4 Steps to Prepare Your Business for a Sale

Are you at a point in your life where you’re considering stepping aside and selling your business? Are you close to retiring? Are there other opportunities you’d like to pursue? Need to take some chips off the table? No matter the reason, there are certain steps that should be taken in order to prepare your business for sale.

Here are 4 important steps to take to prepare your business for sale:

1. Get a business valuation.

Business valuations are instrumental in preparing for the sale. Do you have a certain price you expect to receive for the business? Have you had a qualified professional run the numbers? Understanding what your business is worth is important before jumping into the sale process. The #1 reason that businesses don’t sell is unrealistic valuation expectations from sellers. Learning what your business is worth is a checkpoint in determining if you’re ready to sell.

Beyond business value, business owners should determine what they will be able to walk away with after taxes, paying off debt, broker fees, attorney fees, etc. While it is impossible to know exactly how things will play out, getting an idea of what your net proceeds will be is crucial.

Be wary of valuations from professionals who do not sell businesses. We have seen it time and again where unrealistic assumptions result in unreasonably high valuations. Find an advisor who has experience and relies heavily on market data for the most realistic value estimate. Please do keep in mind that they can’t tell you exactly what your business is worth because they aren’t buying it!

2. Meet with professional advisors.

According to the International Business Brokers Association, over 70% of business owners do not engage in formal planning before proceeding with a sale process. Planning ahead can help the process run more smoothly and maximize the sale proceeds.

The primary advisor during the sale process will be a business broker or M&A advisor. It would behoove sellers to connect with these intermediaries to learn more about the sale process and how they can add value. Advisors have different skillsets, specialize in different areas, and charge different fees. Meeting with a few brokers will give you a chance to decide who will be your best advocate during the process.

Besides M&A advisors, there are other key professionals to remember. M&A attorneys play a key role – especially down the stretch when trying to negotiate the purchase agreement. You may already have an attorney you work with. It is important to make sure they are familiar with business transactions specifically so they don’t cause mistakes or slow the process down. Your business broker should be able to provide recommendations for attorneys that are well-versed in M&A.

Wealth advisors also play an important role in your exit. Selling your business will likely result in a significant windfall for the owner. Wealth advisors can help you with tax implications and other important aspects of managing your well-earned money.

3. Clean up the books.

Many small business owners use their businesses as piggy banks for travel, meals, gas, and more. While this can help lower their tax burden each year, it can also reduce business value when you try to sell. While these expenses should be pulled out in financial analysis, it is very important that they are verifiable for buyers and lenders to believe in the add-back so be sure to keep supporting documentation of these expenses.

Keep in mind, it is much easier for buyers to analyze your business and get comfortable buying it when the financials aren’t riddled with non-business expenses. This will help the marketability and increase your odds of a smooth and successful business sale.

Buyers and lenders can become hesitant to move further in instances where things don’t make sense or aren’t verifiable. Examples include adjusted financials with significant add-backs, lots of inconsistencies in line items year-over-year, or where the balance sheet doesn’t balance.

Note that buyers will generally require the past three years of tax returns or internal financials when they’re considering buying a business.

4. Don’t Forget to Run Your Business

If you’re thinking about selling your business, it can be easy to let your foot off the pedal. We can’t stress how important it is to avoid that at all costs. Stay focused on your business throughout this process to ensure the stronger marketability and a higher valuation is achievable from the eventual sale. If sales or earnings performance falters during the sale process, it almost certainly will cause buyers pause and may affect price and deal structure. As the business owner, your #1 priority is to keep the business running effectively and ensuring steady performance. Keep in mind that the most recent financial information will likely be the basis for buyer offers and lender financing commitments.

Similarly, don’t tone down your advertising spending because you don’t expect to own the business in 6 months. If things take longer than you expect and performance begins to slip, buyers can be hawks and will lower their offers.


The sale process can be challenging. If you are preparing to sell your business or thinking about preparing to sell your business, we’d love to connect and help you reach your goals.

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