Naschools – Sell a Business

I still remember the first time I watched a friend try to sell his small business and thought to myself, “Man, this looks simple enough.” Spoiler alert. It wasn’t. Selling a business feels a bit like training for a playoff run while studying economic indicators at the same time. You’ve got to keep your head in the game, understand the numbers, stay patient, and know when to push. And even then, people still trip over the same mistakes again and again.

If you’re thinking about selling your business, or you’re somewhere in the messy middle of it right now, this might help you dodge a few land mines. I’m not here to preach. Think of me as a buddy pulling up a chair, loosening the tie a little, and sharing the plays that actually work. So let’s talk about the biggest mistakes people make when selling a small business and how to avoid them before they take you out of the game.

Not Preparing Your Financials Early Enough

Here’s the truth no one likes to admit. Buyers care about your story, but they only pay for your numbers. I learned this while helping a friend who thought “organized financials” meant printing out a few months of bank statements. When a buyer showed up asking for profit-and-loss reports, balance sheets, tax returns, and the whole financial highlight reel, the scramble began. It wasn’t pretty.

Clean, accurate, and up-to-date financials build trust faster than any sales pitch. When your numbers are dialed in, you look like a business owner who knows what they’re doing. When they’re a mess, buyers start wondering what else is wrong.

And here’s the kicker. Preparing your financials early gives you time to fix things that might tank your valuation, like unnecessary expenses, missing documentation, or poor bookkeeping habits you’ve been meaning to fix. The sooner you get this stuff together, the more confident you’ll feel when the real conversations start.

Related: How to Value Goodwill When Selling a Business

Asking for a Price Based Only on Emotion

Pricing a business is like shooting a free throw. If your form is off, the whole shot goes sideways. Too many owners pick numbers based on how they feel about the business, not what the market will pay. They think, “This place is my life’s work. It should go for top dollar.” I get that. You’ve poured your energy, sweat, maybe a few tears into it. But buyers only pay for what the business earns, not what it meant to you.

I once spoke with an owner who priced his business nearly double what it was worth because he said it “felt right.” Not surprisingly, the business sat on the market until he adjusted to reality.

A proper valuation is your anchor. It keeps the emotions in check and gives the buyer something solid to work with. Think of it like reviewing game footage. The truth is in the numbers, even when it stings a little.

Keeping the Sale a Secret From Key People

This one surprises people. They think telling staff will cause panic. And yes, handled poorly, it can. But handled correctly, it’s a strength, not a weakness.

When employees eventually find out you’re selling, and trust me, they always do, they want to know one thing. “What does this mean for me?” If you have no plan for that conversation, uncertainty fills the room, and productivity can drop fast.

I watched an owner lose two of his top employees because they heard rumors and panicked. He had to scramble to replace them, which made the business less valuable just when buyers were looking closely.

You don’t need to announce it to the entire team at once, but having a smart communication strategy is essential. Keep your key people informed and reassure them about the transition. A stable team makes the business worth more. It also keeps you sane during the process.

Neglecting Day-to-Day Operations

Selling a business is time-consuming, and it’s easy to focus so much on the sale that daily operations start slipping. But remember, buyers want to purchase something that’s performing well today. Not something that used to perform well before you got distracted.

One owner I advised let customer service slide because he was too busy negotiating with buyers. Reviews slipped, revenue dipped, and suddenly his business felt less appealing. A sale isn’t guaranteed until the money hits your account. Until then, you’re still running the show. Keep the business sharp, because buyers can smell neglect from a mile away.

Think of it like staying in peak condition right up until the final buzzer. You don’t quit playing just because you’re ahead.

Failing to Qualify Buyers

You’d be shocked how many people waste months talking to “buyers” who were never serious in the first place. Some are curious. Some are unprepared. Some just like the idea of owning a business but don’t have the financing.

I once watched an owner spend six weeks giving tours, sharing financials, answering questions, and doing follow-up calls with someone who wasn’t even sure they could get a loan. All that time could have gone into real prospects.

Qualifying buyers isn’t rude. It’s smart. Ask the right questions early. Confirm their ability to buy. Make sure they understand the industry. Protect your time like you protect your gym bag.

