For most small business owners, selling their company represents the largest financial transaction of their lifetime—often worth more than their home, car, and other investments combined. Yet while we readily know our home’s market value and can sell it relatively quickly, the vast majority of small business owners have little idea what their business is worth or how to navigate the complexities of selling it.
According to Brit Karel, cofounder of SMB, a marketplace for selling businesses, 80 percent of small businesses never successfully sell, with many owners simply shutting down because they don’t know where to start or can’t find buyers. This challenge is particularly relevant in Cincinnati, where a strong entrepreneurial ecosystem has created thousands of family-owned and privately-held businesses across industries from manufacturing to home services. As the baby boomer generation reaches retirement age and begins retiring—what experts call the “silver tsunami”—more area business owners than ever are facing exit decisions.
The region’s business community has responded by developing robust support networks, from UC’s Goering Center for Family and Private Business to entrepreneurship-through-acquisition groups that connect local buyers with local sellers. The difference between those who exit successfully and those who don’t often comes down to preparation, realistic expectations, and strategic thinking about the transition years before it happens.
Industry experts who have sold a business, supported entrepreneurs through the sale process, or bought a business themselves agree on one key point: It’s never too early to start thinking about your exit strategy and understanding your business’s value. The most successful business sales happen when owners think strategically about their exit years in advance rather than make reactive decisions when offers appear or personal circumstances force a quick sale.
As Karel puts it, it’s never too early, and just like retirement you should have multiple options. She says too many business owners get “stuck in the weeds”of running the business day to day and fail to take time to ensure they’ll be able to exit successfully and retire from all their hard work. While there’s no single playbook to follow, there are generally situations to consider and red flags to manage when preparing your business for sale.
Dave Knox, executive director of Blue North, one of Kentucky’s six innovation hubs, says identifying your “why” is the first question business owners must ask themselves before considering a sale. Are you looking to maximize financial return, preserve your legacy, or maintain the community you’ve built? Consider whether you want to sell to employees (ESOP), family members, local entrepreneurs, or private equity firms. Each path has different implications for price, transition, and long-term impact.
Knox, co-founder of The Brandery, Cincinnati’s seed stage startup accelerator, first became aware of the term entrepreneurship through acquisition (ETA) when Northern Kentucky lost three locally-owned hardware stores to an out-of-town owner. When they went up for sale, local entrepreneurs, including Knox, were interested, but a national franchisee from Chicago ultimately bought them all. “Yes, the hardware stores are still there, but we’ve lost our local tie,” he says. “National private equity firms come in and don’t necessarily care about your community.”
Local businesses are more than just businesses—they’re sponsors of local sports teams, they know customers by name, and they reinvest profits locally. That’s why Knox says the fundamental question every business owner must ask themselves is: What’s your goal for your business’s next chapter? Is it to maximize profit by selling to the highest bidder or to preserve the community impact you and your business have built?
Carol Butler, president of the Goering Center for Family and Private Business, says answering that question can be tough, but you have mutliple options. Selling to employees and selling to family are two of the most common situations the Goering Center helps owners navigate. “Cincinnati is the third largest ESOP city in the country per capita,” she says. “That says a lot about people who want to leave the legacy to their employees.”
Butler cites Messer Construction and The Party Source as examples of local ESOPs. A consideration for that set-up, she says, is that opening your books to employees may not be something a business owner wants to do.
Once you’ve clarified your motivations and ideal buyer, the next critical step is understanding what your business is actually worth in today’s market. Understanding true market value is essential, as many business owners overestimate their company’s worth similar to homeowners believing their property is worth more than the market is willing to pay.
Knox advises business owners to research industry valuation as their starting point. “There’s so much publicly available information,” he says. “Just starting with a benchmark within your industry educates you about what you have and how you approach it.”
Be prepared for a reality check in the valuation process, says Butler, who recommends getting a business valuation every two years to keep a pulse on the value regardless of sale plans. She describes a business owner who shared that his valuation was half of what he expected, but he discovered what he needed to work on in order to attain the value at which he wanted to sell. “Just like any other key decision we make in business or in life, knowing the sense of value is incredibly important,” she says, “so you know where your value adders are, what you need to do to grow the business, and what is detracting from the value of your business.”
One red flag that could impact a company’s valuation is the weight the business has in one or a small number of contracts. For example, if 80 percent of your business is from one customer, the company’s future is at risk if the contract doesn’t renew.
Get ahead of determining value by researching comparable sales in your industry and understanding the current market. Butler says that hiring a professional is important to conduct a thorough valuation and to be prepared for reality checks on pricing expectations as well as understanding what buyers in your market are actually seeking.
Home services represent a particularly hot business sector, for instance, though Knox notes that trends can emerge quickly and are often driven by private equity interest. Regardless of the industry, businesses with repeatable revenue streams, consistent customers and contracts, and steady subscriptions wil be consistently attractive to buyers who value predictable cash flow.
Start one to two years ahead of your sale by separating personal and business expenses, organizing all financial documentation, and obtaining a professional business valuation. It’s common for small businesses to have a personal car that’s being treated as a business expense, for instance, which isn’t necessarily bad practice but can complicate the sale process.
Buyers need to see clear “seller discretionary earnings,” the cash flow a new owner can expect from the business if they took over. Knox recommends investing in a quality-of-earnings analysis even before starting the sale process. “If somebody’s books are in really good shape, the buyer is going to have faith that the rest of the business is in equally good shape,” he says.
