FAQ: What's The First Thing A Broker Looks At When A Business Wants To Sell?
- Sunbelt Texas
- 22 hours ago
- 3 min read
When a business owner decides to sell, one of the first questions a business broker asks is simple: Is this business actually sellable?
Not every profitable business is attractive to buyers. Not every busy owner has built something transferable. Experienced brokers quickly assess whether a business can command interest, secure financing, and close at a strong valuation. Here is what they typically evaluate first.
1. Clean, Verifiable Financials
The first and most critical factor is financial clarity. Brokers look for accurate profit and loss statements, balance sheets, and tax returns that align with reported revenue.
They want to see:
At least two to three years of consistent financial performance
Clear revenue trends
Documented expenses
Add-backs that are reasonable and defensible
If financials are disorganized or inconsistent, the business becomes difficult to value and harder to finance. Buyers and lenders rely heavily on clean documentation. Without it, confidence erodes quickly.
2. Consistent and Predictable Cash Flow
Profit on paper is important, but predictable cash flow is what makes a business sellable.
Brokers analyze whether revenue is stable, seasonal, declining, or overly dependent on one-time projects. A business with recurring revenue, long-term contracts, or repeat customers is significantly more attractive than one constantly chasing new sales to survive.
Predictability reduces risk. Reduced risk increases buyer interest.
3. Owner Dependence
One of the most common obstacles to a sale is an owner-centric business.
If the owner handles all sales, maintains all key relationships, manages daily operations, and holds all institutional knowledge, the business becomes difficult to transfer. Buyers are not purchasing a job. They are purchasing a system.
Brokers look for:
Documented processes
A management layer or key employees
Customer relationships tied to the brand rather than the owner
Systems that function without daily owner involvement
The more independent the business is from its founder, the more sellable it becomes.
4. Customer Concentration
Revenue concentration is another early checkpoint. If a single customer accounts for a large percentage of total revenue, risk increases.
Most brokers become cautious when one client represents more than 20 to 30 percent of total revenue. Losing that client after a sale could significantly impact performance.
Diversified revenue streams signal stability and reduce buyer anxiety.
5. Industry and Market Position
Brokers evaluate whether the business operates in a stable or growing industry. They also assess competitive positioning.
Questions include:
Is demand increasing or shrinking?
Does the business have a clear niche?
Are there barriers to entry?
Is the brand respected in its market?
A well-positioned company in a steady or growing industry attracts more buyers and often commands stronger multiples.
6. Operational Infrastructure
Sellable businesses run on systems, not improvisation.
Brokers look for:
Standard operating procedures
Established vendor relationships
Reliable inventory management
Technology that supports operations
Clean legal and licensing documentation
Operational chaos creates friction during due diligence. Organized infrastructure builds confidence.
7. Realistic Valuation Expectations
Finally, brokers assess the seller.
If an owner expects an unrealistic valuation based on emotion rather than market data, it may be difficult to move forward. Businesses are typically valued based on earnings, industry multiples, risk factors, and market demand, not on personal sacrifice or sentimental value.
A seller who understands market realities and is open to professional guidance is far more likely to complete a successful transaction.
The Bottom Line
Business brokers are evaluating risk, transferability, and value from the very first conversation. They are asking whether the business can survive and thrive without the current owner, whether financial performance can be verified, and whether buyers will see opportunity rather than uncertainty.
Building a sellable business requires intentional structure, disciplined financial management, and operational independence. Owners who focus on these elements long before they decide to exit position themselves for stronger offers and smoother transactions.
A business is sellable when it is not just profitable, but transferable.
Dan Elliott recently retired after more than 30 years as Managing Director of Sunbelt Texas Business Sales & Acquisitions. Throughout his career, he led the successful sale of over 500 privately held companies, ranging from small businesses to those exceeding $30 million in revenue. He served clients across Texas—including Houston, Austin, and San Antonio—providing expert guidance in mergers, acquisitions, and business brokerage across a wide range of industries. Recognized as a “Thought Leader” within the Sunbelt Business Brokers Global Network, Dan has been a trusted voice in the field and frequently featured in media for his expertise in buying and selling privately held businesses.
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