The Seller Readiness Checklist

The principle: the best time to start preparing is two years before you want to sell. The second best time is now.

You do not have to be perfect. Buyers know they are buying a business, not a spreadsheet. But every item you complete lowers the buyer's risk, which supports your price and reduces the chance of a renegotiation or a failed deal in diligence.

24 to 18 months out

• Get a preliminary valuationKnow your baseline earnings and the range businesses like yours trade at. It tells you whether your timeline makes sense.
• Decide between an asset sale and a stock saleTalk to your CPA now. Deal structure has large tax consequences and takes time to plan around.
• Clean up ownershipResolve shareholder disputes, minority interests and informal equity promises before you go to market.
• Review key contracts for assignabilityCustomer contracts, leases and vendor agreements: do any require consent to assign? Deals stall here more often than owners expect.
• Start reducing owner dependencyWrite down what you do each week and who could take it over. Buyers pay more for a business that runs without its founder.
• Hire or promote a strong number twoA general manager or operations lead who can run the business day to day during diligence and after the transition.
• Start financial cleanupTake personal expenses out of the business, normalize owner compensation and reconcile every account. Three clean years is the standard buyers hope for.

18 to 12 months out

• Compile three years of tax returnsFiled, reconciled to your P&L, with no open balances owed to the IRS or the state.
• Prepare a normalized earnings scheduleDocument every add-back with evidence. It is the first thing a buyer challenges in diligence.
• Document your recurring revenueGather contracts, renewal history and churn. Predictable revenue is one of the strongest drivers of price.
• Look hard at customer concentrationIf one customer is a large share of revenue, make a plan to diversify or to show the relationship is secure.
• Review employee agreementsKey people should have written agreements. Identify flight risks and address them now.
• Put intellectual property in the company nameTrademarks, domains and proprietary systems should belong to the business, not to you personally.
• Start writing the company storyHistory, team, why customers choose you, where growth comes from next. Refine it over the coming months.

12 to 6 months out

• Engage an M&A advisorEarly enough that your advisor can help position the business, not only run the sale.
• Consider a sell-side Quality of Earnings reviewBuyers will run one anyway. Seeing it first helps you avoid a retrade late in the deal.
• Set up your data roomFinancials, legal documents, customer and employee information, organized before anyone asks for them.
• Stress-test your financialsWalk through your P&L the way a buyer's accountant will. Find and explain anything unusual before they do.
• Prepare your leadership teamBuyers will want to meet them. Brief the right people without alerting the whole company too early.
• Understand what you will be asked to representKnow your exposure under the purchase agreement and whether representations and warranties insurance makes sense for your deal.

The active sale, about 6 months

• Finalize the confidential information memorandumThe document that introduces your business to qualified buyers. Accurate, clear and honest about the story.
• Sign NDAs before sharing anythingNo financials or names go out until a buyer has signed and been vetted for fit and capacity to close.
• Keep buyer meetings to serious partiesA focused list of qualified buyers protects your time and your confidentiality.
• Negotiate the letter of intentPrice, structure, exclusivity and key terms. Be clear on what is negotiable before you sign.
• Respond to diligence quickly and completelySlow or inconsistent answers make buyers nervous. This is where most deals are won or lost.
• Negotiate the purchase agreementIndemnification, escrow, earnout mechanics and survival periods are real money. Use an experienced M&A attorney.
• Plan the transitionTransition services, any seller note, and how and when customers and employees hear the news.