Are you selling your company in a few years? Since it’s a defining moment that not only reflects years of hard work but also has the power to change your financial situation, you need to prepare your business for sale in such a way that maximizes your returns. Without it, you risk leaving money on the table or jeopardizing your exit goals.
Today’s guide lays out what exit strategy planning takes. Expect to learn the following:
Preliminary preparations, which include bringing out value drivers and organizing financials
Choosing professional advisory services
Preparing for due diligence
Marketing strategy
Understanding the Importance of Preparing for a Sale
Preparing to sell your business should be done even if you don’t have plans to exit soon. You’re likely to hit roadblocks, surprises, and even risks without the help of a roadmap. Imagine this: You were counting on the sale of your business to fund your retirement, only to find out it’s worth less than you expected. Had you prepared for it, you would have been reaping the benefits and living comfortably, without post-sale regrets.
Adding serious value is one advantage you never want to miss, as it drives the sale price up to even much higher than what you expected. Do this by tightening your metrics, solidifying your value drivers, and making your company an irresistible deal for prospective buyers.
When a buyer shows serious interest, the deal doesn’t close overnight. There’s a long road ahead, often stretching out for months. One major step is due diligence, where buyers take a deep dive into every part of your business. You could be dragging out, or even derailing, the deal entirely. On the other hand, advanced preparations avoid last-minute renegotiations that could be costly.
Benefits of Professional Advisory Services
Form an advisory team that will focus solely on the sale. Each member needs to have a background in selling a company similar to yours. Why is this important? It’s because they already know the steps to achieve the best results from a sale. The following professionals typically form a sell-side advisory team:
Brokers. Brokers serve as facilitators between the sell-side and buy-side. You can trust them to assign an accurate value to your company with their market experience and deal-making background. Considered the heavy-lifters of the transaction, they move the deal forward, beginning with valuation all the way through post-closing. Selling a business will be a challenging event, but these professionals make it less tedious through guidance.
Accountants. Their main role is to check whether your books are accurate and statements are up to standard before the deal.
Legal counsel. Businesses will always have legal aspects (e.g., compliance in certain industries). Ensuring that you’re compliant and that you won’t be legally liable post-sale are just some of the scope of attorneys.
The Impact of Exit Strategy Planning
The best thing about planning is that you won’t be forced to sell abruptly and accept a lower purchase price. You will be able to take home money that will be worth your investment. Ideally, planning should start 1 to 5 years before the sale.
When you ask brokers how to prepare to sell your business, they’ll point you toward changes in how your operations run. In particular, changes that drive up the sale price. Address each inefficiency as you discover each. Make it your goal for the business to run better, as doing so will make it attractive to buyers.
Timing-wise, the best time to sell is when market conditions are strong and your operations are performing at their peak. When you slowly build your business toward these conditions and time the sale perfectly, you’ll get the best results.
Steps to Prepare Your Business for Sale
Look up procedures on how to start selling business, and you’ll find out that it’s not as easy as putting up a “For Sale” sign. Make it well-run — the kind that is established on a system that can run on its own without much supervision. In this section, we break down the preparations into manageable steps.
Assessing Your Business’s Current Status
Part of evaluating the company’s current standing is figuring out what your goals are for selling the business. Most owners go into a sale with a few key goals:
Getting the highest possible return
Making sure their team is looked after
Closing the deal smoothly
Carve a legacy in the industry
If a buyer walked in tomorrow, would you be ready to show them everything? Being ready for a sale means you’re ready to show what’s behind the scenes. Only then can you present a realistic position of your business.
JMBM partner Jeffrey R. Groendal, who advises clients as corporate counsel, recommends conducting what he calls “corporate housekeeping.” It’s a practical way to prepare for a future sale—even if that sale is still years off. The idea is simple: clean up now so you’re not scrambling later.
That means reviewing foundational documents, tightening up internal records, and making sure your company can hold up under scrutiny. Buyers are running longer and more demanding diligence processes, and they’ll comb through everything—from financials and customer contracts to employment practices and compliance issues. If you want to move through that smoothly, you need to spot the gaps before they do.
Internally commenced pre-sale audits let you assess these areas without the pressure of outside scrutiny. You can fix what needs fixing without raising red flags or drawing judgment from a buyer’s team of advisors.
Identifying Value Drivers
If you’re learning how to prepare your business for sale, one of the things to discover is knowing exactly the elements that contribute to its growth. Known as value drivers, these are the core parts of your business that directly (or sometimes indirectly) affect your bottom line.
At a glance, you won’t be able to pinpoint them. One business may have entirely different value drivers than another, even when both operate in the same industry and have the same set of offerings. Hence, you need to determine value drivers during your early-stage exit preparation.
