What buyers actually look at

When an owner thinks about selling, the first question is almost always the same. What is it worth? I would sell my business again. I had stopped having fun, and I knew it was time for my next chapter. I enjoyed selling work and producing work, but keeping score was no longer fun.

Buyers are asking a different question. How likely is it that this business keeps performing after the person who built it is gone?

Everything about price, terms and how much of your money is paid up front comes back to that second question. I led our family business through its sale, and at LeafGuard by BELDON I worked on more than 20 gutter company M&A deals. Sitting on both sides of the table teaches you what buyers actually look at.

Clean numbers come first

Before anyone talks about multiples, a buyer has to TRUST the financials. That means clean books, consistent reporting and a clear picture of true profitability. An owner needs to learn and understand two terms every buyer will use. TTM is trailing twelve months, the last twelve months of actual results rather than a calendar year. QofE is quality of earnings, an outside review a buyer runs to test whether the profit you reported is real and repeatable.

It also means separating the business from your personal life. Vehicles, family members on payroll who do not work in the business, the second home and the season tickets all have to come out and be explained. Every unexplained item costs credibility, and lost credibility costs money.

If your financials take three months and an outside accountant to untangle, you are NOT ready to sell.

Then they look for concentration

Concentration is the word buyers use for anything the business depends on too heavily.

One customer at thirty percent of revenue is a risk. So is one salesperson holding every relationship, one supplier with no alternative, and one owner who is the only person who knows how the business really runs.

The most common concentration of all is you. If every key relationship, every estimate and every decision runs through the owner, the buyer is not buying a company. They are buying a job that the seller is about to leave.

Systems and people

Buyers pay more for a business that can be taught. Documented processes, a real management TEAM and a workforce that will stay through a transition all reduce the risk they are taking.

This is where culture shows up on the price. A buyer looks at turnover, at safety records, at how long key people have been there. A TEAM that stays is worth real money, and a TEAM that walks out the month after closing can turn a good deal into a bad one.

Preparation takes years, not weeks

The most expensive mistake I see is waiting until you want out to start getting ready.

Give it 18 to 24 months if you can. Clean up the financials and operate like a company owned by private equity. Reduce the concentrations. Build the leadership TEAM. Get the contracts, the leases and the licenses in order. Fix the problems you would not want a stranger to find, because they will find them. Trust me, they will find them.

Assemble the right help before you need it. An investment banker or broker who knows your industry, an attorney who has done this before, and a CPA who understands the tax side. The fees are real. So is the cost of a bad deal.

Know what you want besides the money

Price is only part of it. Terms matter. So does what happens to your people, your name and your customers.

Think about how much of the payment is at closing, how much depends on future performance, how long you are expected to stay and what happens to the TEAM you built. I have watched owners take a lower number because the buyer was the right home for their people. I have never heard one regret it.

The best time to prepare a business for sale is the same time you should be building it anyway. Everything that makes it valuable to a buyer makes it better to own.