapers, and case studies for software companies under my own name, filing taxes with Schedule C.

While this structure worked initially, I realized that as I took on larger enterprise clients and higher-value projects, I needed more liability protection and growth potential.

2. Partnership

A partnership is like a sole proprietorship, except two or more people own it. There are two types of business partnerships:

1. Limited liability partnerships (LLP).
2. Limited partnerships (LP).

In an LLP legal business structure, each partner has limited liability. The partners’ personal assets are off-limits in litigation and for debt repayment. Plus, partners are protected from the actions of other partners.

So if one co-owner gets sued for misconduct, the other partners aren’t responsible for the costs that incur.

An LP is a little different — one or more general partners (GPs) have unlimited liability, and the other owners have limited liability. Some differences include:

All partners decide the voting power LPs will have, which can be restricted to certain areas. For example, an LP may have 20% voting power because they invested 20% of the capital in the company and can only vote on matters revolving around equipment purchases and acquisitions.

The partnership agreement details the roles and rights of each partner to prevent future conflicts and is critical to have before establishing the business.

It should outline:

This isn’t an all-inclusive list, but it provides an idea of what most partnership agreements cover.

Note that partnerships are tax-reporting entities (not tax-paying). It’s required to file Form 1065 annually to provide information to the IRS about business profits and losses. However, the business doesn’t pay taxes to the government.

Instead, profits and losses pass through to the owners. Each owner must fill out a tax return and include details about their percentage share of the profit (based on the partnership agreement). They then pay taxes on their portion of the profits or report a loss.

Partnerships aren’t difficult to form, but require detailed agreements that are best done with the help of an attorney.

The cost to start a business partnership depends on several factors like:

• Location/state of registration.
• Number of partners involved.
• Type of partnership (LP vs LLP).
• Complexity of partnership agreement.

For example, registration fees can range from around $200 for an LP in Delaware to $1,061 for an LLP in Florida. Many states also require annual renewal fees, which can be as high as $820.

Examples of partnerships include medical, legal, and dental practices.

Example: Digital Content Solutions

Another freelancer and I considered forming a partnership to combine our expertise. I‘d handle B2B SaaS content strategy and writing while they’d manage SEO and content distribution, and we would have split profits 60-40 based on workload, with me as the majority partner.

However, we opted against this structure due to shared liability concerns. If one partner made a mistake with a client’s product messaging or SEO strategy, both of us would be personally liable.

3. Limited Liability Company

A limited liability company, or LLC, is a mix of corporate, sole proprietorship, and partnership legal business structures. It provides liability protection to safeguard your personal possessions from business debts.

LLCs can have one or more members, like a partnership. However, some states require the business to dissolve when someone leaves the company. You can then re-form the company under the same or a different business structure.

If you plan to sell the company one day, include a clause in the agreement about buying, selling, and transferring ownership of the LLC.

An LLC is a tax-reporting entity and must file an informational tax return. However, it pays no taxes to the IRS as its business income passes through the company to the LLC members. Each member files an individual tax return to report their share of profits or losses. This can prevent double taxation (paying corporate taxes on the profits, while also paying personal income tax on your owner’s salary).

However, since LLC members are self-employed, they pay self-employment tax contributions for Medicare and Social Security.

Note:

• If you’re the only LLC member, you can report business expenses using Form 1040 Schedule C, E, or F.
• If there are two or more LLC members, each must file a partnership return using Form 1065.

Each LLC member’s profit share is taxable income, including undistributed profits.

The cost to form an LLC depends on the state but can range between $100 and $800. In addition, if you are doing business in your state, it is best to form an LLC in that state. Otherwise, if you form an LLC in another state, you will have to pay your fees twice.

You must also have articles of organization (certification of formation) before establishing the business.

Some states require an LLC operating agreement outlining:

• Profit and loss sharing.
• Buy-sell provisions.
• Member voting power.
• Ownership interest per member.
• Rights and responsibilities of each member.

LLC is an ideal business structure for medium-risk companies. It separates your business and personal finances, since you’ll need a separate LLC bank account to run your business (this holds true for all business structures except for sole proprietorship).

Examples of LLCs include real estate companies, law firms, accounting firms, and consulting businesses.

Example: My Current LLC Structure

I operate my B2B SaaS content consulting business as an LLC, which protects my personal assets while maintaining operational flexibility.

This structure works perfectly for my high-value consulting work with software companies, where a single messaging mistake could potentially impact a client’s product launch.

I can also easily bring on subcontractors for larger projects, scale my services, and maintain professional credibility with enterprise clients who prefer working with LLCs over sole proprietors.

4. Corporation

A corporation, or C-corp, is independent of the people who own and run it (shareholders). As a shareholder, you own portions (shares) of the corporation, giving you partial ownership rights.

Shareholder benefits include:

• More shares = greater voting power in company decisions.
• Receive dividends (share of post-tax profits).
• Dividends only taxed upon distribution to shareholders.
• Personal assets protected from business liabilities.
• Shares can be passed on after death according to formal documents.

A corporation is considered a separate legal person — it has its own assets and liabilities. Therefore, it can do things separate from its owners, such as enter into contracts, sue and be sued, and pay taxes. Its structure even protects shareholders’ personal assets from business liabilities and debts.

