How to Prepare Your Business for an Acquisition
Just over half of business owners say they have an exit plan. Fourteen percent have ever had the business valued by anyone. That gap is where most sale processes go wrong, and it opens years before a buyer is in the room.
Preparation is not presentation. A buyer's diligence team exists to find the distance between what a business looks like and what it is, and they are good at it. The useful question is not how to make the business look ready. It is what a buyer will check, and what evidence will satisfy them when they do.
1. Start before you have a buyer
The work below takes eighteen months to two years to do properly. Started after an offer arrives, it becomes a scramble that the buyer watches you perform.
Getting the business valued is the first step and the one most owners skip. Half have a rough idea of what it is worth and a third have no idea at all. A number you have not tested is not a floor, it is a hope.
2. Get the financials into a state someone else can audit
Not tidy. Auditable. A buyer will commission a quality of earnings analysis, and that analysis will recompute your profit from source records rather than accept your statements.
This matters more than it used to. Disagreements between the seller's earnings figure and the buyer's recomputed one now account for 21.3 percent of broken letters of intent, having more than doubled since 2023. It is the second most common recorded reason a deal dies after both sides have committed.
Most of that gap is add-backs: the owner's salary, the vehicle, the family member on payroll, the one-off legal bill. Any of those may be legitimate. Each one you cannot evidence with a document is one the buyer removes, and every removal comes off the earnings your multiple gets applied to.
3. Assume diligence finds what you already know
Findings that come out of diligence are the largest recorded cause of broken letters of intent, at 25.3 percent. Note where in the process that sits. The price was agreed. Both sides had spent money. Then someone looked properly.
Almost nothing found in diligence surprises the owner. The customer concentration, the lease expiring next year, the handshake deal with a supplier, the contractor who should probably be an employee. Disclosed early, these get priced. Discovered late, they read as concealment, and the buyer reprices everything else on the assumption that there is more.
Write the list yourself, before anyone asks.
4. Clean up the contracts, the disputes and the record
Buyers acquire liabilities as well as earnings. Unresolved legal matters, customer or supplier disputes, contracts never signed or never updated, and licenses held in your name rather than the business's are all ordinary findings and all avoidable.
The specific thing to check is whether your key relationships survive a change of owner. A supplier agreement with a change of control clause, or a major customer with nothing in writing at all, is a question the buyer reaches eventually.
5. Make the business work without you
This is the item that moves the price rather than protecting it. A business that depends on the owner for its relationships, its pricing decisions or its technical knowledge is buying its next owner a job.
Buyers price that risk in two ways, and both cost you. They pay less, or they hold more of the money back and tie it to you staying. Building a management team that runs the business in your absence is the difference between selling a business and selling yourself along with it.
6. Decide what you actually want before you negotiate
Sellers do not all want the same thing, and the split is close to even. Thirty-four percent say what matters most is a fast, low-stress sale. Thirty percent say it is continuity for the business and the people in it. Thirty percent say it is the highest price.
Those three cannot all be maximized in the same deal, and owners who have not chosen tend to find that out mid-process, which is expensive.
Where deals do fail on price, the most commonly reported distance between the two sides is 11 to 20 percent. That is usually a preparation problem rather than a real disagreement about what the business is worth.
How FM Enterprises works on this
FM Enterprises is a business advisory practice in Atlanta. The work on this page is the work: an honest valuation, then a diligence rehearsal, which means going looking for the findings a buyer would find while there is still time to act on them.
Every figure above comes from our own market data reference, sourced and dated. Preparation and seller intent sit on the ownership transfer; why deals collapse sits on how deals close. To get a view on where your business stands, schedule a session.
Frequently asked questions
How long before a sale should I start preparing?
Eighteen months to two years for the full list. The financial record and the management structure are the two that cannot be fixed quickly, because both need a track record before a buyer will credit them.
What is a quality of earnings analysis?
An independent recomputation of your profit from source records, commissioned by the buyer. Not an audit, not a valuation. It establishes what the business actually earns before a multiple is applied.
Do I need a valuation before I talk to buyers?
Without one you are negotiating against a number the buyer brought, with nothing to test it against.