Most business owners start thinking about selling 6 months before they want to close. Most advisors will tell you that's 2.5 years too late. The businesses that command premium valuations get there because someone spent 2–3 years making the business look like an acquisition target.
Step 1: Clean and Accurate Financial Statements
Buyers request 3 years of financial statements immediately. If those statements are messy or inconsistent, the deal either dies or reprices downward — sometimes by 30–40%. What buyers want: consistent revenue recognition, properly categorized expenses, clean reconciliations, and financials that match your tax returns.
Step 2: Normalize Your EBITDA
Your reported EBITDA is almost never your real EBITDA. Buyers will recast it — adding back owner compensation above market rate, one-time expenses, personal expenses, and non-recurring items. You want to arrive at the table with a pre-built, well-documented EBITDA bridge.
Step 3: Reduce Owner Dependency
The single biggest valuation discount in lower middle market deals is owner dependency. If the business cannot operate without you for 30 days, buyers price for that risk. Document your processes. Build a management layer. Show that the business runs on systems.
Step 4: Build a Quality of Earnings Ready Package
A sell-side QoE lets you find the issues before the buyer does. You can address them, explain them, or document them properly — rather than having them surface mid-deal as leverage against you.
The Cost of Not Preparing
A business generating $1M in EBITDA could sell for $4M at a 4x multiple without preparation — or $6M–$7M at a 6x–7x multiple with 2–3 years of proper preparation. That's a $2M–$3M difference on the same business.