It’s similar to a partnership, except corporations are owned by shareholders who elect directors to oversee the company. The board of directors then hires managers to run the business. So it’s an attractive option for investors who want to earn from the company, but don’t want to work “in” the business.

There are two types of corporations: C-Corporations and S-Corporations. Here are some of their differences.

It’s common for sole proprietors and LLC businesses to elect to be taxed as S-corporations to save on taxes. But it’s only worth it if you earn at least $75k a year.

For example, your business generates $100k in earnings per year — and instead of the entire amount passing onto you like a regular LLC member, you could split the $100k by paying yourself a salary of $50k and taking the rest as dividends. You’ll pay $7,650 in self-employment tax (or 15.3%) for your pass-through income — not the dividends — saving you $7,650 compared with getting all $100k as a pass-through.

Although forming a corporation is the most complex, it’s affordable, costing between $50 and $200.

Examples of corporations include social media companies, software companies, and grocery chains.

Example: My B2B SaaS Clients like HubSpot

Most of my clients, including HubSpot, operate as corporations. This structure makes sense for SaaS companies because they often need to raise significant capital, have multiple shareholders, and plan for rapid growth.

As a content consultant, I work directly with their marketing teams but understand that major decisions go through their board of directors.

The corporate structure helps these companies manage complex operations across multiple products, attract top talent with stock options, and maintain the professional image needed for enterprise sales.

Think Bigger Than Your Current Situation

Writing this piece reminded me of all the conversations I‘ve had with fellow consultants who rushed into choosing a business structure without proper research. I’ve seen talented writers get stuck in partnerships that limited their growth and others who outgrew their sole proprietorships but waited too long to make a change.

There’s no one-size-fits-all solution — understand where you want your business to go and build the right foundation to get there.

While the paperwork and legal considerations might seem overwhelming at first, investing time in this decision early on saves considerable headaches down the road.

I once worked with a client who completely changed the way I think about business growth. He ran a mid-sized tech company, growing steadily but slowly — until everything suddenly took off. I asked him what changed. His answer? “Joint ventures.”

That was the first time I really understood what a joint venture is — a strategic partnership where two businesses combine strengths while staying independent. Instead of building new tech from scratch, he partnered with a company that had what he needed. In return, his company provided the market access his partner lacked. The result? They both scaled faster than they ever could alone.

Since then, I’ve seen joint ventures reshape industries, from tech to automotive. Unlike acquisitions, they let businesses share resources without giving up control. Of course, not all joint ventures work, but when done right, they can be a game-changer.

Table of Contents

• What is a joint venture?
• 4 Types of Joint Ventures
• Joint Venture Examples
• The Advantages and Disadvantages of a Joint Venture
• Joint Venture Alternatives
• Takeaway Thoughts

Take BMW and Brilliance Auto Group, for example. They partnered to produce BMW vehicles in China, helping BMW expand in a highly regulated market while Brilliance gained access to BMW’s engineering expertise.

Or, Google and NASA — collaborating on AI and quantum computing at NASA’s Ames Research Center to push space exploration and data analysis forward.

Every joint venture is built on a contract that spells out how things work. Think: Who’s contributing what, how decisions get made, and how profits (or losses) are split. Some agreements are simple, just covering the basics, while others go deep into financing structures and decision-making authority.

Pro tip: I’ve learned that clear governance is everything. Who has the final say? How will disputes be handled? Sorting these out upfront keeps things running smoothly and avoids unnecessary power struggles.

Why Companies Form Joint Ventures

When growth feels risky, I get why companies look at joint ventures as the smarter bet. Instead of taking on the cost and complexity of a full acquisition or building from the ground up, they team up simply because it’s just more practical at times.

Right now, 60% of companies say JVs hold up better in economic downturns, and 58% see them as a safer bet than mergers and acquisitions (M&A), especially given today’s geopolitical climate. And I see the appeal.

A strong JV can help businesses:

• Break into new markets without starting from scratch.
• Share the financial and operational load of big projects.
• Leverage each other’s expertise for faster innovation.
• Streamline operations and cut inefficiencies.
• Gain a competitive edge without going all-in alone.

It’s less about ownership and more about strategic advantage — because the right partnership can get you further faster.

I’ve seen joint ventures work wonders when done right. They help businesses cut costs, boost efficiency, and share risks. But not all joint ventures are created equal. There are four main types.

1. Project-Based Joint Venture

A project-based joint venture has two or more parties working on a specific project. This agreement is usually temporary, lasting until the project’s completion.

One of my favorite examples? NASA and Boeing teaming up to develop a new type of sustainable airplane, the X-66. NASA’s goal is to reach net-zero carbon emissions in aviation by 2050, and developing the X-66 with Boeing is the first important step in this project.

Project-based joint ventures can also include:

• Construction firms joining forces to tackle a massive development.
• Tech companies co-developing a product, then parting ways once it’s launched.
• Retailers banding together to break into a new market.

Pro tip: I always recommend doing some deep due diligence before committing. Make sure you and your potential partner align on company culture, decision-making, and operational capacity. Misalignment here can be a dealbreaker later. Use HubSpot’s Free Business Startup Kit to align you and your cofounder’s vision — and even pitch your new venture to investors.