So how do you determine what your value drivers are? Experts have determined some common areas, namely the following:
Financial analysis: Are there patterns/trends within necessary metrics (e.g., margins, ROI, and revenue)? Then ask yourself: Where does the business stand against other competitors? Statistics often point to what’s working and what’s not.
Customer base evaluation. What do your best customers value most? Track feedback, retention rates, and purchasing behavior.
Competition. How are you positioned in your industry? Look at what sets you apart from competitors—and where you’re falling behind.
Operational review. Where is your team efficient? Which areas make your time and resources bleed? Zoom in on systems or processes that hugely affect your bottom line.
Investor and staff feedback. Your team often sees what leadership doesn’t. What do they say is working well? What do they think slows the business down?
Benchmarking: Measure yourself against top performers. You’re bound to unearth both financial and intangible drivers that might be worth investing in.
Tech and innovation: Are you keeping up with tech that improves your product, service, or internal efficiency?
Preparing Business Financials for Sale
Did you know that clear and organized financials improve your value from the perspective of an investor? This is because when a potential buyer knows where to look, they can quickly understand how your business makes money and trust that what they’re seeing is accurate.
An income statement shows whether your business is making money. Buyers use it to gauge earnings and spot trends in revenue and expenses. It’s one of the first things they’ll ask for.
A cash flow statement shows buyers where the money flows from and where it goes. An ideal scenario is that operations are the main money source, not loans or external funding.
A balance sheet is for buyers to check whether you can handle expenses and debt without issues.
Bank statements help buyers see how money moves through your accounts. Monthly averages will be checked. In this step, they’ll try to spot any red flags, like low balances or unresolved debt.
Tax returns confirm that your business has been run cleanly. Buyers don’t want to inherit tax issues, and solid records here give them peace of mind.
Financial projections, while simply conjecture, give buyers a look at what the future could look like. They’re built using your existing numbers and help make the case for growth potential.
Other necessary documentation:
SDE statement
Accounts payable and receivable (aging reports)
Loan and debt documentation
Navigating the Process of Selling Your Business
After some internal preparations, it’s finally time to prepare for the sale process itself. Now, you may have these questions:
How are you going to attract potential buyers?
Who’s going to handle the negotiations?
What do buyers need to know? What do they want to see?
You’ll find the answers to these and more in the sections ahead.
Preparing for Due Diligence
A huge percentage of due diligence preparation by the sell-side is anticipating what potential buyers will ask for and organizing it in a clear and organized way. Buyers want access to everything that matters. So, when preparing your business for sale, have a due diligence checklist in handy. Generally, due diligence documents can be categorized into the following items:
Corporate documents. Formation papers, ownership records, operating agreements, stock ledgers, and bylaws stand as proof that the company is legally formed and that it is authorized to sell or offer its services.
Operational documents. Brokers need to see how the company runs and a description of the people who run it.
State registrations and good standing certificates. Buyers will look for proof that your company is:
Duly registered in the state where it operates
Compliant
In good standing
Financial statements. These are a top priority for buyers. The three most important statements for the past 3 to 5 years will be presented. By the commencement of due diligence, statements should already be comprehensive, accurate, and transparent.
Tax returns. They serve as proof that the company files and reports consistently. When filings are complete, buyers don’t have to worry about tax issues after the sale.
Material contracts. Where your revenue comes from and which obligations you’ve committed to are documented here. Buyers will thoroughly check agreements, scrutinizing every aspect such as documents involving customers, employees, lenders, and suppliers. They do so to observe the stability of operations and revenue streams.
Litigation history. Buyers will expect full disclosure of active, pending, or threatened lawsuits, and what risks they might carry. Be upfront about this.
Assembling Your Advisory Team
Finding a broker. Looking for a broker with a CBI (Certified Business Intermediary) designation, as it verifies real experience and ongoing training in business sales. But don’t stop there. You need to screen them the same way a buyer would screen your business. Ask smart questions, check their track record, and make sure they’ve closed deals like yours. Here are questions to ask a broker to help you separate experienced ones from the ones who just list and wait.
How many deals like mine have you closed recently?
What kind of buyers are active in my space right now?
What usually stops businesses like mine from getting sold?
Finding an accountant. When preparing business for sale, bring in an accountant who can clean up your books and get everything in order. If your financials are a mess, or even just slightly off, it could hurt your valuation or slow down the deal. So what is considered a good accountant?
Someone who will spot gaps in your records, flag any tax issues, and make sure everything lines up before buyers start digging.
They can also help you run the numbers on different deal structures.
Finding a transactional lawyer. As you prepare to sell your business, you need a lawyer who specializes in deal-making. Never go for a generalist. A transactional attorney will help you structure the sale, draft the paperwork, handle negotiations, and make sure everything checks out legally. They also flag risks early so you’re not blindsided later. Here are some excellent advice from author and corporate lawyer Andrew Sherman:
Look for a lawyer with both buy- and sell-side experience.
