Proper preparation for a business sale doesn’t start just a few weeks before the sale process begins, but ideally 12 to 24 months in advance. If you start too late, you may leave money on the table.
As an entrepreneur, you’re naturally focused on the future. Yet in practice, we see that many entrepreneurs put off preparing for a potential sale for too long. That’s understandable—day-to-day operations demand your full attention. But starting preparations too late often has a direct impact on the outcome of the sales process.
Why It Pays to Start Early
The current M&A market is demanding. Buyers—both strategic parties and private equity firms—are more critical than ever. They’re not just looking for businesses with solid historical financials, but especially for those that can present a compelling and well-founded narrative about future growth. Building that narrative—the equity story—takes time. Furthermore, the sooner you identify and address potential risks, the greater the chance that you can do so on your own terms—before a buyer discovers them during the due diligence process.
What do buyers look for?
In our M&A practice, we’ve observed that buyers pay particular attention to the following factors:
- Predictable revenue: recurring or contractually guaranteed revenue gives buyers confidence in future cash flows.
- Strong margins and cash flow: with demonstrable room for further improvement following an acquisition.
- A competitive edge: What makes your business unique compared to competitors? Consider customer relationships, technology, or a strong market position.
- An independent management team: buyers want to know that the continuity of the business does not depend entirely on the current owner.
- Reliable and insightful data: not just historical figures, but also a well-founded and credible outlook for the future.
Many of these elements take time to build or improve. That’s why it’s important to start early.
Concrete Steps in Preparation
- For entrepreneurs considering sell a business in the future, there are a number of important points to consider:
- Ensure that your financial reports are clear and consistent. Unclear or inconsistent figures raise doubts among buyers—even if the underlying business is performing well. A buyer must be able to quickly and independently build confidence in the company’s financial position.
- Develop a realistic and well-founded forecast. Buyers are willing to pay a premium for businesses with plausible growth prospects. An overly optimistic forecast that is not realized later undermines confidence and weakens your negotiating position.
- Identify and address risks in a timely manner. Customer concentration, reliance on key individuals, legal uncertainties, or a backlog of investments—these types of issues almost always come to light during the due diligence process. By addressing these risks in advance, you, as the seller, maintain control over the process.
- Strengthen the management team. A business that is heavily dependent on its owner-manager is less attractive to buyers. Demonstrating that the management team is capable of running the business independently significantly increases its value and builds trust among potential buyers.
Conclusion
Good preparation is often half the battle. Entrepreneurs who start preparing early are in a stronger position during the sales process: they have more choice among potential buyers, a better negotiating position, and generally achieve a higher selling price.
