The best time to prepare a business for sale is about two years before you want to sell it. That is roughly how long it takes to make the numbers clean, make the business run without you, and build the record that a buyer's advisers will pick through. Founders who start when the offer arrives sell for less, and the process is harder than it needs to be.
Here is how we structure it with clients.
Two years out: make it clean
Accounts. Monthly management accounts, produced on time, that reconcile to the statutory accounts. Personal spending out of the business. Revenue recognised the same way every month. A buyer will rebuild your numbers; make sure they get the same answer you do.
Contracts. Customers on signed agreements with clear terms. Know which contracts have change-of-control clauses, because a sale can trigger them. Suppliers and key partners the same.
Ownership. The company must own what it sells: the brand, the software, the designs, the content. If a founder, a former employee or a freelancer created something and never assigned it, do that now. It is a small piece of paper that becomes a large problem in due diligence.
People. Written contracts for everyone, and incentives for the handful of people the business cannot lose, so they stay through a sale.
One year out: make it independent
The question every buyer asks, out loud or not, is what happens when you leave. If the answer is that the business stops, they are not buying a business; they are buying a job, and they will price it that way.
- Can the business run for a month without you? If not, build the team and the systems so that it can, and then actually take the month.
- Does any one customer account for more than a fifth of revenue? Concentration is a discount. Spread it where you can.
- Is the process written down? Sales, delivery, finance, hiring. Not a manual nobody reads; a short, real description of how the work gets done.
- Is the data room ready? Accounts, contracts, cap table, IP, employment, insurance, disputes. If you can open it in a week, you negotiate from strength.
Tax matters here too. The reliefs available when a founder sells have been changing, and most of them have conditions that must be met well before the sale, not at the point of signing. Get advice from your accountant early, while there is still time to qualify.
What moves the price
Buyers value predictability. In practice that means recurring or repeat revenue, growth they can see continuing, healthy and stable margins, low customer churn, and a business that does not depend on one person or one client. Every item on the lists above feeds one of these. Fix them and the valuation multiple moves; leave them and the buyer uses them to chip the price down after the offer.
A buyer is not paying for what the business did. They are paying for how confident they are about what it will do next.
The process itself
Expect it to take six to twelve months from first conversation to completion. Trade buyers and financial buyers want different things and behave differently; a trade buyer is often buying your customers or your product, a financial buyer is buying your cash flow. Earn-outs, where part of the price depends on future performance, are common; understand exactly what you are agreeing to before you sign one. And run the business as if the sale will fall through, because some do, and the ones that complete are usually the ones where the numbers did not wobble during the process.
If an exit is somewhere in your plans, even a few years away, book a complimentary consultation. The earlier the conversation, the more options you have.