Don’t settle for someone who only handles general legal work.
Ask the following
How does the lawyer address risks?
What measures do they take to protect clients after the deal?
Crafting a Marketing Strategy for Your Business
A straightforward approach is to simply connect with a serious buyer and commence the due diligence process. However, for most business owners who have managed their company most of their lives, selling is completely unfamiliar territory.
They can’t just put the business up for sale in plain view. It has to be done quietly, because if the wrong people catch wind of it, it could throw off daily operations and stir up unnecessary trouble.
For those who want to sell on their own, some online marketplaces offer active support once you’ve listed your company with them. However, the biggest catch is that you’re bound to encounter buyers who only do “window shopping.” If you want to sell your company efficiently, you definitely don’t want to waste your time on these people.
For first-time sellers, it’s best to partner with a broker and let them handle the marketing strategies, which may include the following:
Typically, these professionals will create a generic teaser, which describes the opportunity without giving away your company. The description will be listed on their platform.
Brokerage firms have a buyer pool. Brokers screen and vet interested parties, so you only talk to serious prospects with the financial ability to follow through.
Strategies for Attracting Potential Buyers
As you prepare business for sale, one of the biggest questions to consider is this: How do I write my message in a way that reaches my target potential buyers? In this section, you will discover two strategies that will address this question.
How to Start Selling Business Effectively
Establish a buyer persona. This is among the initial strategies recommended by experts as you prepare your business for sale. Why is it effective? It’s because you can create messages that really speak to them.
Remember that choosing your buyers ties to your post-sale goals. For example, if the legacy of your company is the top priority, then you should look for buyers who share the same passion and are operating within your industry. If you want to witness growth, then it might be best to offer the company to financial buyers whose goal is to scale the business.
Not every interested party will be the right fit. On the other hand, chasing the wrong ones can waste your time. Some important aspects to help you narrow down your search are the following:
Financial capability. Can they afford the business? Do they have the resources to follow through on a deal without delays or complications?
Industry background. Do they understand your space well enough to run the business and keep it successful?
Strategic alignment. Will they achieve their goals? Is it going to boost what they’ve already built? Will it solve internal company issues in their company when they acquire yours?
Highlighting Your Business’s Unique Selling Points
Do you know what the most rewarding experience is as you work with pros (lawyers, brokers, and CPAs) when preparing a business for sale? You receive the best guidance, including how to frame your company to spark interest in prospects. One of the best tools that highlight your unique selling points is called the Confidential Information Memorandum (CIM).
You work with brokers and investment bankers to formulate the content of this marketing asset. The information presented here introduces what makes your business valuable and why a buyer should take a closer look.
Facts and stats about your business are presented, but it shouldn’t be treated as a data dump. Remember that it’s a presentation. Pull together your USP and relate it to operational strengths and growth potential to create a clear document that entices acquirers.
Conclusion
Let’s recap the steps on how to prepare business for sale.
Setting your goal for the sale comes as the priority. This is necessary because it guides you through the decisions you make as you go along with the sales process.
Experts recommend “corporate housekeeping,” which is a periodic organization of documents and requirements. Through this practice, you’re ready to sell the company once conditions are excellent.
You need to observe which areas of your business drive your income. Is it your branding and reputation? Is it the diversity of your customers? Are you the industry leader? Give investors an idea of how they can push the company’s growth further through its value drivers.
Clean up your financials and make it easy for potential buyers to see how you handle company finances. Buyers will appreciate the transparency that they will observe when you organize financial statements.
Key Takeaways for First-Time Sellers
For first-time sellers, don’t expect to transact with the first seemingly serious buyers and jump into due diligence. You can’t just put the business out there for everyone to see. It needs to be discreet. The better option? Work with a broker who knows how to screen buyers and market your business the right way.
When you work with a broker, you will also be guided on how to market your company best. But for starters, you need to determine which buyers you want to attract. This can be done by narrowing down your preferences by creating a buyer persona. You can then discuss this with your broker, who will then create the strategy and marketing materials.
One of the biggest advantages of working with professionals is knowing how to present your business in a way that gets buyers interested. With their help, you’ll build a strong CIM, which is a marketing tool that highlights your value, connects the facts to your strengths, and shows why your business is worth considering.
Don’t just clean up the numbers. Anticipate what buyers want and hire people who can help you seal the deal with a potential buyer.
When you build a team of professionals who’ve done this before, you get guidance that keeps the deal on track. Add smart exit planning to that, and you’ll be in a much better position when it’s time to sell. Simplify your goals into the following:
