Why Preparation Makes or Breaks a Deal: A Comprehensive Guide to Selling Your Business
- Katie Tibbetts
- Jun 2
- 3 min read
Updated: Jun 16
Selling a business isn’t just about listing it and hoping for the best offer. It’s a process that requires thorough preparation. Whether you're exiting due to retirement, market timing, or new opportunities, getting your house in order increases your valuation, shortens timelines, and reduces the risk of deal failure.
In this guide, we’ll walk you through the five essential steps to prepare your business for sale. This preparation ensures you present a strong, credible, and attractive proposition to potential buyers.
1. Clean Up Your Financials
Why It Matters
Buyers need to trust the numbers before they’ll write a cheque. Financial due diligence is typically the first and most scrutinized step in the process.
What to Do
Reconcile all statements for the past 2–3 years.
Normalize earnings. Adjust for one-off expenses or owner compensation.
Prepare monthly financials, including P&L, balance sheet, and cash flow statements.
Ensure tax filings are accurate and up-to-date.
Get a third-party accountant to review or audit your books.
Tip: If your numbers are messy, consider delaying the sale until they’re cleaned up.
2. Get Your Team and Systems Ready
Why It Matters
Buyers want to know that the business can operate without you. A well-documented system with a self-sufficient team boosts the perceived value and scalability of your business.
Key Steps
Document key processes and Standard Operating Procedures (SOPs).
Clarify job roles and responsibilities.
Ensure employment contracts and benefits are formalized.
Identify and retain key personnel with retention plans.
Review your technology stack. Ensure your systems are secure, scalable, and current.
3. Tidy Up Legal and Compliance Issues
Why It Matters
Legal red flags can kill a deal late in the game. Cleaning up loose ends now avoids panic during diligence.
What to Review
Corporate structure and shareholder agreements.
IP ownership and trademark filings.
Key contracts related to suppliers, customers, and partners.
Employment agreements and HR policies.
Any pending or historical litigation or disputes.
Pro Tip: Involve your lawyer early to get ahead of potential deal breakers.
4. Build a Professional Data Room
Why It Matters
A virtual data room is where due diligence happens. Having an organized, secure, and professional VDR shows buyers you’re serious and reduces back-and-forth.
What to Include
Financials for the past three years.
Legal documents such as corporate agreements and contracts.
HR information including team structure and contracts.
Operations and SOPs.
Technology architecture and licenses.
Platform Suggestions: Check out Dropbox, Google Drive, or purpose-built VDRs like DealRoom or Firmex.
5. Set Expectations for the Due Diligence Process
Why It Matters
Due diligence is intense and often where deals stall or fall apart. Being mentally and operationally ready for this phase can make or break your exit.
Expect
Multiple document requests over several weeks.
Invasive questions about your finances, personnel, and contracts.
Requests for customer interviews, system demonstrations, or facility tours.
Negotiations around indemnities and risk allocation.
Mindset Tip: Transparency and responsiveness build trust.
6. Start Early, Finish Strong
Even if you're 1–2 years away from a sale, now is the time to prepare. By cleaning up your financials, organizing your legal documents, and getting your team and systems ready, you'll be well-positioned to attract the right buyers and close at the right value.
In conclusion, the groundwork you lay today can significantly influence your business's future sale. The effort you put into preparation shows your commitment to potential buyers and can result in a smoother sales process.
Further Reading:
Remember, proper preparation can make the difference between a successful deal and a missed opportunity.
