Preparation is boring, invisible to the outside world, and the single biggest driver of sale price. Two businesses with identical SDE can sell 30% apart based on how well the seller prepared. Here’s what actually moves the number.
Months 12–10: Financial foundation
Your financials are the first thing a serious buyer asks for and the last thing they stop scrutinizing. The goal is three years of clean, consistent, accrual-basis financial statements that tell an honest story.
- Move to accrual accounting if you’re on cash. Buyers normalize to accrual anyway; doing it yourself protects your narrative.
- Reconcile every bank and credit card account through the prior year-end.
- Build a trailing twelve months (TTM) P&L updated monthly — this becomes the number buyers anchor on.
- Draft your add-back schedule. List every non-recurring, personal, or discretionary expense with the dollar amount and the document that proves it (credit card statement, payroll record, invoice).
- Identify any customer concentration. If your top customer is >20% of revenue, this is a known price reducer — start diversifying or plan to address it in your CIM.
Months 10–7: Operational independence
If the business can’t run without you for 30 days, it’s worth less. Period. Buyers price in the risk that customers leave, the team quits, or operations seize up during transition.
- Hire or promote a general manager who can run day-to-day operations.
- Move at least the top five customer relationships to an account manager. Step out of regular touch points.
- Document your standard operating procedures — pricing, quoting, hiring, complaint resolution, vendor management. Video walkthroughs count; perfect manuals aren’t required.
- Cross-train at least two people on any single-source-of-knowledge function (billing, payroll, key technical roles).
A test: take a two-week vacation with your phone off. What breaks? Fix it before you list.
Months 9–6: Legal and corporate housekeeping
Legal issues don’t kill deals — surprises do. Front-load the cleanup.
- Renew your lease with terms that survive a sale (assignment rights, 5+ years remaining, market rent). A month-to-month lease cuts value.
- Review all material contracts — customer agreements, supplier terms, employment contracts. Are they assignable? Do any contain change-of-control clauses?
- Resolve or document pending disputes. Small litigation with a reserve is manageable; hidden disputes discovered in diligence tank deals.
- Confirm corporate records are complete — organizational docs, minutes, stock ledger, tax returns for at least 5 years.
- Meet with a transaction-focused tax advisor to map out entity structure, asset-vs-stock sale implications, and potential tax-saving strategies.
Months 6–3: Performance momentum
You’ll be judged on your trailing twelve months at the time of listing. This isn’t the stretch to launch risky new initiatives — it’s the stretch to execute well on what you know works.
- Close known pipeline. If a contract can be signed now versus after the sale, sign it now.
- Raise prices where you’ve been undercharging; buyers don’t pay you for price increases they implement.
- Contain discretionary spend, but don’t cut investments that will show up as an SDE drop next year.
- Keep your team intact. Departures during a sale process are costly — address retention risks now.
Months 3–0: Presentation
Now you package what you’ve built.
- Finalize your add-back schedule with supporting documentation for every line.
- Commission a Quality of Earnings report if you’re selling above $1M SDE or are concerned about buyer scrutiny.
- Work with your broker on the Confidential Information Memorandum (CIM) — the 30–50 page deck that tells the business’s story.
- Prepare a data room with every document a buyer will ask for, organized by category. A clean data room signals professionalism and shortens diligence.
- Line up your deal team: M&A attorney, CPA, wealth advisor. Don’t hire these in the middle of negotiations.
The quick-win list
If you’re short on runway and can only do five things:
- Get three years of books onto a clean accrual basis.
- Build and document an add-back schedule.
- Hire or elevate a GM so you can step back from daily ops.
- Renew the lease with assignability and 5+ year terms.
- Stay consistent — close the year strong, don’t do anything new or risky.
Preparation doesn’t have to be overwhelming. It has to be deliberate. Owners who treat the 12 months before listing as a project — with a timeline and a checklist — consistently outsell owners who just hand the business to a broker and hope.
If you’re thinking through your timeline, a confidential valuation is the cleanest way to see where you stand today and where the work will move you.