2. Functional-Based Joint Venture

A functional-based joint venture is a long-term collaboration where two or more parties share resources to support each other’s operations. Unlike project-based ventures, this one keeps going as long as it works for both sides.

Say I own a bakery. To expand my reach, I might partner with a local coffee shop. They sell my pastries, I promote their coffee beans, and suddenly, we’re both growing.

Microsoft and OpenAI, for example, began working together in 2023. Microsoft provides cloud computing infrastructure through Azure while OpenAI develops AI models that Microsoft has exclusive access to. They share the revenue they jointly produce and plan to expand their partnership with new projects in 2025.

Source

3. Vertical Joint Venture

A vertical joint venture takes place between buyers and suppliers — usually when a traditional supplier-buyer relationship doesn’t maximize benefits. This type of joint venture helps create economies of scale and cut costs for both parties.

One recent example I found fascinating was Honda and LG Energy Solutions investing $4.4B in an Ohio battery plant. Honda gets a steady supply of high-quality battery modules, while LG secures a long-term manufacturing partner.

4. Horizontal Joint Venture

A horizontal joint venture happens when two companies in the same industry team up to gain a competitive edge. The twist? They may also be competitors.

For instance, semiconductor producers Intel and UMC formed a joint venture in 2024 to collaborate on advanced chip production. They are at the same level of the industry but Intel provides cutting-edge chip design expertise and access to U.S. government incentives (e.g., CHIPS Act funding) while UMC, a Taiwanese company, provides manufacturing expertise in mature node production, helping Intel scale up older chip manufacturing. Moreover, this international partnership aims to help avoid future supply chain disruptions.

Pro tip: I can’t stress this enough — clear, frequent communication is non-negotiable in a joint venture, especially when working with a competitor. Transparency builds trust, and trust keeps the partnership running smoothly.

Joint Venture Examples

Telstra and Accenture

In early 2025, Telstra joined forces with Accenture in a seven-year venture to push AI and data transformation forward — fast. The goal? To embed AI deep into Telstra’s systems, improving network performance, customer experience, and efficiency across the board.

Source

With Accenture’s AI expertise, Telstra gets access to cutting-edge tools and a stronger data infrastructure. Meanwhile, Accenture locks in a major telecom client, helping shape the AI-driven future of one of Australia’s biggest providers. For Telstra, this means faster automation and smarter systems. For Accenture, it’s a proving ground for its AI innovations.

Mitsubishi Corporation and Nissan

By March 2025, Mitsubishi Corporation and Nissan are rolling out a joint venture aimed at two big things: making autonomous driving more practical and turning EV batteries into scalable energy storage.

Nissan brings the EV and self-driving expertise, while Mitsubishi taps into its massive business network to commercialize these innovations in the market. Beyond an auto partnership, I see this as a bold move to tackle real-world problems, from urban congestion to sustainable energy storage.

Volkswagen and Rivian

Volkswagen and Rivian made it official in late 2024, forming “Rivian and VW Group Technology, LLC” — a venture dedicated to developing next-gen EV software and electrical architecture, with the first models slated to roll out in 2027.

Source

For Volkswagen, this means access to Rivian’s cutting-edge tech to accelerate its EV roadmap. For Rivian, it’s deep-pocketed support to expand its technology across more vehicles. With up to $5.8 billion on the table, this deal focuses on making EVs more accessible, affordable, and packed with smarter software.

At its core, this is a win-win: Volkswagen picks up the pace in the EV race, and Rivian cements itself as a leader in automotive tech.

The Advantages and Disadvantages of a Joint Venture

I’ve seen joint ventures unlock incredible opportunities — new markets, fresh expertise, and access to resources that would’ve been out of reach solo. But they’re not without their challenges.

Here’s why I’d consider a joint venture:

• Access new markets, knowledge, and resources.
• Combined financial resources means sharing both risks and rewards.
• Each partner brings unique strengths to the table, making the whole greater than the sum of its parts.
• Increased speed to market — something I always appreciate in business.

Here are some reasons I may not:

• More people involved means more complexity (and red tape).
• Potential for disagreement or a partner not upholding their end of the bargain.
• Possibility of unbalanced power dynamics.

Joint Venture Alternatives

Joint ventures can be a smart way to grow a business, but they’re not always the right fit. If you’re weighing your options, I recommend considering the following alternatives as well.

Strategic Alliances

Strategic alliances are agreements between two or more companies that involve sharing resources, such as technology or personnel, to achieve a shared goal.

I like to think of a strategic alliance as teaming up without tying the knot. The key difference from a joint venture? You don’t have to create a new legal entity. Each company stays independent while working together, which makes this a more flexible option if you want the benefits of collaboration without giving up control.

Partnerships

A partnership is a formal agreement between two or more people to run a business together. It comes with some big perks — shared profits, access to more capital, and a bigger network — but it also requires trust. If one partner decides to leave, things can get complicated fast.

I find Gauri Manglik’s perspective, as CEO and co-founder of Instrumentl, apt here: “A partnership can help you maintain more control over what happens with your company than a joint venture or an alliance. You maintain the autonomy to make decisions and keep the rights and responsibilities to your brand and product/service offerings.”

Pro tip: Choosing between a joint venture, strategic alliance, or partnership comes down to how much control you want to keep and how much risk you’re willing to take. If you’re unsure, I’d recommend talking to a business lawyer to make sure you’re making the right move and protecting yourself in the process.

