The best time to prepare a company for sale is a year or more before you go to market. Buyers pay for certainty. Everything you do to make the business easier to understand, verify, and run without you shows up in the price.
12 months out: get the numbers right
- Clean financials. Move to accrual accounting if you haven't, and consider reviewed or audited statements. Three years of reliable numbers is the foundation of every offer.
- Document your add-backs. List owner expenses and one-time costs, with support. Undocumented add-backs get negotiated away.
- Consider a quality of earnings review. A sell-side review finds issues before a buyer does, when you can still explain or fix them.
- Talk to your tax advisor. Entity structure and deal structure can change what you keep by a meaningful amount. Plan early.
9 months out: reduce the risks buyers price
- Customer concentration. If one customer dominates, grow others where you can, and extend key contracts.
- Owner dependence. Hand key relationships and decisions to your team. Buyers want to see the business run without you.
- Management depth. Make sure a capable number two exists, and consider retention plans for key people.
- Contracts. Check that important customer, supplier, and lease agreements can be assigned to a buyer.
6 months out: get ready for diligence
- Organize a data room. Corporate records, contracts, licenses, permits, insurance, employee matters, and intellectual property, all in one place.
- Clean up loose ends. Resolve open disputes, expired licenses, informal agreements, and anything a buyer's lawyer will ask about.
- Understand working capital. Know your normal level of receivables, inventory, and payables. It becomes a negotiated target at closing.
3 months out: decide what you want
- Your goals. Full sale or partial? Stay on or step away? Care about the name, the team, the community? Your answers shape which buyers fit.
- Your number. Know the value you need, after taxes and debt, to make a sale worthwhile.
- Your team. Choose an M&A advisor, an experienced deal attorney, and a tax advisor before the first buyer calls.
The payoff
Preparation shortens diligence, reduces price cuts late in the process, and gives you leverage when buyers compete. It's the most reliable way to turn an average outcome into a strong one.
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