How to Prepare Your Business for Sale

Preparing a business for sale is mostly financial work done before any buyer appears: plan the transfer, get the books clean and current, explain your real earnings, list every asset and liability, build the model and data room, and line up your advisers. Here are the steps in order.

By Jake McKenna, FounderPublished Last reviewed

1. Decide what you are planning

The SBA's advice for an owner who wants out is to create a thorough plan to transfer ownership, sell or close the business. Start there: who might buy, roughly when, and what you want from the sale. The wider question is covered in what exit planning is.

2. Get the books clean and current

A buyer will read your records closely. Bank and card accounts should be reconciled, transactions categorized consistently and the month-end close finished on time. If the books have fallen behind, catch-up bookkeeping comes first. Everything after this step rests on it.

3. Normalize your earnings and explain the one-offs

Reported profit is not always the earnings a buyer will pay for. Owner pay, one-off costs and personal expenses can all distort the picture. Normalizing the financials, and listing each adjustment (an add-back) with its support, is the heart of a quality-of-earnings-style analysis. Our guide to quality of earnings reports explains what buyers look for.

4. Get a valuation from the right person

The SBA says to use business valuation to set a monetary value before marketing to prospective buyers. Formal valuations are outside our services, so this is work for a qualified valuation specialist or your broker. We prepare the financial information they will rely on.

5. List every asset and liability

The SBA warns not to leave out any assets or liabilities, because this can create problems even after the sale has been finalized. Make a complete list, and check it against your balance sheet.

6. Build the financial model and the data room

The financial model shows buyers where the business is heading. The data room is the organized set of documents they will ask to see. Assembling both before you go to market means you can answer questions quickly instead of hunting for files.

7. Line up your advisers

A sale involves a broker, a lawyer and a tax adviser. We work alongside all three. Negotiating the deal, legal advice, tax advice and investment advice are outside our services.

8. Prepare for due diligence

Once a buyer is interested, they will test your numbers. We support the owner through buyer due diligence, answering financial questions with the records already in order.

If you want help with the financial side, see our M&A and exit advisory service and what M&A advisory means.

Need this done for you? See our Fractional CFO & Advisory service, or pricing. English Oak Financial does not prepare tax returns, perform audits or give investment advice. This guide is general information, not tax, legal or investment advice.

Sources

Common questions

How early should I start preparing to sell?

Early enough to fix the books and explain your earnings before a buyer sees them. How early that is depends on the condition of your records. If they are behind, begin with catch-up bookkeeping.

Do you value my business?

No. Formal valuations are outside our services. We prepare the financial information that a valuation specialist or buyer will rely on.

Will you negotiate the sale?

No. Negotiating the deal is outside our services. We work alongside your broker and lawyer.

What is a data room?

A data room is the organized collection of documents a buyer reviews during due diligence, such as financial statements, reconciliations and supporting records. We help assemble it.

Talk it through with us

Schedule a free introductory consultation. No surprise bills. No unnecessary services.

Schedule Consultation