Takeaway Thoughts

I’ve seen firsthand how powerful joint ventures can be when they’re set up right — but I’ve also seen how easily they can go off the rails. Without a solid plan, clear governance, and real trust, things can fall apart fast. That’s why so many businesses opt for strategic alliances or partnerships instead — collaboration without the legal and operational headaches.

If you’re thinking about a joint venture (or any kind of business partnership), prioritize laying the right groundwork upfront.

Editor’s Note: This blog was originally published in December 2022 and has been updated for comprehensiveness.

What’s the difference between sales and marketing?

At a high level, marketing is all about informing leads and attracting them to your company, while sales is about working directly with prospects to highlight the value of your company’s solution to convert those prospects into customers. Sounds simple enough, right? But it turns out that the difference between sales and marketing is more complicated than you might think.

In this article, I’ll go through what these two vital business functions are, as well as how they differ in terms of planning, goals, and more. Then, I’ll share some of my personal thoughts and expert tips on how to ensure sales and marketing are aligned within your organization.

Table of Contents

• Difference Between Sales and Marketing
• Marketing vs. Sales
• How Sales and Marketing Work Together
• The Power of a Marketing and Sales Partnership

Sales includes all of the activities that lead directly to a sale. Salespeople are responsible for managing relationships with potential clients, or prospects, as well as providing solutions that eventually lead those prospects to turn into paying customers.

In contrast, marketing encompasses all of the activities that help spark interest in your business. Marketers use market research and analysis to understand who their potential customers are and what they care about, and they run campaigns to attract people to their business’s brand, product, or service.

Digital marketing expert Kyrus Keenan Westcott offers a helpful analogy: “Marketing and sales are like siblings with the same goal: helping a company succeed. But just like siblings, they have their own distinct personalities and roles to play.”

Westcott continues, “Marketing focuses on getting people interested in a product or service, while sales focuses on closing the deal and making sure the customer leaves happy.”

Clearly, there is a lot of overlap between sales and marketing — but there are also a few important differences. So, let’s dive a little deeper. How exactly do these two business functions differ?

Marketing vs. Sales

To ensure your marketing and sales departments are set up for success (both individually and together), it’s essential to understand the core elements of each. Below, I’ll share some key differences between marketing and sales, including differences in planning, goals, tools, and more.

Planning

Both marketing and sales plans typically start with an overview of the company’s history and its overarching goals and initiatives. However, that’s where the similarities end.

After this basic information, a marketing plan lays out what the product is, its price, who it’ll be sold to, and where it will be sold. This is also known as the 4Ps of marketing: product, price, place, and promotion. Goals are set, marketing channels are chosen, and a budget is defined for the various campaigns that the marketing team plans to pursue.

In contrast, sales plans include details about the sales process, team structure, target market, and goals, as well as the action plan, tools, and resources that will be used to hit these targets.

Goals

Similarly, while the high-level goal of both sales and marketing is to generate revenue, the two departments pursue different specific goals in light of that larger objective.

The primary goal of marketing is to promote the company, offering, and brand. Marketing departments are responsible for pricing their company’s products and communicating how these products address customers’ needs and wants. These goals are often fairly long-term, as marketing campaigns can span many months or even years.

Sales, on the other hand, is focused on hitting shorter-term quotas and sales volume goals. Sales goals are often measured month-over-month, with sales leaders defining targets and calculating how much their department, team, and/or individual salespeople need to sell to meet corporate goals.

Tools and Resources

Sales and marketing teams also differ substantially with respect to the tools and resources they leverage.

To be sure, they do share some tools: A CRM database can be used by sales, marketing, and the company as a whole to help all departments manage relationships with contacts at any stage of the customer lifecycle. I’ve also found that both sales and marketing departments can leverage social media, with marketers using it to promote content and sales using it as part of a social selling strategy.

But beyond these basics, there are several tools that are specific to each department:

Marketing Tools

On the marketing front, here are some of my favorite kinds of marketing tools to consider:

• Conversion Rate Optimization (CRO) tools.
• Search engine optimization (SEO) tools.
• Project management tools.
• Data reporting software.
• Content creation tools.

Sales Tools

And on the sales front, here are some of the types of sales tools I always recommend:

• Meetings apps.
• Documents tools.
• Invoicing software.
• Email management tools.
• Inventory and order management software.

It’s also important to note that new tools and technologies emerge constantly. For example, AI and live chat are two newer tools that marketing and sales teams have begun using to personalize their communication with leads. While not every tool will be a good fit for every team, I firmly believe that to stay competitive, it’s essential for organizations to evaluate and consider adopting new tech as it’s created.

Strategies

Because sales and marketing have different goals, it’s only natural that these departments pursue different strategies as well. For example, common marketing strategies include:

• Internet marketing.
• Print marketing.
• Blog marketing.
• Search engine optimization (SEO).
• Social media marketing.
• Video marketing.

