23 projects to prep your business for sale

You've decided the time is right to sell your business.

You've considered the pros and cons of selling vs continuing to run the business, including personal, business and market factors.

You are on the same page with your partners and co-founders.

This is not a panic sale – you have some time to get organised and prepared.

Of course, you want to get the best valuation from an aligned buyer, and you want the sale to run smoothly.

The main question on your mind will be:

The first and most important project – keep growing the business. The performance of the business is key, and trumps all other factors. You should keep spending over 90% of your energy on growth, as if you weren't even considering a sale.

But... there are some other side projects that you need to start working on in parallel, as you prepare your business for sale.

Put yourself in the shoes of the buyer. What will they want to see when they are getting to know the business? What might get them (or their lawyers and advisors) stressed?

By analogy, think about what you would do before selling your house. You would re-paint the front door, mow the lawns, fix the leaky taps, get the safety certificate for the boiler that's overdue... It's similar for your business.

By getting prepared, you will show off the business in the best possible light to sellers. This will:

• Attract more buyers, creating some competitive tension
• Maximise the valuation
• Reduce risks of the deal stalling in due diligence
• Speed up the sale process and reduce advisor costs.

In the language of the M&A industry, this is called 'seller preparedness'.

So specifically, what do you need to do to become a well-prepared seller?

We will lay out a menu of 23 projects you could consider, based on our experience of working with sellers to get them prepared for a sale. Some will apply to your business, others might not.

Then we'll share some tips for how to organise yourself to get these done without interrupting the business.

All of these projects should benefit the business, whether or not you end up selling. They are mostly good housekeeping... projects which you know about but have delayed or not prioritised as you have focused on growth.

Let's go.

👉 Finances

1) Clean up the books

Impact: High

Buyers will deep dive into your books as one of the first steps in their review of the business, usually supported by a firm of accountants or financial auditors.

You don't want them to report obvious red flags to the buyer in the first few days of their review.

You need to show clean, consistent and well-prepared accounts for the last five years.

For example, these should be prepared using the correct accounting treatment for your jurisdiction – extra scrutiny will be given to how you recognise revenue in your books.

2) Get regular management accounts

Impact: Medium

As you go through the sale, the buyer will ask you for regular updates on your financial performance.

That means you need to prepare proper month-end accounts quickly after each month closes, and share these with the buyer within a few days. You should also have up-to-date management accounts for the current financial year.

You might not have prioritised this process, and only prepare full accounts after the end of the year. That can problematic, and makes you look like you don't have a good handle on your numbers.

If you're unsure of where you stand, or you're worried that you've taken some shortcuts in the past, hiring a firm of accountants yourself to do a review might be a helpful process.

3) Pay down any debts, if you can

Impact: Low

Having some debt in the business is not necessarily a bad thing. But if you plan to pay down debts in the future, it could be helpful to get it done sooner.

This is especially true if the debt is expensive, or structured unusually, which could spook a buyer (like some funky asset finance or invoice factoring deals).

4) Improve your cash flow

Impact: Medium

It's always helpful to improve cash flow, if you can.

A buyer will always look to see whether you get paid on time by your customers, and what payment terms you've got with your bigger suppliers.

Consider running a project to improve your cash collection from customers, reducing the balance of accounts receivable.

In most businesses, you can find some improvement from tightening up the processes around unpaid invoices and how those are escalated to management. You might also want to renegotiate payment terms with key customers and suppliers, if you feel you have the leverage and it's appropriate to do so.

There's a secondary benefit here. Most businesses are bought on a Debt Free Cash Free basis. The company is valued without considering its debt and cash, then the value of any cash held at closing is added to the purchase price (and debt subtracted). Reducing accounts receivable and increasing the cash balance at closing means that value will flow into your pocket as a seller.

5) Improve the 'quality' of revenue

Impact: High

Your buyer will closely assess whether your revenue growth is sustainable, and what risks are attached. That's often done through a Quality of Earnings (QoE) report, prepared by an external firm.

