How to Prepare Your Business for Sale: A 12 to 36 Month Plan

How do you prepare a business for sale, step by step?

Preparing a business for sale is a project with a sequence. The order matters, because early steps change what later steps find. Here is the sequence that works for most owner-run private businesses, whether you sell to a competitor, private equity, your managers or your employees.

• 1. Set your goals and your number: the cash you need in hand after tax and fees.
• 2. Work backwards to the price that number needs: (number / (1 - tax rate) + debt) / (1 - fee rate), using your advisers' estimates.
• 3. Rebuild earnings: list every add-back and deduction and mark each one documented, needing evidence or rejected.
• 4. Get a value range: adjusted EBITDA (or SDE) times a multiple range from your accountant, a valuer or experienced brokers.
• 5. Score the value drivers 0 to 4 with people who will disagree with you, and rank gaps by gap times impact.
• 6. Turn the gaps into dated, owned actions for 12 to 36 months, with a roadmap and a RACI.
• 7. Fix the books: monthly accrual accounts, revenue by line and customer, working capital understood.
• 8. Build the data room index and an evidence register for every number you will use.
• 9. Choose a broker or M&A adviser, lawyer, accountant and tax adviser on experience and terms.
• 10. Run a process, compare offers like for like, answer diligence in writing and plan the announcement and handover.

How long does it take to prepare a business for sale?

The changes buyers pay most for take the longest. Moving decisions and relationships away from the owner, building a second leader and reducing reliance on one customer usually take more than a year. Tidying records, building a data room and evidencing add-backs take months. The sale process itself, from first approach to completion, often adds several months more.

That is why a 12 to 36 month horizon is sensible. The first three months set the foundations: goals, number, baseline scores, the exit team and a confidentiality protocol. The long middle phase builds value. The last year prepares the documents and runs the sale. If your business is already in good order, you can compress the middle; if it depends heavily on you, give it longer. The US Small Business Administration's guide to selling a business also stresses getting a valuation and professional help before marketing the business.

How is a small business valued: SDE or EBITDA?

Most small and mid-size private businesses are valued as a measure of earnings times a multiple. EBITDA is earnings before interest, tax, depreciation and amortisation. Adjusted EBITDA removes items a new owner would not carry: owner pay above a market manager's salary, personal costs, one-off items, family on payroll who do not work and above-market rent to the owner. Seller's discretionary earnings (SDE) adds back one owner's full pay and is common for smaller, owner-operated firms.

The multiple is the buyer's view of risk and growth. It is not a fixed number for your sector: two businesses with the same earnings can sell at very different multiples. Ask your adviser for a range and treat it as a discussion figure. Here is a worked example from a fictional 35-person HVAC services company with a multiple range set only for illustration.

What is the value gap, and how do you close it?

The value gap is the distance between the price your number needs and what the business is worth today. In the example, the owner needed $3.6 million in hand. With a planning tax estimate of 22%, fees of 6% and $420,000 of debt repaid at completion, the price needed was about $5.36 million. The mid value was $4.63 million, so the gap was about $724,000.

There are two levers. Grow earnings: here, adjusted EBITDA would need to rise by about $170,000 at the mid multiple. Or reduce risk so buyers pay more per dollar of earnings: at today's earnings, the multiple would need to be about 4.9. Most plans pull both. Score fourteen drivers from 0 (not in place) to 4 (tested by an outsider), multiply each gap by its impact, and work on the top of the list first. Owner dependence, management depth, customer concentration, financial records and quality of earnings readiness usually lead.

How do you choose a business broker or M&A adviser?

Interview at least three and ask each the same questions: which deals like yours they have closed in the last three years, who will do the work day to day, how they find and screen buyers, what they think the business is worth and why, how long they expect the process to take and how they protect confidentiality. Ask for references and choose which ones to call yourself, including one deal that was difficult.

Then read the terms with your lawyer. Fees often combine a retainer or monthly fee with a success fee calculated on some measure of the price. Check what the success fee is calculated on (headline price, cash at completion, or deferred amounts as they are paid), the length of any exclusivity, and the tail period during which the adviser still earns a fee if a buyer they introduced completes after the engagement ends. Be wary of the adviser who quotes the highest value: a pitch built to win the mandate can lead to a failed process and a stale business on the market.

Your lawyer and accountant matter as much as the broker. Ask whether they have handled sales of private businesses recently, how they estimate fees and who on their team will do the work.

What do buyers check in due diligence?

After a letter of intent, the buyer tests financial, tax, legal, commercial, people, operations, IT and data, property and insurance matters. They want monthly management accounts on an accrual basis, revenue by line and customer, working capital history, contracts, licences, employment terms and any claims. Many commission a quality of earnings review, an accountant's test of the earnings the price is based on.

Two habits make diligence faster. Keep an evidence register: every number in your teaser, information memorandum or presentation has a source document and a review date. And build the data room in stages: nothing confidential before an NDA, nothing sensitive before a letter of intent, and named staff pay or customer prices only through a clean team on your lawyer's advice. Privacy law applies to a data room as it does to any customer database.

How do you compare offers with earn-outs, escrow and seller notes?

Split every headline price into cash at completion, escrow or retention, seller note, earn-out and rollover equity. Then weight each deferred amount by your confidence that it will be paid and discount it for the years until it arrives. In the example, three letters of intent arrived. The highest headline was not the most valuable once risk and time were counted.

• Earn-outs: ask for a sliding scale, a metric you can influence and the right to see the figures. A cliff at 100% pays nothing at 99%.
• Seller notes: ask about security, ranking behind the buyer's lender and what happens on default.
• Rollover: ask for information rights and a route to sell.
• Walk the chosen offer down to cash in your hand after debt, fees, working capital and tax.

Do the rules differ in the US, UK, Canada, Australia and New Zealand?

The method is the same everywhere; the rules that decide the after-tax result and the obligations to employees are not. In the US, both buyer and seller in an asset sale report the price allocation to the IRS on Form 8594. In the UK, Business Asset Disposal Relief can apply to qualifying disposals, relief on sales to employee ownership trusts was reduced from 26 November 2025, and TUPE protects employees where a business transfer changes the employer. Canada has a lifetime capital gains exemption for qualified small business corporation shares. Australia has four small business CGT concessions with eligibility tests. New Zealand's Inland Revenue expects buyer and seller to allocate the price across asset classes.

Outreach is regulated too: the US CAN-SPAM Act sets rules for commercial email, and Canada, the UK, the EU, Australia and New Zealand have their own consent-based or opt-out regimes. Rates, limits and dates change at budgets, so check the official page and your adviser before you rely on any specific.

What are the most common mistakes when selling a business?

• Starting with the price you want instead of the number you need.
• Selling when tired or ill, so urgency weakens your position.
• Guessing add-backs that a buyer's accountant will strip out.
• Keeping books that only satisfy the tax return.
• Telling too many people too early.
• Choosing the adviser who quotes the highest value rather than the most experienced one.
• Comparing offers on headline price.
• Agreeing long, open exclusivity.
• Hiding a problem instead of disclosing it.
• Letting the business slip while the owner runs the sale.
• Not planning life after the transition.

Where can I get a structured plan and the templates?

The Exit-Ready Kit from Bodhih Training turns this method into working files: a workbook with a 0-4 self-assessment, valuation and value gap, data room index, evidence register, RACI and roadmap; a calculator for the business case and offers; forms, templates, cheat sheets and a dated country sheet. If you want to check your own financial and negotiation judgement first, AssessAll's Negotiation & Value Creation assessment is a useful starting point. And if the plan stalls, Jobulary's guide to the fresh-start effect explains how to reset a goal at a natural milestone.