Similar to marketing strategies, sales strategies also vary depending on a company’s industry, products, market, and target customer. Some of my favorite sales methodologies are:

• SPIN Selling
• Solution Selling
• N.E.A.T. Selling
• Conceptual Selling
• SNAP Selling
• CustomerCentric Selling
• Inbound Selling
• MEDDIC
• The Challenger Sale
• The Sandler System

Each of these sales strategies can help prospects solve a problem, achieve a goal, or satisfy a need — which, hopefully, will help the sales team close a deal by turning those prospects into new customers.

How Sales and Marketing Work Together

Clearly, there are many differences between marketing and sales. But that doesn’t mean that the two shouldn’t work together.

To the contrary, over the course of my career I’ve learned firsthand just how important it is to ensure that sales and marketing are aligned in service of common business goals.

As branding expert Sean Dougherty explains, sales and marketing are “two departments that sometimes feel worlds apart. It’s a common and challenging dynamic: The marketing team crafts the message, and the sales team closes the deals. But the synergy between the two often gets lost in translation.”

But, Dougherty continues, “When these two departments work together, qualified leads improve and revenue soars. You experience a cohesive approach that drives success.”

In other words, making sure that sales and marketing are aligned is critical for any organization to succeed. But what does this look like in practice?

First and foremost, it means defining all the different processes, goals, tools, and strategies that each department will pursue — and then taking steps to address any conflicts or inconsistencies.

More tactically, one of the most effective tools I’ve used to keep sales and marketing working together is a service-level agreement (SLA). An SLA is a contract that establishes a set of deliverables that one party has agreed to provide another, making it one of the best ways for disconnected marketing and sales departments to come together into a fruitful partnership.

The SLA offers a framework for both departments to define their shared goals, identify their buyer personas or ideal client profile, and standardize lead definitions. It also sets a protocol for lead management, and it outlines how sales and marketing performance will be measured.

At the end of the day, I’ve learned that when sales and marketing teams establish an effective SLA that keeps them aligned, they’re able to work together to attract and qualify more leads — and ultimately, to generate more revenue.

The Power of a Marketing and Sales Partnership

I’ve learned that the best way for marketing and sales to succeed is for each department to have clearly defined roles and goals. This ensures no stepping on toes. However, since the two are ultimately part of the same business with the same goal, they need to be closely aligned to provide the best experience for customers and the highest possible revenue for the company.

You’ve done it: You took an idea, built it into a thriving business, and now you’re ready to sell. Congratulations — few entrepreneurs make it to this point. You’re in the right place if you find yourself asking, “How do I sell my business?”

Now, it’s time to ensure you make the right deal for your most prized possession. Regardless of why you’re moving on, there are actionable steps you can take so that your business is sold at the right time, for the right price, and to the right buyer.

Table of Contents

• How to Sell a Business
• When to Sell Your Business
• How Much to Sell Your Business For
• Choosing a Path to Sell a Business
• Where to Sell Your Business
• Life After Exiting Your Business

How to Sell a Business

M&A is everywhere right now, according to Monique Swansen, Founder and CEO of Automated Accounting Services, a firm committed to supporting small and growing businesses. “Every group I’ve seen putting together conferences is talking about mergers and acquisitions as a tool for making an exit plan or growing your business,” she says.

Entrepreneurs choose to sell their businesses for many reasons, ranging from retirement and health problems to co-founder conflict and just plain boredom. In 2024, 9,456 small businesses were sold, a 5% jump from the year before.

With that in mind, here are the basic steps we recommend following

1. Educate yourself.

Spend some time researching how to sell (you’re doing that now!), and figure out if you need to make any changes to get your business ready for the process. Common actions include adding business processes to make the business scalable, adding features that would open up a new market, or filing patents to lock down intellectual property.

Tips to Get Started:

• Research recent business sales in your industry. You’ll want to understand market trends, pricing, and common deal structures.
• Identify areas where your business may need improvement. This might include streamlining operations, increasing profitability, or documenting workflows.
• Explore industry-specific resources. Consider M&A reports, exit planning webinars, and financial modeling tools.

2. Get organized.

Do your due diligence by gathering all of your documentation and getting ahead of anything that could slow down the sale (such as signoff from other shareholders or active lawsuits or legal proceedings). In addition to preventing delays, this step makes your business far more attractive to potential buyers. Here’s a breakdown of what you’ll need across the three main categories:

Financial Documents

It’s a good idea to create a financial packet with copies of important documents that can be shared with serious buyers during due diligence:

• Gather three to four years of financial statements, tax returns, and profit & loss reports.
• Outline all business assets, liabilities, and revenue streams to clearly identify what is included in the sale.
• Compile current lease agreements, outstanding loans, and supplier contracts to give buyers a full picture of ongoing obligations.

Legal Documents

It makes sense that your buyers will want to ensure the business is legally sound, so preparing legal documentation in advance can prevent last-minute delays:

• Verify ownership agreements, business licenses, and regulatory compliance records to confirm the business is properly registered and in good standing.
• Review employment contracts, NDAs, and any existing non-compete agreements to clarify obligations for both employees and buyers.
• Secure intellectual property rights, including patents, trademarks, and proprietary processes, to protect valuable business assets.

Operational Documents

• To ensure you get the top price for your business and plan for continuity after the sale, you’ll want to document your processes and operations:
• Develop a comprehensive operations manual detailing day-to-day processes and key workflows.
• Map out employee roles, leadership responsibilities, and key personnel contributions to ensure continuity after the sale.
• Evaluate physical assets, equipment, and business premises, addressing any necessary upgrades or repairs before listing.
• Implement systems and automation where possible to make the transition easier for new ownership.