Trying to Go Through the Process Alone

Selling a business can feel like playing a full game with no help. You’re juggling negotiations, due diligence, financial prep, buyer communication, legal paperwork, and operations all at once. It’s exhausting.

Some owners try to DIY because they want to save money. But often, they end up leaving more money on the table than they saved. A good broker or advisor is like a coach who sees the entire court. They help you avoid pitfalls, negotiate with confidence, and keep the pace moving.

You’re not weak for asking for help. You’re strategic.

Final Thoughts

Selling a small business is one of the biggest financial decisions you’ll ever make. It’s emotional. It’s stressful. It’s a test of patience and discipline. But if you can avoid these common mistakes, you put yourself in a position to walk away proud of the outcome.

Take the time to prepare. Keep your numbers clean. Set a realistic price. Communicate wisely. Stay focused on operations. Qualify your buyers. And don’t be afraid to bring in a pro when you need one.

It’s your exit. Make it a smart one.

You know what nobody tells you about selling a business? It’s not just about the equipment, the inventory, or even that fancy coffee machine in the break room that cost more than your first car. There’s this sneaky little thing called goodwill that can make or break your deal, and honestly, I didn’t fully appreciate it until I was knee-deep in my first business sale negotiation, sitting across from a buyer who kept throwing around numbers that seemed to come from thin air.

Let me back up for a second.

Understanding What Goodwill Actually Means in Real Terms

Goodwill is basically everything about your business that makes it worth more than just the sum of its physical parts. Think about it like this: if you walked into your favorite local coffee shop and they had all new owners, different staff, and a completely different vibe… would you still go there as often? Probably not, right? That intangible something you’d be missing? That’s goodwill, my friend.

I remember when I first had to explain this concept to my accountant (who, bless his heart, was great with numbers but terrible with metaphors). I told him it’s like the difference between buying a guitar and buying Eric Clapton’s guitar. Same wood, same strings, but one’s got something extra you can’t quite put your finger on. He stared at me blankly, then went back to his spreadsheets. But you get what I’m saying, right? 😊

Goodwill is confusing and hard to measure, that is why working with business brokers is a smart move for most business owners.

The IRS defines goodwill as the value of a trade or business attributable to the expectancy of continued customer patronage. Translation: it’s what keeps people coming back even when they could go anywhere else.

Why Goodwill Matters More Than You Think

Here’s where things get interesting. When I sold my first company back in the day, I thought I had everything figured out. Assets? Check. Liabilities? Double-checked. Customer contracts? Triple-checked and laminated. But goodwill? I basically pulled a number out of thin air and hoped for the best.

Spoiler alert: that didn’t go well.

The buyer’s team tore my valuation apart like a pack of wolves at a barbecue. And honestly? They were right to do it. I hadn’t done my homework, and it showed. That experience taught me something crucial: goodwill can represent anywhere from 30% to 70% of your total business value in service industries. In some cases, it’s even higher. We’re not talking pocket change here, folks.

The Three Main Methods for Calculating Goodwill Value

After that first disaster (and several bottles of aspirin later), I dove deep into understanding how professionals actually value goodwill. Turns out there are three primary approaches, and each one has its place depending on your situation.

The Excess Earnings Method

This is probably the most common approach, and for good reason. It’s relatively straightforward once you get the hang of it. Basically, you’re looking at what your business earns above and beyond what would be considered a normal return on your tangible assets.

Let’s say your business generates $500,000 in annual earnings, and a reasonable return on your tangible assets (equipment, inventory, whatever) would be $200,000. That extra $300,000? A significant chunk of that can be attributed to goodwill. Then you apply a capitalization rate (usually between 15% and 25% depending on risk factors), and boom, you’ve got your goodwill value.

I know, I know. It sounds complicated when I put it like that. But stick with me.

The Market Approach

This one’s my personal favorite because it’s based on reality rather than theory. You look at what similar businesses have sold for recently, figure out what portion of those sales prices was attributed to goodwill, and apply similar ratios to your own business.

