How do I prepare my business for sale?
Buyers pay for predictability and transferability. Everything in sale prep comes back to one question: can the business keep earning after you leave? The more confidently a buyer can answer yes, the higher your multiple and the smoother due diligence.
Financials come first. Have 2-3 years of clean, accrual-based statements, separate personal expenses from business expenses, and prepare a normalized earnings figure - SDE for smaller owner-operated firms, EBITDA for larger ones - with add-backs you can defend. Sloppy or cash-basis books are the most common reason deals stall or get repriced during diligence.
Then reduce risk. The big value killers are owner dependence (the business can't run without you), customer concentration (one client is a large share of revenue), and lumpy one-off revenue. Building a management layer, diversifying customers, and growing recurring or contracted revenue all push you toward the top of your industry's range.
Finally, get the house in order before buyers look: organized contracts, leases, and licenses; clean corporate records; resolved legal or tax issues; and a realistic valuation so you go to market with the right number. A defensible confidential information memorandum (CIM) then packages all of this for qualified buyers.
Related questions
How far in advance should I prepare to sell my business?
Ideally 1-3 years. The levers that raise value - clean financials, reduced owner dependence, recurring revenue, and a diversified customer base - take time to build and to show a track record.
What hurts business value the most?
Owner dependence, customer concentration, messy or cash-basis financials, declining revenue, and unresolved legal, tax, or lease issues. Each one increases perceived risk and pulls your multiple down.
What financials do buyers want to see?
Typically 2-3 years of clean accrual-based profit-and-loss statements, balance sheets, and tax returns, plus a normalized SDE or EBITDA figure with documented add-backs. Cash-basis books should be converted before going to market.
Should I make improvements before selling?
Focus on changes that reduce buyer risk and are visible in the numbers: building a management team, growing recurring revenue, diversifying customers, and cleaning up the books. Cosmetic upgrades rarely move the multiple.
What is SDE versus EBITDA?
SDE (seller's discretionary earnings) adds the owner's salary and perks back to profit and is used for smaller owner-operated firms. EBITDA is used for larger businesses with a management team. Buyers above roughly $1M of earnings think in EBITDA.
Sources & methodology
- •DealSeam guide: How to Sell a Business
- •DealSeam guide: Business Valuation
- •DealSeam EBITDA Multiples by Industry (/data/ebitda-multiples)
This is general educational information, not legal, tax, or financial advice. Consult a qualified CPA and M&A attorney about your specific situation.
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