Of course, you want your revenue to look like it will continue growing well into the future, with a strong and stable client base.

There are two main projects you can consider here, neither of which are easy or quick to implement.

Firstly, you want to avoid massive client concentration, where a large proportion of your sales come from just one or two clients. The tipping point for this being flagged is usually around 30%. If that's the case, a business development push to get new clients might help. Not easy – but worth prioritising.

Secondly, try to get some element of recurring revenue. Businesses with recurring revenue get much higher multiples, because the buyer can better forecast future performance.

This isn't a quick fix! If you can think of ways of moving some of your customers onto monthly plans or retainers, that will help. Or could you launch a side product which suits a recurring model? Only do this if it's the right thing for your customers – pushing new pricing plans or products onto them to chase recurring revenue may be a move you regret.

Both of these are hard to do, and may not be possible at all. If that's the case, don't waste your effort here and focus on other areas. Having some client concentration or no recurring revenue will not be a total deal-breaker, especially if that's common in your industry (so your buyer will be expecting it).

6) Lock in terms with key suppliers

Impact: Low

If your business is reliant on a few key suppliers, you might want to try and lock in terms with them before you start a sale process.

A buyer would be nervous about those suppliers changing pricing or payment terms, and giving them certainty over that can be a real help.

7) Delay any big expenditures

Impact: Low

This is a controversial one.

Imagine you have a new growth initiative, which will cost the business upfront but hopefully pay off with increased profits in the longer term.

One approach is this: don’t weigh down the P&L with those extra costs ahead of the sale. That will reduce the EBITDA in the current period, reducing your valuation. So hold off on those projects until the sale is done.

You need to be careful here. You don't want to do something which helps the sale but harms the business longer term – as a sale is far from certain. If that decision could limit growth, you might regret it.

You can always deal with these costs through an adjustment (see below).

8) Do a cost spring clean

Impact: Low

Every business can benefit from an occasional spring clean of costs.

You are likely to find software subscriptions which you no longer use or are paying for too many seats, for example.

Now is a great time to see if you can squeeze out some of this waste – all of that saving will go to your bottom line.

9) Document any unusual items or adjustments

Impact: Medium

During the negotiations, you are likely to use a valuation multiple to agree on the purchase price. You choose a financial metric of the company, and scale this up by a 'multiple' to give you the price for the exit. Read more here if you're new to this.

That metric is often EBITDA, which can be 'adjusted' to take into account unusual or one-off items which mask the the true profitability of the business.

Typically that's things like:

• Unusual, non-recurring costs, like litigation fees or restructuring expenses.
• Excluding irregular profits or losses not related to core operations.
• Adjusting to reflect transactions with the owners or directors, such as personal expenses run through the business – sometimes on the fringes of what's technically allowed.

The last one is most important here.

It's common for owners to do this, but these costs drag the profitability down and make the business look far less impressive. You can have them adjusted out of the EBITDA... but only if you have a good list of what these items are.

Start keeping a private list of these items, so you're ready to flag them during the negotiations.

10) Apply for any tax credits

Impact: Low

Are there any tax credits for previous years that you could have applied for? In the UK, the classic example is R&D tax credits, where you get rebates on qualifying research spend.

Putting that money into the company bank account before you sell is a no-brainer.

11) Think twice about dividends

Impact: Medium

If you regularly take dividends (or other distributions) from the company, you might want to consider if it's best to continue, increase or reduce those in the run up to sale.

This is very context specific – and depends on the business' cash position, it's tax position and your personal tax status. This is useful one to take some advice on.

👉 Documentation

12) Document your handshake deals

Impact: Medium

Most businesses have some arrangements which aren't fully or properly documented.

That might be: renting an office from a friend without a formal lease, stock options offered to staff without completing all the paperwork, or contractors working without formal consulting agreements.

These are common and not really problematic, but they will be flagged by eager lawyers in due diligence, and it makes you look a little sloppy.

Getting that all these properly written down and signed will remove some headaches later.

