How to prepare a business for sale: the one to three year plan that changes the price

Most advice on preparing a business for sale is a checklist. Tidy the books, get a valuation, gather your contracts, build a support team.

All of it is correct and none of it is sequenced. Which matters, because the items are not equal and they do not take the same amount of time. Some can be done in a fortnight. Others take eighteen months and cannot be compressed, and those are the ones that move the price.

PwC describes early preparation as a presale checkup, sell-side due diligence, followed by corrective actions (PwC Australia). That is the right frame. What follows is the corrective actions in the order they should happen.

How long does preparing a business for sale take?

Business Queensland's advice is to give yourself as much time as possible before you advertise (Business Queensland), which is true and hard to plan around.

The workable answer is one to three years, and the reason is arithmetic rather than preference. The strongest thing you can show a buyer is a period during which the business performed while the owner was not central to it. That evidence cannot be created quickly. It accumulates, or it does not exist.

Twelve months gets you a tidy business. Two to three years gets you a transferable one.

Year one, quarters one and two: find out what you are selling

Run the diligence on yourself first. Ask what a buyer will ask and write down the answers you cannot give. Who else can approve money. What happens to new work if you stop. Do the customers deal with the business or with you. Where do the answers live.

Get the financials into a state a stranger can read. Three to four years of profit and loss, balance sheets and tax returns, with personal and business expenses cleanly separated. If your accountant has been running both through one set of books, start now, because it takes longer than you think.

Find the personal attachments. Guarantees you have signed, intellectual property registered in your name, licences held personally, supplier terms that exist because of a relationship. Each takes a different specialist to unwind and each takes months. our guide to how a sale works covers what buyers do when they find them.

Raise the tax structure with your accountant. Not to plan a sale, to find out what your current structure means. Eligibility for concessions often turns on decisions made years earlier, and this is the last point at which changing anything is realistic.

Year one, quarters three and four: move the decisions

This is the part that changes the number, and it is the part most owners skip because nothing visible happens.

Log the interruptions for a fortnight. Every question and decision that comes to you, written down, changed nothing. The items appearing repeatedly are your list.

Give someone else real authority, with limits. A spending threshold they can approve without you. A pricing range they can quote inside. A category of exception they can settle. Stated in writing, and then left alone.

Accept the first few will be handled differently to how you would have handled them. This is where the work usually dies. The owner sees the variation, steps back in, and the authority drifts back. Deciding in advance what level of difference you can live with is the difference between a transfer and a rehearsal.

Document what those people now do, including the thresholds and permissions, not only the steps. our guide to standard operating procedures covers what separates a usable procedure from a description.

Year two: build the evidence

Nothing new starts here. The work is letting the previous six months run long enough to become a record.

Take a proper absence. Two weeks, then longer. Whatever comes back to you is the work still attached to you, regardless of what is written down.

Fix what surfaces, then repeat. The second absence should bring back less than the first.

Reduce customer concentration if a small number of clients carry most of the revenue. This is slow work and it directly affects risk in a buyer's eyes.

Get contracts in writing. Supplier terms, key customer arrangements, anything held together by a relationship and a handshake.

Keep the financial record clean through the whole period, because this is the stretch a buyer will examine most closely.

Year three: go to market from a position you chose

Get a valuation and understand where in the range you sit and why. our guide to valuing a business covers the methods and what moves the multiple.

Choose your advisers. Broker or corporate adviser, lawyer, accountant. our guide to business brokers covers what each does and how to compare them.

Assemble the documents buyers will want, before they ask, so due diligence runs in weeks rather than months.

Then list. With a business that has demonstrably operated without you for a year or more, which is the single thing that separates the top of a valuation range from the bottom.

What if you have less time than that?

Most owners reading this do not have three years, because the decision to sell usually arrives before the plan does.

Twelve months is enough to clean the financials, unwind the personal attachments, move some decisions and produce a short but real record of the business operating without you. That is meaningfully better than listing cold.

Six months is enough to get the documents in order and shorten due diligence, which protects the price you agree rather than raising it.

Below that, the honest position is that you are selling what you have. Which is a legitimate choice, and worth making with your eyes open rather than discovering during due diligence.

Where to start

Run the four questions on yourself this week. If the answers are uncomfortable, that discomfort is the buyer's view of your business arriving early enough to act on.

Then start with the interruption log, because it tells you where the business is attached to you rather than guessing. That's the work we walk owners through, and you can start it with a conversation.

Frequently asked questions