What to Prepare Before You Put Your Business on the Market
Most business sales take 6 to 12 months to close — sometimes longer. The sellers who move quickly and command the best prices are almost never the ones who scramble to get ready after a buyer shows interest. They prepared before the process started.
Here is what that preparation actually looks like.
Get Your Financials in Order — Three Full Years
Buyers and their lenders want to see three years of clean financial statements: profit and loss, balance sheet, and cash flow. “Clean” means they reconcile, reflect reality, and can be explained. If you run personal expenses through the business — a common practice among owner-operated companies — those need to be identified, quantified, and added back in a formal recast of earnings (EBITDA add-back schedule). Buyers will ask. Better to have the answer ready than to reconstruct it under due diligence pressure.
If your books have been prepared by a bookkeeper with minimal oversight, consider having a CPA review or compile them before going to market. Audited financials are rarely required at the lower-middle market, but reviewed statements add credibility.
Understand Your Own Numbers
You should be able to answer the following without hesitation: What is your trailing twelve-month revenue? What is your adjusted EBITDA? What are your top five customers by revenue, and what percentage of total revenue do they represent? What contracts are in place, and when do they renew or expire?
Customer concentration is one of the first risk factors a buyer will analyze. If one customer represents more than 20% of revenue, that is a material issue. Know it ahead of time and be prepared to address it.
Document What You Actually Do
If the business runs primarily because of your personal relationships and institutional knowledge, that is a transition risk. Buyers need to see that the business can survive without you — or that there is a credible plan for knowledge transfer. This means written processes, an organizational chart that reflects reality, and an honest assessment of which employees are key to operations.
You do not need a 200-page operations manual. You need enough documentation that a capable new owner could reasonably learn the business.
Identify and Resolve Legal and Structural Issues
Outstanding litigation, unsigned contracts, expired licenses, unclear intellectual property ownership, and informal agreements with employees or suppliers are all issues that surface in due diligence — and each one has the potential to delay or kill a deal. Review these before you go to market, not after a buyer is already engaged.
If you have a business partner, make sure your buy-sell agreement is current and that there is no ambiguity about who controls the sale process.
Know What Your Business Is Worth — Realistically
Owners often have an emotional attachment to a number that reflects what they need in retirement, not what the market will pay. A business is generally worth a multiple of its sustainable earnings, adjusted for growth, customer concentration, management depth, competitive position, and deal structure. In the lower-middle market, most transactions close at 3x to 7x EBITDA, with significant variance based on sector and quality of business.
Getting an independent opinion of value — not from a broker trying to win your listing, but from a disinterested advisor — is worth the time before you commit to a process.
Decide What You Actually Want
A sale process will force decisions you may not have thought through: Are you willing to stay on for 12 to 24 months post-close? What is the minimum number you will accept? Are you open to seller financing or an earnout? Would you consider a partial sale or recapitalization instead of a full exit?
These are not questions to answer for the first time when a buyer is sitting across the table from you. They should be resolved — at least provisionally — before you start.
Choose the Right Advisor
A sell-side M&A advisor handles positioning, buyer outreach, process management, negotiation, and the coordination of legal and financial due diligence. The right advisor for a $5M transaction is not necessarily the right advisor for a $50M transaction. Look for someone with direct experience in your sector and deal size, not just a generalist with a long list of past clients.
At eightM, we work with lower-middle-market business owners across the US and Europe. If you are considering a sale in the next 12 to 24 months and want an honest assessment of where you stand, contact us.