Tips to Get Started:

• Tidy up your books. Verify that financials are accurate, debts are addressed, and records are clear.
• Assemble key documents. Organize essential agreements (leases, contracts, compliance records) in a structured format.
• Enhance operational efficiency. Fix inefficiencies, document processes, and ensure the business can function smoothly without you.

3. Get a preliminary business valuation.

Turn to experts (e.g., business brokers, merger and acquisition advisers) to understand how much your company is worth, then consider if you’re willing to accept that price.

Tips to Get Started:

• Calculate EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). Your financial pros can help you do this and establish a financial benchmark.
• Research valuation for businesses in your industry. You’ll want at least a rough idea of what your business might be worth.
• Contact a business broker or valuation expert. Even if you’re not ready to hire them, getting their advice is a good starting point. An early assessment can also help you identify areas that could increase your potential sales price.

4. Create a potential buyer profile.

Find the why when thinking of your ideal fit. For example: Does the buyer have the cash to buy, or do they need financing? Have they bought companies before? Who would need to approve the deal on the buyer’s end (internally: founders, board members, management; externally: investors, banks)? Will they keep your team employed after the sale?

Tips to Get Started:

• Identify the type of buyer. Consider whether your ideal buyer is a strategic buyer (industry competitor, supplier, or partner) who wants to grow by acquisition or a financial buyer (private equity, individual investor).
• Think about financing vs cash. In addition to making or breaking the deal, it could affect the legacy you’re building if that’s important to you.
• Think beyond just the sale price. What do you want to happen to your employees, customers, and brand after the transition?

5. Assemble your team.

Putting together a team early can prevent a lot of stumbling down the road. Professionals who could help with the process include:

• Corporate finance attorney.
• Business broker.
• M&A adviser.
• Personal tax accountant.
• Company auditor.
• Sell-side bankers.

Tips to Get Started:

• Contact your existing experts. Do your current tax preparer, bookkeeper, or attorney offer these services? If not, can they recommend someone?
• Interview your options. Do they instill confidence and do you get along? You don’t have to be best friends but you do have to be able to trust them.
• Start early. Don’t wait until you’re 6 months out unless it’s an emergency. Instead, start this process several years ahead of time, even if you don’t end up selling, getting everything in order does you favors short term and in the long run.

6. Prepare to go to market.

For small businesses, owners can list their companies anonymously on business broker sites. For larger ventures, owners should identify potential suitors by looking at direct rivals and companies in related industries.

Tips to Get Started:

• Draft a confidential information memorandum (CIM) once selling is in your near future. This should contain details on financials, market position, and growth potential.
• Research small business sales platforms. BizBuySell, BizQuest, and Flippa are all examples where small business owners can discreetly list their companies for sale.
• Create a shortlist of potential buyers. Then explore outreach strategies through your industry network or a sell-side banker.

7. Stay involved in the process.

Deals can fall through days before closing; stay on top of it along the way by responding to requests within 24 hours, scheduling weekly calls with advisers, and pushing legal counsel to move documents forward quickly.

Pro tip: Time is your enemy. Resist any efforts made to push the closing date.

Tips to Get Started:

• Use a deal tracker. Doing so will help you stay on top of important deadlines, buyer requests, and negotiation points.
• Respond quickly to buyer-side requests. Getting organized ahead of time will make it easier to handle due diligence requests, legal paperwork, and buyer inquiries in an appropriate time frame.
• Be prepared for last-minute deal adjustments. You’ll need to work closely with your advisers to finalize the best possible agreement.

8. Prepare for life after sale.

Your business is your baby: You should be hands-on when planning your company’s transition (this includes how the new owner will interact with your employees and customers). But entrepreneurs also need to give thought to life after their exit, from retirement planning and managing sale proceeds to future personal and professional goals.

Tips to Get Started:

• Start thinking about your next steps. Do you want to launch a new venture, invest in other businesses, or take a break?
• Develop a tax-efficient plan for managing sale proceeds. Working with an advisor will make this easier.
• Decide on your role post-sale. Consider whether you’ll stay involved with your company in a consulting role or exit completely. If you’re staying involved, what are the conditions and terms?

When to Sell Your Business

Age is one of the reasons that Swansen is seeing such an uptick in small business owners getting ready to sell. “Lots of founders are getting closer to retirement age and are ready to pass the torch.”

She goes on to say that she also talks with lots of other business owners who started a company with the idea of selling, and now that things are flush, they’re ready to “make a profitable exit.

How do you know the right time to sell your business?

Knowing exactly when to let go of your venture can be intimidating, but one thing that most experts seem to agree on is that it’s best to decide early on if selling is in your future.

“The best time for entrepreneurs to consider selling their business is when they start their company,” says business broker Katie Milton Jordan. “Consider what you want your company to do for you. Are you creating a company that you want to sell or a company that will create an independent stream of income just for you?”

For those who start a business as a side hustle, that’s not always at the forefront, but choosing to sell your business isn’t something most companies can do on a whim.

