Preparing a business for sale: the year that moves the price

Preparing a business for sale starts with financial statements a buyer can rely on. The work that moves the price reduces how much the business depends on you and on its largest customer, and builds revenue that repeats. Each change takes about a year to show in a buyer’s numbers, so start at least twelve months before going to market.

Why a year

A buyer prices the last two or three years of financial statements, and weights the most recent one heaviest. A change made this month appears as part of one year in the statements a buyer sees next year, and as a full year the year after.

So preparation pays, slowly. An owner with two years can do all of what follows, and one year covers most of it. With three months, an owner can fix the statements and go to market on the business as it stands.

First: statements a buyer can rely on

This comes first, because a buyer who doubts the numbers discounts everything else you say. It is also the fastest item on the list.

• Have an accountant prepare financial statements, reviewed if the size warrants it, that agree with the tax filings line for line. Our guide for accountants whose clients sell sets out what that work involves.
• List your salary and benefits, and any personal costs run through the business, on a schedule, so each add back is documented and a buyer can check it.
• Keep monthly figures for the current year, so the buyer can see the trend before the year end.
• Reconcile the receivables, payables and inventory, and make sure the statements explain the bank balance.

The difference between adjusted earnings and the profit on the statements is set out in SDE or EBITDA. The schedule that gets you from one to the other is the most read page in your data room, the folder of documents buyers review.

Second: a business that runs in your absence

A buyer asks one question about you, in various forms: what would happen if you were away for six months? If the business would struggle immediately, the buyer is buying a job, and prices it as one.

This item has the longest lead time and, from where most owners start, the largest upside. A turn is one year of adjusted earnings added to the price. In InvestDeal’s valuation engine a management team already running the business adds 0.4 of a turn, and a second in command who could hold it through some disruption adds 0.2.

A promise to stay on for six months counts for least, because the buyer has heard it before.

• Move the customer relationships you hold personally into a system, and put someone else on the calls.
• Hand over one function at a time, starting with purchasing and moving on to scheduling and quoting. Each function you hand over removes a reason for the buyer to discount.
• Take a real holiday, and let the business find out what breaks while you can still fix it.

Third: spreading revenue across customers

Over 30 percent of revenue from one customer is priced as a risk, because that customer leaving would change the business. A largest customer under 10 percent of revenue is priced as a strength, and anything between the two counts as normal.

This takes time to fix and shows at once, because the buyer asks for revenue by customer on the first day of due diligence. In a year you can grow the rest of the book so the large customer shrinks as a share. You can also put that customer on a contract with a fixed term, so the buyer is pricing a signed commitment.

Fourth: revenue that repeats

A maintenance contract renews, while a completed job ends. Revenue that repeats on its own is worth more than revenue that must be won again each year, and the difference shows in the multiple.

The move here is to sell what you already do as a renewal, through service plans or annual agreements. Retainers and standing orders do the same job. The revenue may be the same, and the buyer prices it higher because the customer has already decided to stay.

Fifth: the trend

Buyers pay more for earnings that are rising than for earnings that are flat, and a business that is visibly coasting invites a lower offer. In the year before a sale, owners are tempted to cut spending that pays off later. Keep it going, because the buyer sees the year you cut and prices the next one on it.

The housekeeping

These items leave the multiple alone, yet each can cost weeks in diligence or a holdback at closing, meaning part of the price kept back until a problem is resolved:

• The lease should have three or more years to run and a right to assign it, because a buyer pays for a location only when it can keep it.
• Contracts with customers and suppliers should be signed and current, filed in one place, with any handshake arrangements written down.
• Where it matters, own the equipment outright, and keep a list of it with ages and condition. In an asset sale it also shows a buyer what the Productivity Mega Deduction is worth in your sector.
• The licences and permits the business operates under should stand in the corporation’s name and in good standing.
• Settle any open claim or tax reassessment, or document it with a lawyer’s view.
• Put staff on written terms and settle the key people’s arrangements, because the buyer is buying them too. What happens to your employees covers the rest.

And the tax structure

Alongside all of this runs the question of whether your shares qualify for the lifetime capital gains exemption. In 2026 it shelters $1,275,000 of gain per owner, worth around $300,000 of tax, and its qualifying tests look back 24 months.

Qualifying often means purifying the company of surplus cash and investments. It is an accountant’s job, and it starts on the same day as the rest.

What it adds up to

Each of the four factors moves the multiple that InvestDeal’s valuation engine applies to the ranges buyers pay. The table shows how far, from the weakest answer to the strongest, on an illustrative business with $800,000 of adjusted earnings, where one turn is $800,000 of price.

An owner who moved from the weakest answer to the strongest on all four would add 1.85 turns, or $1,480,000 on these earnings. Few owners start at the bottom of every row, and a single year rarely moves all four. The smallest row alone is $320,000 of price.

The Full AI valuation reads your statements and shows which of the four is costing you most, which tells you where the year should go.

Questions owners ask

How far in advance should I prepare my business for sale?

Start at least a year before going to market, and two years is better. Buyers look at the last two or three years of financial statements, so a change made this month shows up as one partial year in the numbers a buyer sees twelve months from now.

What increases the value of a business before a sale?

A management team that runs the business in the owner’s absence adds the most in InvestDeal’s valuation engine, 0.4 of a turn, a turn being one year of earnings added to the price, and revenue that repeats under contract adds 0.3. A rising trend and a largest customer under ten percent of revenue add less. Clean statements and a lease the buyer can keep protect the price through diligence.

Should I keep growing the business while preparing to sell?

Keep growing it. Buyers pay more for a business whose earnings are rising than for one that is flat, and a business that is visibly coasting invites a lower offer. The sale is priced on the trend as much as on the level.