Ten things to do before you sell

1. Get your financial statements in order

Buyers underwrite what they can verify. If your books are on a cash basis, converting to accrual gives a far clearer picture of the business and removes an argument before it starts.

If you can afford it, a reviewed or audited statement for the most recent year materially increases buyer confidence. If you cannot, at minimum ensure the last three years are internally consistent and reconcile to your tax returns.

2. Build your adjusted EBITDA schedule with evidence attached

Every add-back should have documentation behind it before a buyer asks. This is the single highest-return piece of preparation available, because undocumented adjustments simply disappear in diligence.

3. Reduce your own indispensability

If you personally hold the key customer relationships, do the estimating, or approve every decision, a buyer is purchasing a business that partly leaves when you do.

Introduce a second relationship owner on your largest accounts. Move estimating or sales to someone else. Take a two-week holiday without calling in, and see what breaks. Fixing what breaks is the work.

4. Separate personal assets and expenses

Vehicles, property, family members on payroll, personal credit cards. Clean these up or at minimum document them clearly. A buyer who finds them one at a time during diligence starts to wonder what else is mixed in.

5. Address customer concentration

A client above roughly a quarter of revenue changes the structure of your deal, usually through escrow or an earnout. If you have two years, growing the rest of the business is the answer. If you have one, longer contracts with that customer are the next best thing.

6. Put your recurring revenue in writing

Undocumented recurring revenue is discounted or excluded entirely. Maintenance agreements, service contracts and renewals that happen by handshake need to become written agreements with terms, ideally with price escalators.

7. Deal with deferred maintenance

A tired fleet or aging equipment is a capital expenditure the buyer deducts from your price. It is usually cheaper to spend the money yourself than to have it valued against you at a multiple.

8. Tidy up the legal file

Corporate records, minute books, share registers, employment agreements, non-competes, leases, licences, insurance. Missing or unsigned documents cause delay, and delay causes deals to die. Have a lawyer run a diligence rehearsal on your own company.

9. Talk to your accountant about structure

Entity type and how long you have held it affect your after-tax proceeds significantly, and several relevant elections have multi-year look-back periods. This conversation is nearly worthless the week before closing and extremely valuable two years out.

10. Decide what you actually want

Not the number. The rest of it. Do you want to be gone in ninety days or stay for three years? Does it matter to you who the buyer is, and what happens to your people? Would you take less money for a cleaner exit, or more money with an earnout attached?

Owners who have answered these questions negotiate well. Owners who have not tend to accept whatever structure the first credible buyer proposes, and regret it later.