The catch? You need access to comparable sales data, and that can be trickier than finding a parking spot at the mall during the holidays. I spent weeks digging through industry reports, talking to brokers, and generally making a nuisance of myself trying to get good comps. But the effort paid off because buyers respect this method. It’s hard to argue with market reality.

The Income Approach

This method focuses on the future earning potential of your business. You’re essentially saying, “Hey, this business will generate X amount of cash flow for years to come, and that future income stream has value today.”

You project future earnings (usually 3-5 years out), discount them back to present value, subtract out the value attributable to tangible assets, and what’s left is your goodwill. Simple, right? (He said, laughing nervously.)

Factors That Influence Your Goodwill Valuation

Now here’s where things get really interesting. Not all goodwill is created equal, and understanding what drives your specific goodwill value can make a huge difference in negotiations.

Customer relationships and loyalty programs. If you’ve got customers who’ve been with you for years and would follow you to the ends of the earth (or at least to your new location across town), that’s valuable. Document those relationships. Show the history. Prove the loyalty.

Brand reputation and market position. Are you the go-to name in your industry? Do people know you without you having to explain what you do? That recognition didn’t happen overnight, and it’s worth something.

Proprietary processes or systems. Maybe you’ve developed a way of doing things that’s more efficient than your competitors. Even if it’s not patentable, it still has value. I once saw a dry cleaning business command a premium price largely because they had a customer tracking system that was absolutely brilliant in its simplicity.

Employee expertise and retention. A well-trained, stable workforce that knows your business inside and out? That’s gold. Literally. Buyers will pay for not having to rebuild that institutional knowledge from scratch.

Location advantages. Being in the right spot at the right time matters. If you’ve got a lease on prime real estate at below-market rates, that’s going to factor into your goodwill calculation.

Common Mistakes That Could Cost You Big Time

Let me share some painful lessons I’ve learned (or watched others learn the hard way).

First mistake: thinking goodwill is whatever number makes the total sale price look good. I’ve seen sellers basically work backwards from their desired sale price, and let me tell you, sophisticated buyers see right through that nonsense.

Second mistake: not documenting the sources of your goodwill. You can’t just say “my business has great goodwill” and expect a buyer to nod along. You need proof. Customer retention rates. Revenue consistency. Market share data. Whatever supports your valuation.

Third mistake: assuming personal goodwill is the same as business goodwill. This one trips people up constantly. If customers are loyal to YOU personally rather than the business itself, that’s personal goodwill, and it typically doesn’t transfer with the sale. I learned this the hard way when a buyer knocked 20% off my asking price because they correctly identified that half my customer relationships were really about my personal connections, not the business brand.

Getting Professional Help (And Why You Absolutely Should)

Look, I’m all for DIY projects. I’ve renovated bathrooms, built decks, and once attempted to fix my own transmission (don’t ask). But valuing goodwill for a business sale? That’s not the time to wing it.

A qualified business appraiser or valuation expert brings objectivity, industry knowledge, and most importantly, credibility with buyers. Yes, it costs money upfront. But having a defensible, professionally-prepared valuation can literally be worth tens or hundreds of thousands of dollars in negotiations.

Plus, if the deal goes sideways and you end up in any kind of dispute, having a professional valuation in your corner is like showing up to a fistfight with a tank. Not that I’m advocating violence, but you get the metaphor.

Wrapping This All Up

Valuing goodwill isn’t rocket science, but it’s not exactly a walk in the park either. It requires honest assessment, solid documentation, and usually some professional guidance. The businesses that command the best prices in sales are the ones where the owners understood their goodwill value long before they put up the “for sale” sign.

Start documenting everything that contributes to your goodwill now. Build those customer relationships. Strengthen that brand. Create systems and processes that don’t depend entirely on your personal involvement. Because when the time comes to sell, you want to capture every dollar of value you’ve built. Trust me on this one.

And if all else fails, remember: goodwill might be intangible, but the money it generates at closing is wonderfully, beautifully tangible. 💰

I still remember the first time I thought about investing in a business. I was sitting at my kitchen table, scrolling through listings of “profitable small businesses for sale,” thinking—how hard could it be? I had some cash, a little confidence, and a caffeine buzz convincing me that I could spot “the next big thing.”