13) Start a due diligence file

Impact: Medium

As soon as negotiations get serious, conversation will turn to due diligence.

That's the process where you open up your files to the buyer, so they can run a comprehensive appraisal on you.

You will be given a document request list, and asked to pull hundreds of files into a secure storage folder called a Data Room.

If you're not prepared, that can take a few months to get ready. That kills the momentum of the deal and can itself be a red flag for a buyer.

Having this all in place ahead of time will make you look organised and diligent, and speed up their due diligence.

This doesn't need to be complex. Start an internal folder, with sub-folders for thinks like:

• Company documents – certificates of incorporation, board minutes, articles, shareholder details
• Finances – annual accounts, management accounts, tax filings, loans, funding documents
• Commercial – sales plans, operational plans, marketing strategies
• Property – leases or ownership documents
• Employees – org chart, employment contracts
• Contracts – key customer and supplier contracts
• IT – architecture overview, hardware and software inventory
• Legal – any other contracts, IP registrations, litigation details, environmental reports, insurance, policies.

You probably have most of this already, spread across different files. As soon as you come across documents in these areas, drop them into the folder.

14) Write up your key processes

Impact: High

This is often overlooked.

Your buyer will ask to see a huge range of handbooks, policies and process documentation for your business processes in their DD review.

Common ones are:

• operational processes like customer support and client onboarding
• financial processes like billing and chasing accounts receivable
• internal policies like staff handbooks, IT security etc.

Most companies have some of these, but rarely all. You're probably focused on growing the business rather than creating thousands of pages of process documentation!

Big companies with big legal teams don't always appreciate this, and will write you off as disorganised or a risky investment because you lack the right documents.

It takes some time to get this all together, so it helps to start early.

This process can often be split up and delegated down to your management team, so it doesn't impact you as CEO too heavily.

A tip – chatGPT can write amazingly detailed policies for areas where you just need some paperwork for the due diligence!

👉 Strategy

15) Minimise owner dependence

Impact: High

It's common for owners to keep a tight hold of certain processes, even as the business scales. Sales is the most common.

The buyer will be worried if the business is still fully reliant on you in some key areas. Who will take over if / when you leave? Will you get lazy after banking a big cheque? Or will they have to hire a range of expensive replacements?

That will make them nervous and they will factor that risk into the price. And they will try to lock you down after the sale, by tying up your payment in an Earnout.

Think about the areas that you still have control over, and whether any of these can be delegated out to your management team. Or maybe you have a gap in your senior team that you've needed to fill for a while?

16) Write down your business plan

Impact: High

Your buyer wants to understand where you think the business is going and what your plans are for the next year.

They will quiz you on this early in the process, and ask to see documents that support your arguments.

So having a written business plan can be really important.

You might write an annual business plan or other strategy document for your Board and exec team. If so, that's a good start.

If you don't have one, or the latest one is out of date, it would be useful to get some thoughts down on paper.

It should answer questions like:

• How will we grow the business?
• How much do we hope to grow by?
• What new products / services will we launch?
• What are our plans on pricing?
• What is the competition doing?
• How will our marketing plans support growth?
• What is our technology roadmap?
• Is any major capex or expenditure planned?
• What key hires do we need to make?

Don't worry about making it perfectly formal and polished. Your M&A Advisor (if you have one) can help you shape this up into a more formal document.

At least, having thought these areas through and discussed them with your team will make you more prepared to answer a buyer's questions in the sale process.

17) Prepare your financial forecasts

Impact: Medium

The buyer will also want to see your financial forecasts.

Having a set up of up-to-date financial forecasts for the coming 2-3 years will really help you through the negotiations.

You can do this as part of the business plan process.

18) Validate new business ideas

Impact: Medium

This one is easily missed.

Your business plan might include plans to grow into new markets or launch new products in the next few years. You want the buyer to take these seriously, and give them full value when considering how much to offer for the business.

The challenge is that these are often just ideas, with any concrete validation that they might succeed. Then buyers tend to be sceptical – they will say 'we aren't convinced about that project, so we've ignored that revenue in our valuation'.

