Selling your business is a lot like selling your house: it should have curb appeal and pass a buyer’s home inspection. Similarly, the one thing that home buyers dread, and often attribute to walking away from the deal, is the thought of pulling back the carpet after closing and being met with unexpected surprises. For many business owners, selling their business is a once-in-a-lifetime event that carries both financial significance and personal meaning. Yet too often, owners enter the market before they are fully prepared, resulting in longer timelines, avoidable erosion of value, and a general fatigue with the process as a whole. In this article, we look at some of the steps that you can consider to alleviate the stress and uncertainty of selling your business, and to help maximize the value of your business.
Objectives and Planning
Establish Clear Personal and Financial Objectives
Perhaps the most important step in any of our discussions with business owners thinking about selling is to fully grasp their personal and financial goals. Whether the motivation is retirement, liquidity diversification, growth capital, or partnering with a strategic acquirer, your goals directly influence the type of buyers you should target and how the business should be positioned. Further, any potential sale will impact employees and management, and the owner’s future role in the company can be dramatically different depending on the buyer. Having these conversations early in the process is crucial in determining the most appropriate transaction.
Establishing a realistic timeline is equally important. Internal readiness, market conditions, leadership transition planning, and family or shareholder considerations all play a role in determining when to launch a process. The earlier you define these factors, the more optionality you preserve.
Financials and Controls
Strengthen Financial Transparency and Controls to Enhance Buyer Confidence
Buyers place significant weight on the quality and reliability of a company’s financials, because valuation ultimately depends on the credibility of future cash flows. As such, the quality of the seller’s financials will be closely scrutinized in any sale to ensure that the cash flows are accurate. Perceived weaknesses in reporting, controls, or consistency thereof often lead to extended diligence periods and reduced buyer confidence. When financial reporting is clean, consistent, and reflective of the true earnings power of the business, confidence increases and valuation typically follows.
While audited financial statements are not common for smaller companies, they become more relevant and needed as business size increases. For companies without audited financial statements, a quality of earnings (QofE) report can also be valuable. A QofE provides an independent view of the company’s true earnings power by adjusting for anomalies and nonrecurring items, reducing uncertainty among potential buyers when evaluating the earning power of the company. Internal systems and controls matter as well. Buyers place a premium on accurate monthly reporting, clear visibility into working capital, and dependable accounts receivable and accounts payable and days sales outstanding records and similar reports. Strong financial leadership also plays a meaningful role in presenting the business as organized, well-managed, and ready for diligence.
Develop a Compelling Strategic Narrative
Define the Company’s Strategic Positioning and Future Growth Potential
A successful sale hinges on more than numbers. Buyers are investing in the future of the company, which means they want to understand what drives growth, what makes the business defensible, and where opportunities lie. A strong narrative highlights strengths such as key customer relationships, market position, and leadership depth, while also proactively addressing potential concerns like customer concentration or key person risk. When owners shape the story with intention, buyers gain confidence in the company’s durability and upside.
Depending on the circumstances, this also gives owner(s) a chance to develop a detailed succession plan that supports their goals. For example, if the seller’s goal is to step away from the business immediately after a sale, then the remaining executive and management teams should be informed and properly trained to continue operating the business as is. If the owner(s) have already stepped away from day-to-day operations, ensuring that the current management team stays in place after the sale becomes critical.
Managing Client and Vendor Relationships
Stabilize Critical External Relationships to Support a Smooth Transition
A company’s relationships with customers, suppliers, lenders, insurers, and other key parties play a critical role in maintaining operational continuity during a sale. Some of these parties may have change-of-ownership clauses, financial covenants, or minimum working capital requirements that may be triggered in a transaction. Identifying these issues early allows owners to engage the necessary parties proactively and prevent disruptions that could affect the business or the closing timeline. Similarly, there are often negotiations regarding which customers the buyer can speak to prior to closing and when, as well as who needs to be notified at all. From a seller’s perspective, thinking through this in advance of starting the sale process is critical.
Transparent planning around key relationships also reassures buyers that the business can transition smoothly without jeopardizing revenue, supply chains, or credit facilities. Addressing these dependencies well in advance supports a more confident buyer base and reduces the risk of delays or renegotiations late in the process.
Tighten Up Legal and Operational Basics
Reinforce Legal and Operational Foundations Ahead of Diligence
The legal and operational foundation of the business also deserves attention well before a sale. Buyers will eventually review contracts, corporate governance materials, intellectual property, and other critical documents. Cleaning up inconsistencies or outdated agreements ahead of time can prevent unnecessary delays and reduce the risk of last-minute surprises. Demonstrating good governance and operational discipline reassures buyers that the business is well-run and capable of scaling under new ownership.
Prepare Your Team for the Process
Prepare Internal Leadership for Participation in a Confidential Sale Process
Preparing the internal team is another essential element. Key leaders need to be aligned on the decision to pursue a sale, understand the expected timeline, and be ready to participate in management meetings with potential buyers. Additionally, businesses that depend heavily on the owner can raise concerns about sustainability and subsequently lower value. Establishing clear roles and strengthening the management structure helps ensure continuity and gives buyers confidence in the organization’s long-term trajectory.
With this in mind, maintaining confidentiality throughout the sale process is vital to protecting relationships with employees, customers, and suppliers. Preparing for a sale inevitably touches sensitive information and protecting confidentiality throughout the process is essential to maintaining employee morale and safeguarding customer and supplier relationships. Clear internal communication helps prevent disruptions and keeps the business running smoothly.
Why Choosing the Right Advisor Matters
It is always easier to sell a house that has been properly maintained over the years and preparing for a sale in a deliberate manner over time may help ease the burdens of selling a business. Working with an experienced advisor early in the process increases deal readiness, expands strategic options, and ultimately strengthens the likelihood of achieving your best outcome.
For over 50 years, Porter White’s M&A team has helped business owners navigate the complexities of the deal process by providing structure, market knowledge, and disciplined execution to the process to facilitate value-maximizing transactions that align with their long-term objectives. If you are interested in selling your business, acquiring a business, or learning more about what your business is worth, please contact Michael Stone, Zac Venos or visit us online to learn more.
