How to Prepare to Sell Your Business: Making Your Company More Saleable

Selling a business successfully starts long before you put it on the market.  A potential buyer is not simply buying your current revenue. They are evaluating how reliably the business can generate profits after you leave. That means the more organized, predictable, transferable, and less owner-dependent your company becomes, the more attractive it may be to a buyer.  If selling your business could be on the horizon, even a few years away, here are some areas to focus on. 

1. Get Your Financials in Order

This is always a good idea, even if you are not planning to sell for a while. Buyers want to understand exactly how the business makes money. Clean, consistent financial records can make the due diligence review easier and give buyers greater confidence in your business financials. 

Before a sale: 

• Keep business and personal expenses separate. 

• Maintain accurate financial statements. 

• Review several years of tax returns for consistency. 

• Document legitimate owner-related or one-time expenses. 

• Understand your revenue, margins, cash flow, and profitability. 

• Work with your CPA to identify financial issues before a buyer does. 

Tip: Do not wait until you're ready to sell to clean up the books. Ideally, give yourself two or three years of well-organized financial history. 

2. Make the Business Less Dependent on You

Ask yourself a difficult question: If I disappeared for 90 days, would the business continue operating successfully? - If the answer is no, you may have a business that's difficult to transfer to a buyer.  

Start making yourself less essential: 

• Document important processes and procedures. 

• Develop capable managers and employees. 

• Delegate key customer and vendor relationships. 

• Create repeatable sales and operational systems. 

• Reduce the number of decisions that require the owner's approval. 

A buyer generally wants to purchase a functioning business, not an owner's full-time job. 

3. Build Predictable Revenue

Revenue quality can matter just as much as revenue size. A business heavily dependent on one customer, one salesperson, or unpredictable one-time projects can present more risk to a buyer. 

Look for opportunities to: 

• Increase recurring or repeat revenue. 

• Build longer-term customer relationships. 

• Reduce dependence on a few large customers. 

• Develop a reliable sales pipeline. 

• Track customer retention and recurring revenue. 

• Diversify suppliers and referral sources. 

The more predictable future cash flow appears, the easier the business may be for a buyer to evaluate. 

4. Clean Up the Business Before Due Diligence

Buyers will likely look beyond your income statement. 

Before going to market, review: 

• Customer and vendor contracts. 

• Employee agreements. 

• Intellectual property and trademarks. 

• Licenses and permits. 

• Leases. 

• Insurance. 

• Outstanding legal disputes. 

• Ownership records. 

• Loans and other liabilities. 

Resolve problems where possible and organize important documents electronically.  Think of it like selling a house: you don't want the buyer to discover the leaking roof during the inspection. 

5. Know What Your Business May Be Worth

Owners sometimes confuse what they need from a sale with what the market will actually pay.  Get an objective understanding of value before making retirement or financial plans around a particular sale price. Consider speaking with a qualified business valuation professional, CPA, M&A (Mergers and Acquisitions) advisor, or business broker. 

Then ask: 

• What drives my company's value? 

• What reduces its value? 

• What could I improve over the next 12–36 months? 

• What might a realistic buyer pay? 

• What could I actually keep after taxes, fees, and transaction costs? 

Your Business Sale Checklist

Before considering your business is ready for sale: 

☐ Clean up your financial statements. 

☐ Separate personal and business expenses. 

☐ Build 2–3 years of consistent financial records. 

☐ Document important business processes. 

☐ Reduce dependence on the owner. 

☐ Develop a strong management team. 

☐ Reduce customer concentration. 

☐ Build recurring and predictable revenue. 

☐ Organize contracts and legal documents. 

☐ Protect intellectual property. 

☐ Address outstanding liabilities or disputes. 

☐ Obtain a realistic business valuation. 

☐ Understand the potential tax consequences of a sale. 

☐ Assemble your CPA, attorney, financial advisor, and transaction professionals early. 

Start Before You are Ready to Sell

The best time to make your business saleable is not six months before you want to retire; it's a few years earlier.  Even if you ultimately decide not to sell, the same improvements that make a company attractive to buyers, clean financials, strong management, predictable revenue, documented processes, and less dependence on the owner, can also make it a stronger business to own. 

Build a company that can succeed without you, and you will have more choices when it's eventually time to exit.

Lightcap Financial Group works with business owners to help them reach their retirement goals. If you’re ready to talk with a financial advisor about preparing your business for sale, call us today.  

This article is for general educational purposes and is not individualized for business, tax, legal, valuation, or financial advice. Business sales can have significant tax and legal consequences, so owners should consult qualified professionals regarding their individual circumstances.

This commentary reflects the personal opinions, viewpoints and analyses of the Lightcap Financial Group, LLC employees providing such comments, and should not be regarded as a description of advisory services provided by Lightcap Financial Group, LLC or performance returns of any Lightcap Financial Group, LLC client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Lightcap Financial Group, LLC manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.