Insights

How to prepare your business for sale: the two-year plan

Most owners ask "what is my business worth?" a few months before they want out. The better question, asked two years earlier, is "what will it be worth by the time I am ready?" The gap between those two numbers is usually the most money you will ever make per hour of work.

Here is what to actually do, on a timeline, so the business you take to market is the one buyers pay up for.

Why two years, not two months

Buyers do not pay for promises. They pay for track record. Every fix you make, cleaner books, a manager running operations, a broader customer base, only moves the price once it has been true long enough to show up in your trailing twelve months.

Hire a general manager in March and go to market in May, and the buyer sees an experiment. Let that manager run the business for eighteen months, and the buyer sees a company that works without you. Same fix, very different price. That seasoning period is why serious preparation starts roughly two years out, even if you are not certain you will sell.

24 months out: fix what buyers pay less for

Start with the three discounts that show up in almost every founder-led deal.

First, get the financials clean. Move to accrual accounting if you have not, reconcile every account monthly, and separate personal expenses from business ones. Every add-back you plan to claim later should be documented now, not reconstructed from memory during diligence.

Second, attack owner dependence. List everything only you can do, key customer relationships, pricing, hiring, the license on the wall, and start transferring each one to a person or a process. This is the slowest fix on the list, which is exactly why it comes first.

Third, look hard at customer concentration. If one customer is more than 20 to 25 percent of revenue, buyers will discount the price and push risk back on you through earnouts and holdbacks. Two years is enough time to grow the rest of the book so the big account becomes a smaller slice.

12 months out: paper the business

A year out, the work shifts from operations to documentation. Buyers do not buy what you tell them. They buy what you can show them.

• Put handshake arrangements in writing. Customer agreements, suppliers, and key subcontractors should be on signed contracts, and check whether those contracts are assignable to a new owner.
• Clean up the entity. Corporate records current, ownership clear, any intellectual property, vehicles, or licenses actually held by the company rather than by you personally.
• Review your lease. A buyer needs the location secured, so a short remaining term or a missing renewal option becomes their problem, then yours.
• Think about key people. Identify the two or three employees a buyer will worry about losing, and plan how you will keep them through a transition. Done right, this turns a diligence risk into a selling point.

This is also the right time to talk to your CPA about how a sale would be taxed under your current structure. Some tax planning only works if it starts well before a deal, and none of it works after you sign a letter of intent.

6 months out: build the story and the number

The last stretch is about going to market from a position of strength.

Pull together a data room before any buyer asks: three years of financials, tax returns, contracts, org chart, customer data. Sellers who respond to diligence requests in days instead of weeks keep their leverage and their momentum.

Get an outside view of your earnings. A sell-side review of your adjusted EBITDA, before buyers test it, means you set the number instead of defending it.

And model your net proceeds, not just the price. Debt payoff, fees, taxes, and escrow all come out before you see a dollar, and knowing your real walk-away number tells you whether an offer actually funds the life after the sale.

This is where an advisor earns their fee. A good Texas business broker or M&A advisor will tell you what to fix, what to skip, and what buyers in your industry are paying right now, before you commit to a process.

What preparation is actually worth

The math is blunt. A business with $1 million in adjusted EBITDA that trades at 4x because of messy books and owner dependence sells for about $4 million. The same business, prepared, at 5x or better, brings $1 million or more of additional proceeds, and typically with more cash at close and less of the price held back in earnouts and escrow. Around Plano and North Texas, where strategic, private equity, and family office buyers are all actively looking, prepared companies are the ones that get competitive processes instead of single lowball offers.

Two years of preparation is not two years of extra work. It is a checklist, worked steadily, that most owners can run alongside the day job.

Where to start this week

If a sale is anywhere on your horizon, book a confidential call. Thirty minutes, no pitch. We will look at where your business stands today, tell you which fixes are worth the effort for your situation, and put a realistic range on what prepared versus unprepared looks like in dollars. More owner questions are answered on our Insights page.

This article is general information, not legal, tax, or financial advice. Tax outcomes and legal requirements vary by situation. Work with your attorney and CPA on the specifics.

Frequently asked questions

When should I start preparing my business for sale?

Ideally 18 to 24 months before going to market. Fixes like reducing owner dependence, broadening the customer base, and cleaning up financials only raise the price once they have been in place long enough to show in your trailing twelve months of results.

What documents do I need to sell my business?

At minimum: three years of financial statements and tax returns, customer and supplier contracts, your lease, corporate records, an organization chart, and documentation for any add-backs to earnings. Having these organized in a data room before buyers ask keeps the deal moving and protects your leverage.

Can I sell my business without preparing it first?

Yes, but usually at a lower price and on worse terms. Unprepared businesses tend to attract fewer buyers, trade at lower multiples, and carry more of the price in earnouts, seller notes, and escrow holdbacks instead of cash at closing.

Does preparing a business for sale actually increase the price?

It is often the highest-return work an owner ever does. Moving from a discounted multiple to a market multiple on the same earnings can add six or seven figures to the sale price, and preparation also increases the odds the deal closes at all.