To overcome this, you can run some simple projects to validate these ideas. That might be testing some ad campaigns into the new market, or doing some interviews with target customers. This data can go straight into your business plan and help give your plans more credibility.

19) Fluff up the brand

Impact: Low

Buyers will be checking you out online, way before you know about it.

Having your brand stand out can help to get them excited about you from their first interaction.

If you've been considering a website refresh, now might be a good time to press the button. You might also want to make sure the exec team have professional Linkedin bios, and that you personally are sharing some content on there to keep things looking fresh.

👉 Legal

20) Run a regulation audit

Impact: Medium

Are there any bits of regulation that you haven't fully complied with?

The classic example is data protection, where the GDPR rules in Europe have become very strict, and you need to think carefully about consents to hold and store user data, cookie policies and so forth.

There might be other examples in your industry too.

You might things these are minor, but the buyer's lawyers will love to make a fuss about any potential risks.

21) Protect your IP

Impact: Low

You may not have found time to register or protect some of your IP. Now is a good time to get that box ticked.

The easiest is to register trademarks for you name and logo. You can hire a firm to take care of it, without needing much input from you.

A bigger project is to apply for patent protection. That would only apply if you have some deep tech which could be patented.

22) Settle any legal disputes

Impact: Medium

Do have you any disputes hanging over the business? These will come out in due diligence, and might freak out a buyer.

Common examples might be:

• an unhappy former employee threatening an unfair dismissal claim
• a fight over the value of an invoice with a supplier
• someone claiming that you've breached copyright by using their content.

Closing off these issues before the deal kicks off can be really helpful, even if they are only small. If they can't be resolved, that won't be a deal-breaker – you will just have to share details with the buyer in due diligence.

23) Review your cybersecurity

Impact: Medium

If your business relies on tech, you will go through a fairly intensive technical due diligence process. That usually involves a cybersecurity review, penetration test and review of the code base to check for vulnerabilities.

It's common for growing businesses to focus on growth and user features rather than some of these areas. Most CTOs will have a long list of security issues they want to address but haven't fixed yet.

The challenge is that these issues take a long time to fix, and can absorb big chunks of valuable developer time. So you will need to start thinking about these early, and at least closing off the most concerning issues.

If you're not sure where you stand on this, you can hire a firm of cybersecurity auditors to do a quick review of the tech and guide you on which areas a buyer would be concerned about.

👉 Getting Organised

This looks like an overwhelming amount of work, especially if you are a busy CEO already working at max capacity with ambitious growth targets.

So how can you make this happen, whilst still focusing on growing the business?

Here's an easy framework to get started.

Step 1: List out your projects
Not all of these projects will apply to you. Hopefully many don't at all, so you are just left with less than 10 that you want to work on. There might also be others which aren't listed above but which you consider important.

If you are really stuck, an M&A advisor can help you by running a mini-audit of the business and guiding you on areas you need to focus on. That's usually surprisingly inexpensive, and helps you build a relationship with an advisor.

Step 2: Rank them
Critically, we suggest working on only one of these projects at a time.

The common mistake is to start 10 in parallel, totally drown yourself in work and none of them actually get done.

Doing one at once limits the distraction risk, and means you can get the first ticked off soon before moving onto the next.

Think about which of your projects needs to start first. You want to consider their impact on a sale process, but also which has the longest lead time and needs to be started first.

Step 3: Scope the first one
Think of these as mini-consulting projects. Each project needs a scope, a deadline and a team to deliver it.

Your role as the CEO is to scope these out and hire the team to get them done. That might be hiring an external advisor, or pulling in team members as you need them. You don't need to tell them this is prep for a sale – these are all good general housekeeping projects.

You can then set that team up, and help them to get the project boxed off before moving onto the next.

Get these done, and your business will look appealing to potential buyers, help you get a higher price, fly quickly through the DD and avoid any hiccups during the negotiations.

Good luck!