Pre-Sale Preparation Guide: How to Prepare Your Business for Sale

1. Assess Your Readiness to Sell

Before putting your business on the market:

• Clarify Your Goals: Are you retiring, seeking a new opportunity, or cashing out?
• Financial Needs: Understand how much money you need post-sale.
• Emotional Preparedness: Prepare to let go of leadership and decision-making roles.

2. Organize Financial Records

Buyers will scrutinize your financials. Ensure:

• 3-5 Years of Clean Financial Statements: Include income statements, balance sheets, and cash flow
  reports.
• Tax Returns: These must reconcile with internal books.
• Add-Back Schedule: Identify non-operational or one-time expenses.

3. Conduct an Internal Due Diligence Review

Be ready for the buyer’s inspection by:

• Corporate Structure & Legal Documents: Review key documentation.
• Contracts: Organize vendor, customer, lease, and employee agreements.
• Licenses & Permits: Ensure all are valid and current.

4. Streamline Operations

A smooth-operating business is more attractive. Consider:

• Standard Operating Procedures (SOPs): Document all workflows.
• Reduce Owner Dependency: Delegate or automate tasks.
• Team Strength: Retain key employees with contracts or incentives.

5. Maximize Business Value

Enhance key value drivers:

• Revenue Stability: Focus on recurring revenue.
• Profit Margins: Cut costs and improve efficiency.
• Growth Potential: Document opportunities for expansion.

6. Value Your Business

Get a professional valuation:

• Valuation Methods: EBITDA multiples, DCF, or asset-based.
• Third-Party Valuers: Use brokers or CPAs for objectivity.

7. Prepare Marketing Materials

Present your business professionally:

• Confidential Information Memorandum (CIM): A detailed overview.
• Teaser Summary: A brief, anonymized profile.

8. Build the Right Team

Assemble professionals:

• M&A Advisor / Business Broker
• Attorney, CPA, Wealth Planner

9. Plan for Post-Sale Transition

Buyers may want:

• Training Period: Often 3-12 months.
• Employment Agreement: Short-term consulting.
• Non-Compete Agreement: Standard in deals.

10. Protect Confidentiality

Avoid alarming stakeholders:

• Use NDAs for all inquiries.
• Limit Information Sharing until buyer intent is clear.