Preparing your business for sale

What preparation achieves

A buyer is judging two things: whether the profit will last and how risky the handover is. Anything uncertain tends to show up in the price, in deferred or contingent consideration, in tougher warranties, in conditions to completion, or in a decision to walk away.

Good preparation can lift the EBITDA a buyer is willing to accept and reduce the discounts they apply for risk. There is no universal rule for how much. It depends on which problem you fix, how long it takes to show results and how each buyer values it.

The aim is for the business, the paperwork and the process to tell the same story.

1. Reduce your own importance

List the decisions, customer relationships and know-how that sit only with you. A good test is to imagine you were away for three months: what would stop?

Buyers price that risk through a longer handover, an earn-out, extra warranties or a more cautious valuation.

What to do, in order:

• Appoint an operations director or general manager other than you, with real authority.
• Bring other senior people into the relationships with key customers and suppliers.
• Write down how you price, quote, set commercial terms and make the big calls.
• Delegate authority and signing powers with clear limits, controls and accountability.

Typical timescale: 12 to 24 months where you need to build a team and hand over relationships. Effect: lower handover risk, a shorter tie-in for you and a wider pool of buyers.

2. Put recurring revenue on paper

A track record of repeat business is useful evidence, but a written contract tells a buyer much more about term, pricing, renewal and termination.

• Put verbal arrangements into writing, even if the terms stay the same.
• Turn services that recur in practice into maintenance or service agreements that renew automatically.
• Find any change of control clauses and plan how and when to seek consent without breaking confidentiality.
• Measure, and be able to prove, your renewal rate over the last three years.

Typical timescale: 6 to 18 months. Effect: more visible revenue, provided the contracts are profitable, renewable and assignable.

3. Reduce customer concentration

Reducing concentration usually means winning other customers, so it takes time. Paperwork alone will not solve it.

Where one customer is a large share of revenue, a buyer may reflect that in the multiple, a condition to completion, an earn-out or a specific warranty. What counts as "too large" depends on the stability of the relationship, the contract, the margin and how hard the customer would be to replace.

While you dilute it, some steps reduce the perceived risk: a signed multi-year contract, a relationship spread across several people on both sides, and evidence that the margin on that customer is no worse than on the rest.

Typical timescale: 18 to 36 months if the only route is growth elsewhere. Effect: less exposure to one relationship and offers with less of the price at risk.

4. Improve your financial information

Consistent numbers reduce uncertainty and make it easier for a buyer to confirm the assumptions behind their valuation.

• Monthly management accounts with a profit and loss account and balance sheet, not just the annual statutory accounts.
• An accounting system that produces the figures without manual rebuilding in spreadsheets.
• Margins by product line, by customer and by project.
• A reconciliation between the management accounts, the statutory accounts and the bank, with differences explained.
• Where the size of the company justifies it, consider a voluntary audit or at least an accountant's review. From April 2025 a company can generally claim the small company audit exemption up to £15m turnover and £7.5m balance sheet total, so many owner-managed businesses have never been audited.

The main payoff comes in due diligence: fewer contradictory answers, faster reconciliation and more credible forecasts. How long due diligence takes will still depend on its scope and what it finds.

Typical timescale: 6 to 12 months to embed reliable monthly closes. Effect: less uncertainty and less risk of the price being renegotiated.

5. Tidy up the balance sheet and the company

• Identify assets the business does not need, such as property, cars or investments, and decide whether they stay, are extracted before the sale or are sold separately. Work out the tax, costs and consents first.
• Clear any HMRC Time to Pay arrangements and overdue PAYE, VAT or corporation tax.
• Review disputes and decide whether to settle them, provide for them or document how they will be handled.
• Check employment status: written contracts, holiday pay, pension auto-enrolment, and any long-term contractors who might be employees for tax purposes under IR35.
• Check that licences, permits and accreditations are current and survive a change of ownership.
• Make sure trade marks, domain names and software are owned by the company and not by you personally.
• Bring the statutory books up to date: register of members, people with significant control, filings at Companies House.

Typical timescale: 6 to 24 months depending on the item. Effect: a clearer perimeter and fewer price adjustments, specific indemnities or conditions.

6. Look after the last two years of results

A buyer reviews several years and pays particular attention to the most recent period. A dip raises doubts about sustainable profit.

That does not mean dressing up the numbers or putting off investment the business needs. It means explaining how results have moved, separating out one-off items and choosing a moment when you have closed, defensible figures. Deferring essential spend can damage the business and simply hands a cost to the buyer, who will spot it.

It also means protecting the margin. Growing revenue on a shrinking margin reads as a loss of pricing power, and buyers penalise it more than slower growth at a steady margin.

7. Build the file before anyone asks for it

This comes last, in the three months before you go to market. The minimum list:

• Statutory accounts for the last three years and up-to-date management accounts.
• Normalised EBITDA for the same three years, with evidence for every adjustment.
• Contracts with major customers and suppliers.
• Articles of association, shareholders' agreement, statutory registers and board minutes.
• Employee list with contracts, salaries, start dates and pension arrangements.
• Corporation tax returns, VAT returns and any HMRC correspondence or enquiries.
• Leases, insurance policies and intellectual property registrations.
• Details of all borrowing, with repayment schedules and any personal guarantees.

Having the documents reviewed before the first approach lets you control versions, catch inconsistencies and release information in stages without improvising answers. Our checklist of documents for selling a business goes into more detail.

What order to do it in

The final order depends on your starting point. Deal first with the risks that most affect how transferable the business is, how good the profit is and whether a buyer can verify it.

Frequently asked questions