One of the biggest mistakes business owners make is waiting until they’ve decided to sell before preparing the business for sale.
By then, some of the biggest opportunities to increase value have already passed.
If selling is even a possibility within the next three years, preparation should begin now.
36 Months Out: Find the Problems
Start looking at your company through the eyes of a buyer.
How dependent is the business on you?
How clean are the financials?
How concentrated are the customers?
Are margins improving or declining?
How strong is management?
How much recurring revenue exists?
What’s the forward pipeline?
Are important agreements documented?
What would happen if you didn’t come to work tomorrow?
You don’t necessarily need to sell.
You’re diagnosing the business.
24 Months Out: Build the Business for Transferability
Now start fixing the weaknesses.
If you’re essential to quoting, train an estimator.
If every customer calls you, transfer relationships to the team.
If you don’t have management, start developing it.
If your books are messy, clean them up.
If revenue is concentrated, pursue new accounts.
If everything lives inside your head, document it.
Your goal is to progressively make yourself less important.
That might sound strange.
But from an acquisition perspective, it’s incredibly valuable.
12 Months Out: Make the Numbers Tell the Right Story
Buyers will spend considerable time examining historical performance.
You want your financials to clearly demonstrate what the business has been doing.
Ideally, a buyer should be able to understand:
Revenue.
Gross profit.
Operating expenses.
Normalised earnings.
Employee costs.
Customer concentration.
Revenue by division.
Recurring versus project revenue.
Historical growth.
Forward pipeline.
If it takes six weeks to figure out whether you actually made money last year, expect buyers to become nervous.
Don’t Suddenly Stop Investing
Some owners preparing for sale make another mistake.
They strip every possible expense from the business to maximise short-term profit.
Be careful.
If you stop marketing, stop hiring and stop investing in equipment purely to make one year’s profit look better, a buyer may discover they’ve acquired a business that has stopped growing.
You want to present a healthy, sustainable company.
Not one that’s been polished for a photograph.
Get Your Documents Organised
Eventually, a serious buyer may request information covering areas such as:
Financial statements.
Tax returns.
Employee information.
Customer contracts.
Supplier agreements.
Leases.
Equipment schedules.
Insurance.
Licences.
Work in progress.
Pipeline.
Legal matters.
Corporate structure.
Intellectual property.
Start getting organised before due diligence begins.
Don’t Wait Until You’re Exhausted
A surprisingly common reason owners decide to sell is burnout.
They’ve had enough.
Then they want the business sold immediately.
Unfortunately, urgency generally benefits the buyer more than the seller.
The strongest position is being able to say:
“I’d sell for the right deal, but I don’t have to.”
That gives you options.
Your Exit Starts Before the Business Goes on the Market
Selling a business isn’t a single event.
It’s the final stage of years of decisions.
The team you build.
The customers you win.
The contracts you negotiate.
The systems you create.
The numbers you report.
The role you choose to play.
You may be three years away from selling.
But if you want the best possible result when that day arrives, your exit has already started.
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