Preparing your business for sale: an exit readiness checklist

Many owners sell a business only once. A buyer and their advisers will usually examine the business from a different perspective, focusing on the risks, evidence and assumptions behind the value. Issues identified late in the process can lead to a lower price, more of the price being deferred, tougher terms or additional negotiation.

Owners often benefit from beginning preparation 12–36 months before a planned sale. That gives time to fix issues rather than explain them. If a sale is closer than that, preparation still helps – it simply focuses on what can be addressed in the time available.

This checklist covers the areas buyers usually examine.

1. Financial information

• Monthly management accounts that are timely, consistent and reconcile to the year-end accounts.
• Year-end accounts prepared on a consistent basis from year to year.
• A clear explanation of sustainable earnings – owner pay, one-off items and personal or related-party costs identified and evidenced.
• Separation of business and personal – personal costs taken out of the business wherever possible.
• Forecasts you can explain and defend, based on actual performance.

Reliable financial information gives buyers greater confidence in the numbers and usually makes due diligence more efficient.

2. Quality and resilience of earnings

• Revenue mix – how much is recurring or contracted, and how much depends on one-off work?
• Customer concentration – does any customer account for a large share of revenue? Is there a plan to broaden the base?
• Margins – are they stable, and do you understand what drives them?
• Pricing – is it reviewed regularly and documented?

3. Dependence on the owner

Buyers are paying for future earnings under their ownership. If the business relies heavily on you, that is a risk they will price in.

• Could the business run for a month without you?
• Are key customer and supplier relationships held by others in the team, not only by you?
• Are processes documented rather than held in your head?
• Is there a management team, or a plan to build one?

4. People

• Employment contracts and terms are up to date and documented.
• Key people are identified, and you have thought about how to retain them through a sale.
• Any informal arrangements – bonuses, benefits, family members' roles – are documented.

5. Contracts, assets and property

• Key customer and supplier contracts are in writing, current and can be found.
• You know which contracts contain change-of-control clauses. Your legal advisers can review these.
• Property arrangements are clear – leases, and any property owned personally and rented to the business.
• Assets, equipment and intellectual property used by the business are owned by the business.

6. Working capital and cash

• Debtors are collected on time and old balances are resolved.
• Stock is counted, valued consistently and free of obsolete items.
• You understand the level of working capital the business normally needs. Buyers often expect a normal level to be left in the business at completion.
• Borrowings, leases and other liabilities are known and documented.

7. Compliance and loose ends

• Tax filings and payments are up to date. Your tax adviser can review any exposures.
• Statutory records and filings are complete.
• Disputes, claims or overdue liabilities are resolved, or at least understood and documented.

8. Your own objectives

Preparation is also about you:

• What do you want from a sale – price, timing, the future of the team, your own role afterwards?
• Would you consider part of the price being deferred?
• Have you taken personal tax and financial advice on the proceeds? This is a matter for your own advisers.

Turning the checklist into a plan

Few businesses tick every box, and that is normal. What matters is knowing where the gaps are, which ones a buyer is most likely to focus on, and which are worth fixing before a sale. An indicative valuation helps here, because it shows which factors are most likely to move value for your business.

How Proplexo can help

Our Exit Readiness Review looks at value, earnings quality, the balance sheet and due-diligence readiness, and gives you a prioritised action plan. Proplexo Exit Ready then supports you month by month as you work through it. A Strategic Valuation Review is a good starting point if you first want an indicative view of value.

This article is general information for owner-managed businesses, not advice on your circumstances.