Spoiler alert: I couldn’t. At least, not right away.

But that messy start is exactly what taught me what really matters when investing in a business—not just the spreadsheets and ROI projections, but the mindset, patience, and gut instincts that separate smart investors from hopeful gamblers.

1. Start With What You Actually Understand

Everyone loves to say, “invest in what you know,” but few actually do it. I learned that lesson the hard way. I once looked at a local car wash that seemed like a money printer—steady traffic, good location, low overhead. What I didn’t understand was how brutal maintenance costs could be when equipment breaks down every other month.

Now? I stick to what I get. If you’ve been in marketing your whole career, maybe you shouldn’t jump headfirst into manufacturing. Pick an industry where your background or connections give you an edge. You’ll make smarter calls because you actually understand the moving parts.

2. Do Your Homework Like a Detective (Not a Dreamer)

The biggest trap for rookie investors? Falling in love with the story instead of the numbers. The seller tells you, “Oh, we’re just one marketing push away from doubling revenue,” and suddenly you’re daydreaming about buying a boat.

Here’s the thing: if the business could double revenue that easily, they’d have done it already.

Before you sign anything, do some digging:

• Get three years of financial statements and tax returns.

• Look for trends, not just totals—are revenues growing or flatlining?

• Ask yourself, what happens if the current owner disappears tomorrow?

If the business can’t run without them, that’s not a system—it’s a person you’re buying.

3. Know Your Role: Investor vs. Operator

Early on, I thought investing meant I had to run everything. Wrong. Being an investor doesn’t always mean being the one behind the counter or managing payroll.

Ask yourself: do you want to be hands-on (making daily decisions, managing staff, solving problems), or hands-off (providing capital, offering advice, and collecting a share of the profits)?

There’s no wrong answer—but confusing the two will drain your sanity. A hands-on investor buys a business because they want control. A hands-off investor trusts a strong operator and focuses on scalability. Know which camp you’re in before you sign a check.

4. Build Relationships Before You Build Equity

Every solid business deal I’ve made came from relationships—not cold calls. Networking isn’t just for job seekers; it’s how smart investors find opportunities before everyone else does.

I’ve met sellers through chamber of commerce events, local meetups, even my kid’s soccer games. Real talk: people sell businesses to people they like and trust. They want to believe their legacy won’t be destroyed after they walk away.

So talk to business owners in your area. Be curious. Ask about their challenges, their market, their dreams. When the time comes, you won’t be another stranger with a checkbook—you’ll be the person they already respect.

5. The Gut Check: Can You Sleep at Night?

Here’s something few “investment gurus” will tell you: not every good deal is a good fit.

I once had the chance to invest in a trendy craft brewery. Everyone said it was a “can’t miss.” But something didn’t sit right. The margins were thin, the team was green, and I realized I didn’t want to spend my weekends worrying about beer inventory.

I passed.
Six months later, they closed their doors.

Sometimes your gut knows before your brain does. Listen to it.

6. Create a Simple Exit Plan (Before You Even Invest)

It sounds backwards—planning how to get out before you get in—but it’s one of the smartest moves you can make.

Ask yourself:

• What does success look like?

• Do you want to sell your stake, scale the business, or collect dividends long-term?

• What’s your worst-case scenario plan if things don’t go as expected?

The best investors aren’t gamblers—they’re strategists with exit routes mapped out.

7. Protect Yourself Like a Professional

Contracts aren’t optional—they’re armor. Always involve a good attorney and accountant before committing money. They’ll catch things you won’t.

Also, consider setting up an LLC or holding company to separate personal and investment liabilities. It’s not just paperwork—it’s peace of mind.

Remember, investing in a business isn’t just about profit. It’s about building something sustainable that aligns with your values, your lifestyle, and your tolerance for risk.

Final Thoughts: Keep It Human

At the end of the day, investing in a business isn’t about spreadsheets or Shark Tank fantasies—it’s about people. You’re betting on leadership, culture, and the ability to adapt.

I’ve made some great calls and some dumb ones, but every deal taught me something new. If you can stay curious, humble, and a little skeptical, you’ll do just fine.