When weighing the pros and cons of an exit, also think about the financial health of your company. “You want to be selling when your company is performing well, you’re cashed up, and you’re growing,” says David Raffa, a corporate finance expert. “The worst possible thing you can have is to sell in the slope part of your year.”

Selling your business is a deeply personal decision.

For Cindy Summers, founder of Sugar Fixé Pâtisserie, moving on felt right once her business no longer challenged her or fit her lifestyle.

“My passion is building businesses and creating great customer experiences. Once my business was established, I became more of an operator. This didn’t give me the mental gymnastics I needed to stay inspired,” she says.

Additionally, the nature of her business made it difficult for Summers to find work-life balance. “I was married but kid-free when I started the business. Three kids later and there was an emotional conflict between my family, employees, and customers. Busiest times in a bakery are weekends and holidays. This meant missing out on a lot at home,” she says.

Some other common life experiences that lead to exits include:

• Burnout.
• Illness
• Co-founder misalignment or conflict.
• Boredom.
• Retirement.
• Shifting life priorities.

Don’t wait for the “five D’s.”

Jordan advises owners to sell their companies before the “five D’s”: death, divorce, disease, disengagement, and downturn. Making an exit prior to those events can ensure you get a fair price for your creation.

“Most entrepreneurs tend to get out too late when they have no gas left in the tank, and the growth rate of the business is a big piece of the value you get in the end,” says Raleigh Williams, who sold his escape-room business for $26M. “Ending on a high note is something that pro exit entrepreneurs do versus amateurs.”

Organize and scale your business before you prepare to sell it.

Swansen emphasizes the need to get your ducks in a row before you get anywhere close to the starting line of selling your business. As an accounting expert, she primarily focuses on the financial and operational aspects of preparing for a sale.

“If your business is well-organized, profitable, and growing at scale, with all of your financials ready to go, you’re probably going to get a higher purchase price,” she says.

So what does that look like?

Several years before you’re ready to exit, it’s a good idea to implement processes and get the right team members in the right places so you can create a turnkey operation.

That means using an integrated suite of tools to automate as much as possible — for example, HubSpot’s CRM and Marketing Hub are designed to work well together, which streamlines operations and makes it easier to create a positive customer experience.

As you get closer to going to market, it’s also important to get your financials in a row to paint the best possible picture for your potential buyers.

How Much to Sell Your Business For

Della Kirkman, a CPA and business investor, uses a simple calculation to get entrepreneurs started: “A quick and easy formula is to determine the five-year weighted average of EBITDA and multiply it by the range of multiples that are appropriate for your type of business.” Kirkman says she most often uses a multiple between three and five.

Get a professional valuation.

Meeting with experts to get a professional valuation of your business is the most accurate way to find the right number. Therefore, get started with assembling a team of advisers early in the selling process, and find professionals who work closely with your industry whenever possible. The more niche their experience, the more they’ll be able to guide your sale appropriately.

Third-party experts can also ensure the business is ready to be sold. “A lot of business owners don’t realize their company can’t be transacted and isn’t packaged properly to go to market,” Jordan says. “That’s why it’s important to ask questions and get educated as soon as possible.”

Step out of solopreneur mode and put on a CEO hat.

A common roadblock Jordan sees is solopreneur businesses. For those who wear every hat at their firm, buyers feel they are essentially buying a job rather than a company. Another reason for a difficult transaction could be if a business is tied up in any sort of legal proceedings.

Jordan suggests depersonalizing your operations to make a business more appealing to buyers.

“Business owners create a business and a system in a way that’s easy for them to run, built around their strengths and personality, because they work so hard around the clock,” says Jordan. “When it comes time to sell, their quirks are not the quirks of the new owner.”

She suggests that owners create manuals, standard operating procedures (SOPs), and automations where possible.

“Just like when someone buys a new car, and you hand them the set of keys and the owner’s manual,” she says. “If you have a company you can hand off with an owner’s manual, you have something that can be transacted.”

Once you have the right deal, stay active in the process until the very end.

“As a founder, so much of your net worth is tied up in this transaction,” Williams says. “Outsourcing that process and not being involved, or expecting a lawyer or broker to be as involved in the details to the same extent you need to be, is unwise.”

Choosing a Path to Sell a Business

As you can see, there are lots of considerations to make when selling your business. And because there are so many factors — including your industry, business size, and personal goals, among others — there’s no single best way to sell your company.

You’ll want to think about whether you want

• Total control over the process
• Someone to hold your hand every step of the way
• A quick exit

Depending on the complexity of your business and your level of M&A experience, it may feel like an obvious choice to go with a broker. There’s a reason that’s one of the most popular routes. However, many businesses choose to sell directly or go to auction as well. Each of the three comes with benefits and drawbacks, so I’m going to break them down below:

Hiring a Broker

A business broker or M&A adviser acts as an intermediary, connecting you with potential buyers and guiding negotiations. Brokers can help increase your sale price, handle complex paperwork, and streamline the process — but they come at a cost.

Pros:

• You’ll gain access to a network of serious buyers.
• Your broker knows the best way to present your business to each for maximum sales price.
• Their expertise in valuation, negotiations, and deal structuring means that you’ll get the best deal.
• The process is less time-consuming than a direct sale, which means you still have time to run your business.
• They manage the process for you and help you avoid common pitfalls.

