24 Months Before You Sell

Start with a valuation you did not pick yourself. Recast the last three years of financials, build the add-back schedule, and price the business against real comparable transactions. The number matters less than the diagnosis underneath it.

Then decide what you actually need. Work backwards from your post-sale life: what you want to live on, your tax exposure, and what the business has to net to get you there. Owners who skip this step frequently reject a fair offer for reasons they cannot articulate, or accept one that does not fund the life they wanted.

Also decide what kind of exit you want. A full sale to a strategic buyer, a partial sale to a private equity group where you stay on, a sale to your management team, or a family transition. Each one attracts a different buyer and needs different preparation.

You cannot improve what you cannot see, and a buyer cannot pay for what you cannot prove. Get monthly financials produced within fifteen days of month end, on a consistent basis, tying to your tax returns.

Add the reporting your industry is judged on. Contractors need a monthly work-in-progress schedule. Service businesses need revenue split by recurring versus one-time. Everyone needs gross margin by revenue line.

Start the add-back schedule now, with documentation for each item as it happens. Reconstructing two years of add-backs from memory during diligence is where credibility goes to die.

This is the work that moves the multiple the most, and the work that takes the longest. The goal is a business that runs a full quarter without you.

Identify every function that runs through you: sales, estimating, pricing, hiring, customer escalations, vendor relationships, financial decisions. Move them one at a time to a named person, then let that person actually make the calls, including a few you would have made differently.

If there is no one to move work to, hire. A general manager hired eighteen months before a sale usually pays for themselves several times over in the purchase price. One hired three months before the sale reads to a buyer as staging.

Write things down. A documented estimating process, a documented sales process, and a documented service workflow are all assets a buyer can see and underwrite.

Buyers pay for revenue that is likely to still be there next year without you.

Every item in this list, left alone, becomes a price reduction or an escrow holdback later.

Review worker classification. If field crews are paid as 1099 contractors but work as employees, fix it now and absorb the cost while it is yours to absorb, not while a buyer is watching.

Confirm licensing is current and held by people who are staying. Confirm municipal withholding has been filed correctly for every jurisdiction your crews worked in. Collect your leases, loan agreements, and top customer contracts and read the assignment clauses.

Get your corporate records in order: entity filings, ownership records, minutes, and any old agreements with former partners. Unclear ownership stops a closing cold.

Tax planning after the letter of intent is signed is mostly damage control. Before it, there are real choices.

Entity structure, the split between asset and stock sale, purchase price allocation across asset classes, the treatment of goodwill, and Ohio's Business Income Deduction all change what you keep. So does the timing of the closing relative to your tax year.

If a trust, a charitable structure, or gifting is part of the plan, those need to be in place well before a sale is in motion. Set up after the deal is visible, they draw scrutiny and often do not achieve the intended result.

Now the materials get built. A blind profile that describes the business without identifying it, a full information memorandum, a clean data room with financials, contracts, equipment lists, org chart, and compliance records.

Build the buyer list before launching: strategic acquirers in your trade, private equity backed platforms, search funds, and qualified individual buyers. Then run them on a schedule so interest arrives at the same time rather than trickling in.

Through all of it, run the business hard. Your numbers during the sale process are the numbers the buyer underwrites. A soft quarter during diligence is the most common reason a price gets reduced at the end.

Two years of this work typically changes three things at once: adjusted earnings go up, the risk discount comes down, and the buyer pool gets bigger. All three push the same direction.

It also changes how the deal feels. Prepared sellers negotiate from a position of choice, with several interested buyers and no urgency. Unprepared sellers negotiate with one buyer who knows it.