And when in doubt?
Take a deep breath, grab a cup of coffee, and remember—you don’t have to chase every shiny deal. The right one will line up with your gut, your goals, and your common sense.

The Early Days: When I Thought Wealth Was a Sprint

I used to think getting rich was about timing. Buy Tesla early, sell high, repeat with the next shiny thing. Spoiler alert: that didn’t work out. My “strategy” looked more like panic-buying during hype cycles and selling right before things rebounded. I was chasing short-term wins—like a dog chasing a squirrel with no plan once he catches it.

It took years (and a few bruised brokerage accounts) to realize that real wealth isn’t built on adrenaline. It’s built on discipline, patience, and boring consistency. The kind of boring that makes watching paint dry seem exciting.

The Mindset Shift: Playing the Long Game

One night, after a particularly rough trading day, I sat on my couch, stared at my account balance, and thought, “What if I stop trying to outsmart the market—and just start working with it?”

That’s when things started to change. I stopped treating investing like a casino and started thinking like an owner. Every dollar became an employee I sent out to work for me. Some were lazy (looking at you, small-cap growth stocks), but over time, the team performed.

The market rewards patience. When you focus on decades—not days—you realize that compound growth is the closest thing we have to financial magic.

Related: How to Value Goodwill When Selling a Business

The Boring (But Powerful) Formula

Here’s the truth no one on YouTube thumbnails wants to tell you:
Wealth builds quietly, not virally.

You don’t need insider tips or a “secret stock.” You need a system. Here’s mine in plain English:

• Invest automatically. Set up recurring investments. Don’t trust yourself to “remember.”

• Diversify wisely. Index funds, dividend stocks, maybe some real estate or commodities if you want spice—but stay balanced.

• Reinvest dividends. Let those tiny payments snowball.

• Ignore the noise. CNBC headlines aren’t financial advice. They’re entertainment.

• Stay liquid. Keep an emergency fund so you’re never forced to sell at the worst time.

That’s it. Simple doesn’t mean easy, but it works.

A Personal Example: The Power of Time

I started investing $500 a month in a low-cost S&P 500 index fund about 10 years ago. I didn’t stop, not when markets dipped, not when everyone was panicking.

Today, that small, automatic habit has grown into something substantial. Not because I’m a genius—but because I didn’t interrupt the compounding. Think about it: markets have bad days, bad years even. But over the long haul, they reward the stubbornly patient.

The real trick isn’t predicting the future—it’s staying in the game long enough to let the math work in your favor.

Emotional Investing: The Silent Wealth Killer

Money makes people emotional. Fear and greed are the twin engines of bad decisions.
When the market tanks, our instincts scream, “Get out!” When it surges, we think, “I’m missing out!”

I learned the hard way that reacting emotionally costs far more than sitting still. I once sold during a dip—only to watch the stock rebound two weeks later. That mistake taught me more about investing than any finance book ever did.

The goal isn’t to feel nothing; it’s to build systems that protect you from yourself. Automate your contributions. Check your portfolio less. Go outside. Touch grass. Seriously—it helps. 🌱

Building Wealth Isn’t About Luck

If you zoom out far enough, markets rise. Not in a straight line, but in a jagged, messy, beautiful way. The investors who win aren’t the luckiest—they’re the ones still holding when others have given up.

Investing for long-term wealth is really about three things:

1. Consistency — keep showing up, no matter what.

2. Discipline — stick to your plan, even when it’s uncomfortable.

3. Perspective — remember that short-term volatility is the price of long-term growth.

Wealth isn’t a finish line. It’s a lifestyle of smart decisions repeated over and over.

Final Thoughts: Patience Pays Dividends

I won’t pretend it’s easy. There will be years you question everything—when your portfolio looks like a bad joke and your friend who “just flipped crypto” seems smarter than you. But here’s the thing: those moments separate investors from gamblers.

Every smart decision you make today—automating your savings, ignoring hype, staying invested—is a small act of rebellion against short-term thinking.

And one day, years from now, you’ll look back and realize your “boring” plan quietly made you rich.

Not rich in drama or headlines.
Rich in freedom.