Cons:

• Broker fees are commission-driven, meaning a significant portion of the sale price goes to them.
• You’ll get less direct control over the negotiation process.
• The process of finding the right buyer may take longer (then again, it may not if they have a turnkey buyer in their network).

Where to Start:

• Research brokers with experience in your industry and business size.
• Look for brokers accredited by organizations like the International Business Brokers Association (IBBA) or M&A Source.
• Discuss their commission structure, marketing strategy, and expected timeline before signing a contract.

Selling Directly

Selling directly to a buyer gives you full control over the process. This is true regardless of who your buyer is, whether it’s a competitor, investor, employee, or even a family member. Experienced entrepreneurs who already have interested buyers and those who prefer to avoid brokerage fees often choose this option. However, there are trade-offs here as well.

Pros:

• No broker fees mean you get to take the full sale price to the bank.
• You have more — if not total — control over negotiations and deal terms.
• The process can be much faster if you already have an interested buyer.

Cons:

• You’ll need strong negotiation skills and legal/financial expertise.
• The process can be emotional and more personal if your buyer is someone you have a relationship with.
• Finding buyers can take time without broker assistance.
• You’ll experience a higher risk of legal or financial missteps.

Where to Start:

• Identify potential buyers from your industry, competitor list, or network. Keep in mind, they may be in a different region or neighborhood and want to grow by acquisition instead of scaling, so cast a wide net.
• Even if you’re not working with a broker, you’ll still want professional experts to support you, including an M&A attorney and financial adviser, to structure the deal properly.
• Consider listing your business on BizBuySell, BizQuest, or Flippa for additional exposure if you don’t have a buyer already lined up.

Going to Auction

If your business is in high demand or you need a quick sale, an auction process can be appealing. You might get multiple competing offers in a short period of time. However, keep in mind that auctions work best for businesses with strong financials, unique assets, or niche market positioning (though going too niche can also be problematic).

Pros:

• An auction may drive up the sale price through competitive bidding.
• Auctions usually lead to a faster closing process from start to finish.
• Auctions attract serious buyers who are ready to purchase.

Cons:

• You’ll need to conduct extensive prep work to ensure everything goes smoothly.
• There is no guarantee you’ll hit your desired price.
• Auctions may not be suitable for smaller or niche businesses.

Where to Start:

• Research auction platforms and decide whether you want an in-person or online auction.
• Much like the other sales processes, you’ll want to prepare all of your legal and financial documents well ahead of time. Your M&A advisor, attorney, and financial team can help here.
• Market the auction aggressively to attract high-quality bidders.

Where to Sell Your Business

If you’re wondering where to sell your business, the right place depends on its size. For small solopreneur-owned ventures, owners can list their companies anonymously on business broker sites such as BizBuySell).

There are many different business sites. Some target specific cities or states, as buyers often want to acquire local businesses. Experts recommend researching the best site to list using a simple Google search that includes your location.

Make a list of potential buyers.

For larger companies, Raffa says that entrepreneurs can spearhead the selling process directly through a sell-side banker rather than list on a business broker website.

“In that situation, you should do rounds of approaches,” he explains. “Make a list of 100 potential buyers, and start with the first 10-30 ideal ones, and work down that list.”

Raffa advises assembling your list by including companies 5-10x your size in your business space (often competitors), companies in a closely related space, companies in a similar industry who are struggling and need a new edge, and companies that want to enter your geographic market.

Create a plan for outreach.

He notes that when reaching out to potential buyers, likely only half will engage with you, and they should sign NDAs before you disclose further financial information and insider business details.

Alternatively, you can start with companies lower down the list to dip your toe in, understand the typical questions asked, and circle back to your ideal buyers when you feel more prepared.

When Williams began the process of finding a buyer, he approached direct competitors first, a tactic he says is helpful across industries.

“People in the same industry or adjacent to the industry are the easiest people to do deals with because they understand what they’re looking at,” he says.

It’s also common for business owners to get inquiries from companies or investors interested in acquiring. Even if a sale isn’t in your immediate plans, don’t ignore the opportunities, which may lay the groundwork for a deal down the road.

Life After Exiting Your Business

Selling doesn’t have to mark the end of your career — your aspirations for the future can actually be baked into the terms of the sale.

“The options are endless,” says Kirkman. “Whatever they can dream up and negotiate into the deal, they can have.”

Kirkman says this includes options such as:

• Annuity in perpetuity: a profit share for the life of the business
• Retaining ownership of a brick-and-mortar building to create a future rent stream
• Taking a revenue share for any new clients brought into the company
• Selling your business on a partial installment basis to spread out the payments (which can help with tax deductions)
• Staying on as an employee (often called an acqua-hire)
• Stay with the business as a consultant

Whatever you choose, be sure to put time into the decision-making process. If a clean break feels like the right move, it likely is. If you’re not quite ready to say goodbye, that’s OK, too.

Plus, your exit might just be the first of many, and you can use the experience to inform your future ventures.

“Most entrepreneurs, after they’ve exited something, realize that the ends won’t justify the means nearly as much as they thought they would,” Williams says of running a business that’s purely profit-driven.

“They tend to actually move into the thing that they wanted to do all along but were scared there wasn’t enough money in,” says Williams. “And they tend to make way more money in the thing they actually enjoy doing than their first exit.”