Preparing to Sell Your Business
What to do 12–24 months before selling a business: clean financials, reduce owner dependence, customer concentration, documents buyers ask for, and confidentiality.
The best time to prepare a business for sale is a year or two before you plan to sell. The work is mostly unglamorous, but it is the difference between a smooth closing at a fair price and a long negotiation over everything a buyer finds in diligence.
Start with your own goals
Before you talk to any buyer, write down what a good outcome looks like for you. Owners who are clear on these questions run better processes:
- When do you want to step back, and how involved do you want to be afterward?
- What matters besides price: your employees, the company name, your customers, your community?
- Do you want to sell all of the business now, or keep a share and sell the rest later?
- Is there a family member or manager who should be part of the plan?
12 to 24 months out
Get the financials in order
- Move to accrual-basis statements if you are on cash basis, and consider having your CPA review or audit at least the most recent year.
- Separate personal and business expenses going forward. Every personal expense in the books becomes an add-back you will have to prove.
- Keep monthly financials, not just year-end tax returns. Buyers want to see trends and seasonality.
- Reconcile inventory and clean up old receivables.
Reduce dependence on yourself
Owner dependence is one of the biggest discounts a buyer applies. Start handing off customer relationships, supplier negotiations, quoting, and day-to-day decisions to a trusted manager. Document how the important things get done. A business that runs well while you are on vacation is worth more than one that does not.
Look hard at customer concentration
If one customer is a large share of revenue, work to broaden the base, and put the relationship on paper with a written agreement if you can. Buyers value contracted revenue far more than a handshake.
Take care of the plant and the paperwork
- Catch up on deferred maintenance; a buyer will deduct the cost of anything they will have to fix.
- Make sure licenses, permits, inspections, and certifications are current.
- Confirm you own your trademarks, website domain, and any formulas, designs, or software the business depends on.
- Review your lease. If you own the real estate personally, decide whether to sell it or lease it to the buyer.
6 to 12 months out
- Assemble your advisors. A CPA and a transaction attorney who have done deals of your size. Decide whether you want a broker or prefer to speak with buyers directly.
- Plan for taxes. Asset versus stock sale, the allocation of purchase price, and state taxes can change your net proceeds meaningfully. This planning is worth doing early.
- Get a sense of value. See our guide to how buyers value a business.
- Think about your people. Consider retention or stay bonuses for key employees, and decide when and how you will tell them.
The documents buyers will ask for
Having these ready shortens diligence and signals a well-run company.
- Three to five years of financial statements and tax returns, plus year-to-date monthly results.
- Revenue by customer and by product or service line.
- An organization chart with roles, tenure, and compensation.
- Equipment and asset list with age and condition.
- Major customer and supplier contracts, leases, and loan agreements.
- Insurance policies, claims history, and any litigation.
- Licenses, permits, safety records, and environmental reports where applicable.
Keeping it confidential
News that a business is for sale can unsettle employees, customers, and competitors. Share information in stages, only after a confidentiality agreement is signed, and only with buyers who have shown they are a serious fit. Be prepared with a short, honest answer if someone asks before you are ready to announce.
We handle initial conversations discreetly. Before requesting detailed nonpublic financial or operating information, we generally enter into an appropriate written confidentiality agreement and establish a secure process for sharing sensitive materials. We will not contact your employees, customers, suppliers, competitors, lenders, or other third parties concerning a potential transaction involving your business without your prior authorization, except where required by law. Our first conversation needs no financials at all.
Common mistakes to avoid
- Letting the business coast while you focus on the sale. A soft year during the process lowers the price.
- Choosing a buyer on headline price alone, without understanding how much is paid at closing.
- Waiting until a health issue, a partner dispute, or burnout forces a rushed sale.
- Giving exclusivity to a buyer before you understand their financing and their history of closing on the terms they offer.
Starting to think about what is next?
A conversation now, long before you are ready, costs nothing and can make the eventual process far easier. We work with owners on their timeline, particularly in Texas and Oregon.
This page is general information, not tax or legal advice. Consult your own CPA and attorney about your situation.