Selling tutorial · Pre-sale readiness
Start 24 months out.
Sell for 20-35% more.
Reviewed by Rob Ismoilov · M&A AdvisorTimeline
Four milestones in the 24-month prep window.
The tutorial below is organized around these four checkpoints. Every priority in the next section lands in one or more of these windows — the sooner you start, the more of them can be moved in time to matter.
- Milestone 0124 months out
Baseline + gap analysis
Run a formal exit-readiness assessment. Identify the 3 biggest multiple movers for your industry and start work on the top-2. This is also the right window to sit down with a CPA on tax-structure choices — some (F reorganization, QSBS eligibility) require pre-work.
- Milestone 0212–18 months out
Execute the improvements
Book cleanup, customer-concentration reduction, management-layer hiring, and recurring-revenue mix shift are all 6-12 month efforts. Do them now — buyers won't credit improvements that happened after they received the CIM.
- Milestone 036 months out
Prep the CIM inputs + tax structure
Lock in the trailing-12 financials. Get the customer-concentration analysis and the management-team org chart into a form the broker can plug directly into the CIM. Finalize the deal-structure decision with your CPA and estate attorney.
- Milestone 0490 days out
Engage the broker + go to market
Interview 3-5 brokers. Sign the engagement letter. This is where /sellers/sales-process picks up — the 9-12 month transaction window officially starts.
The 8 priorities
What actually moves your valuation.
Priorities 1-7 mirror Value Builder System's 8-driver framework — the most-cited third-party framework for pre-sale business improvement. Priority 8 (emotional readiness) comes from EPI's State of Owner Readiness — the #1 driver of post-close regret.
Financial books cleanup
Three years of accrual-basis financials with a documented add-back schedule is the single biggest reason well-run businesses close at fair-market multiples. Cash-basis books, unreconciled bank statements, or undocumented owner add-backs cost 0.5×–1.5× of SDE in Quality of Earnings review — often the whole deal margin.
Do this
- Convert to accrual basis if you're still on cash
- Reconcile bank + credit card statements monthly (no exceptions)
- Document every owner add-back with supporting invoice / contract
- Have your CPA prepare a 3-year normalized SDE / EBITDA schedule
KPI documentation + dashboard
Buyers underwrite what they can measure. A one-page KPI dashboard — revenue by service line, gross margin, utilization, customer count, contract renewal rate — that you can defend in a management presentation is worth 0.25×–0.5× of SDE on its own. Value Builder System calls this the 'Monopoly Control' driver.
Do this
- Pick 5-8 KPIs that actually explain how the business runs
- Track them monthly for at least 12 months before going to market
- Build a visual dashboard the buyer's CFO can read in 30 seconds
- Document how each KPI is defined and calculated
Customer concentration reduction
Any single customer above 20% of revenue starts pulling the multiple down. Above 30% and most institutional buyers walk. Top-decile deals have <15% concentration across the top-5 customers. Reducing concentration is a slow motion — you can't unbuild it in the last quarter — which is why this needs the full 24-month window.
Do this
- Segment revenue by customer at multiple cuts (annual, TTM, top-5)
- Identify the 2-3 customers that dominate the risk
- Invest in new-customer acquisition until top-1 is under 15%
- Diversify the customer profile (industry, geography, size)
Management depth (build a #2)
Businesses where the owner is the primary technician, salesperson, and decision-maker sell for less because the buyer has to replace three roles at once. A number-two who owns the P&L, or who owns the largest customer relationships, is worth 0.5×–1.0× of SDE. EPI's State of Owner Readiness data consistently identifies this as the single most-overlooked prep priority.
Do this
- Identify or hire your #2 at least 12 months before going to market
- Transfer the top-3 customer relationships to your #2 by year-end
- Document your role — what would need to be replaced when you leave
- Give your #2 real P&L authority, not just operational responsibility
Recurring-revenue mix boost
Contracts trade at higher multiples than one-off jobs because buyers can underwrite them. In HVAC and home services, above ~40% recurring revenue is where multiples materially step up. In IT services / MSP, above ~60% MRR is the pricing benchmark. Shifting mix takes 12-24 months of intentional program work.
Do this
- Launch a maintenance-contract / retainer / subscription program
- Set an internal target for recurring-revenue percentage
- Reward salespeople on recurring-revenue attach rate, not just deals
- Report and manage recurring revenue as a distinct P&L line
Contracts, IP + assignment consents
Real-estate leases with assignment restrictions, franchisor consent rights, key-customer contracts with change-of-control clauses, and exclusive supplier agreements are the most-common consent-driven deal killers. Inventory them early — a landlord who won't consent to assignment can either kill the deal or extract a fee.
Do this
- Inventory every contract with an assignment / change-of-control clause
- Renegotiate leases with restrictive assignment terms if possible
- Register trademarks and document IP ownership by the operating entity
- Move personal assets (vehicles, real estate) OUT of the operating entity
Personal financial + tax planning
The after-tax number is what pays for your post-sale life. Federal long-term capital gains, 3.8% NIIT, state tax where applicable, and deal-structure choices (installment sale, F reorganization, QSBS) can move the after-tax outcome by 15-30%. Most of these choices need 12+ months of pre-work — you can't structure your way out at LOI time.
Do this
- Meet with a CPA to run after-tax scenarios (asset sale vs stock sale)
- Evaluate F reorganization if you're an LLC/S-corp
- Check QSBS eligibility if you're a C-corp (requires 5-year hold)
- Meet with a wealth manager on the financial-independence number
Emotional + identity readiness
The Exit Planning Institute's State of Owner Readiness survey consistently finds emotional non-readiness is the #1 reason owners regret their exit within 12 months of closing. Deals also die at week 22 when the owner realizes they didn't actually want to sell. Do the work of imagining your post-sale life before you sign an engagement letter.
Do this
- Write down your post-sale plan (work, hobbies, geography, philanthropy)
- Talk to 3-5 owners who've been through an exit — good and bad
- Discuss with your spouse what a full-time home life looks like
- Decide whether you want a clean exit, consulting role, or rollover
Quick start
Do these three things this quarter.
If you can only take three actions in the next 90 days, do these — they unblock every other priority and are almost entirely free.
Run the free exit calculator
Five minutes, no signup required. Applies industry-specific SDE and EBITDA multiples to your current numbers and gives you a valuation range plus an Exit Readiness Score across the five factors buyers actually diligence.
Run the calculatorGet your books to accrual basis
Whatever it takes. Hire a fractional CFO for a month, engage your CPA for a special project, or subscribe to a bookkeeping service like Pilot / Bench / Sequence. This is the single highest-leverage step in the prep window.
See the sales processIdentify your #2
If you don't have one, start the hire. If you have one, start transferring customer relationships and P&L authority. A credible #2 by go-to-market time is worth 0.5×–1.0× of SDE on its own.
Register a seller accountSave your progress
Register to track your readiness in one dashboard.
A free seller account lets you save your exit-calculator results, run the sellability score, and re-run the readiness check every quarter as you work through the priorities above.