The Final Twelve Months Before Selling Your Company
Most of the value lost in a sale process is lost not at the negotiating table but in the preparation period before anyone sits down. Used properly, that period sees the same company sold to the same buyer on markedly different terms.
12–9 months: cleaning the numbers
The buyer's due diligence team prices normalised earnings, not reported profit. Preparation therefore starts with quality of earnings: separating non-recurring income and costs, bringing related party transactions to market terms, removing personal expenses from the company, and correcting inconsistencies in accounting policy.
Done during the sale process this looks like a defence; done a year earlier it simply becomes the company's normal condition.
9–6 months: reducing dependencies
A buyer wants to see that the company it is acquiring can operate independently of its founder. Customer relationships resting on one person, major customers without contracts, unwritten supply arrangements and key staff without employment agreements all cut the price directly.
Customer concentration should be reviewed in the same period. A large share of revenue coming from a single customer affects the valuation at the level of the multiple.
6–3 months: legal and operational order
Currency of permits, licences and authorisations; intellectual property registered to the company; ongoing litigation and disputes documented; transfer clauses in lease and supply contracts checked — these items create cost not when they are present but when they are missing.
This is also the period to run a vendor due diligence, so that everything the buyer will find is found first by the seller.
3–0 months: designing the process
In the final stage the information package is prepared, the buyer list is tiered and the timetable is set. There is one critical principle here: do not proceed with a single buyer. In a process without competition the seller loses not the price but the terms — the price adjustment mechanism, the earn-out structure and the warranty and indemnity clauses are written entirely on the buyer's conditions.
This is where the preparation pays off: a prepared file makes it possible to hold several buyers on the same timetable at once.
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