Work with qualified accountants to ensure your books are clean and transparent. Knox says consistent revenue patterns are more attractive to buyers than revenue that doesn’t follow a pattern. “A lot of businesses can be lumpy because of contracts,” he says. “But somebody looking at a business that in 2023 was $6 million in revenue and then in 2024 it was down to $4.5 million and then the next year was up to $7 million, they don’t know what to do with that information versus one year was $4 million, then $4.25 million, then $4.5 million. Being able to see that nice straight line is a really good thing.”
One of the biggest reasons a business might be a tough sell is that the owner is a significant part of its success. So the experts recommend making your business transferable by reducing reliance on your personal involvement. Document processes, develop your management team, and ensure the business can operate without you. “Buyers don’t want to buy a job, they want to buy a business,” says Karel. “Buyers want businesses that cooperate with a great operator in place. And getting that person to understand they need to slowly get themselves less intertwined with the business is huge.”
Operational risks to watch out for can also include specific certifications or required union memberships that can narrow down the buyer pool. Also address potential red flags like customer concentration, legal issues, and expiring leases.
Current employees are another area that must be ironed out. Buyers are buying revenue, but they’re also buying a team that helps that business run. “I’ve seen children of the previous owner who are employed in the business and the family decides not to sell it or pass it along to them and there’s bitterness, which can be really messy,” says Knox. “There can also be longterm employees who feel they should have had an opportunity to buy.”
Butler and Knox reommend that business owners not go at it alone in the sales process. Build relationships with key advisors, including business attorneys, accountants, tax specialists, and potentially business brokers or merger and acquisition experts. Each plays a crucial role in maximizing value and ensuring a smooth transaction.
Butler emphasizes the need for objective analysis of the business. “We think it’s really important to have a board of advisors or a board of directors,” she says. “For a business going through a transition, it’s wonderful to have a group of independent advisors who can really help you through that process. When you’re so close to the business, it’s often hard to work on the business.”
Start building connections in the business community early, but be strategic about confidentiality to avoid awkward conversations with employees and your key contracts and vendors. As ETA activity has heated up and more private equity has entered the space, Knox says he personally knows business owners who get multiple cold calls a week asking if they’re looking to sell their business. “The thing I’d love to see is more business owners thinking about selling in two, three, or four years getting involved today,” he says. “Meet the people who are in this community. You’re not going to get that if you’re relying only on the people who are cold-calling you.”
Engage with local groups like Cincy ETA or other business networks to meet potential buyers before you’re ready to sell. You’ll have a better opportunity to find buyers who align with your values and vision for the business’s future and learn from others who have gone through the sales process.
Beyond traditional networking, digital platforms like SMB are creating new ways to build these relationships—think Zillow for businesses. The goal is to make business transactions more transparent and accessible. “We can list any business, but really our sweet spot is the under $1 million or $2 million businesses, which are completely underserved,” says Karel.
Like Zillow, if you’re looking for something within a 30-mile range of your home, you can narrow down your search. You can also search for not-yet-listed businesses, and SMB can help owners or buyers find hidden opportunities. “Most of these owners have no idea that a possible exit is even possible unless they’re in industries like HVAC, laundromats, and car washes that get bombarded from private equity firms,” says Karel. “We reach out to these owners on their behalf and make those connections.”
From the Buyer’s Prespective
Buyers have their own set of priorities when assessing a potential acquisition and how they’d manage the new business on day one. Steve Bennett made the leap from corporate consulting to business ownership when he bought Pilot Lumber, a building materials company in Northern Kentucky, which he’s since sold.
Bennett spent his early career working on process improvement and large-scale supplier relationships at Accenture’s Strategy Group. After roles at a software startup and leading organizational change at Cengage Learning, he decided to pursue entrepreneurship through acquisition (ETA).
What motivated you to pursue acquisition rather than starting a new business from scratch? I was drawn to ETA because it offered me a faster path to business ownership with a real, proven business and allowed me to apply skills I’d developed in the corporate world in a way where I could grow and operate for myself. I also have a family, so it allowed me to have income on the very first day and somewhat lower risk than starting a new business from scratch.
How did you find your first acquisition, and what was your biggest surprise or challenge? I found the Pilot Lumber deal through a local network and a broker via relationships I had grown previously. What drew me in was its long history of profitability, its loyal customer base, and opportunities I saw to grow the business. I moved forward because the fundamentals were strong, even though I knew nothing about lumber. The biggest challenges I understood going in, but honestly didn’t fully grasp before purchasing, were how relationship-driven the day-to-day operations were, how competitive and how much purchasing power helps in the industry, how hard it was to hire good employees, and how important it is to manage cash flows in an asset-heavy business.
How do you approach the transition period after acquiring a business? My goal for the first year was to understand the business and listen to employees. I spent the early weeks learning the business on the ground, building relationships, and making it clear that I wasn’t there to make sweeping changes. Retaining key employees was crucial, so I had a lot of one-on-one conversations and worked to understand what motivated them. I also made sure I could do every job for every employee—though they never let me drive or run a forklift—to show my dedication to the business and to understand what every role entailed.
What advice would you give someone considering his or her first acquisition? Don’t underestimate the emotional component—for you and for the seller—and have people in your corner to get you through it. I would also make sure you’re purchasing something you will enjoy. It’s something you’ll end up thinking about 24/7.