What Needs to Be in Place Before You Sell Your Company
Most founders don’t decide to sell their company because everything is perfect.
They sell because they’re tired, bored, ready for something new, or because an opportunity suddenly appears and they’re not sure it’ll come again. That’s normal. What’s not normal is being prepared.
I’ve seen deals fall apart not because the business was bad, but because the founder wasn’t ready for the questions buyers always ask. Revenue looked good. Growth looked fine. But when it came time to open the hood, things got messy fast.
So let’s talk about what actually needs to be in order before you sell a company — how buyers think about pricing, what documents matter, what records you need, and what this looks like in the real world.
I’ll walk through this using a simple scenario along the way.
A Simple Scenario (We’ll Come Back to This)
Let’s say you run a company called North River Supply.
It’s a small but growing business doing about $1.8M in annual revenue with $320k in profit. It’s not venture-backed. No fancy pitch deck. Just a solid, boring business with customers that pay on time.
A competitor reaches out and asks a casual question:
“Have you ever thought about selling?”
That question alone doesn’t mean anything — but if you say yes, you need to be ready immediately. Not six months later. Not after you clean things up.
Let’s walk through what “ready” actually means.
1. Your Financials Have to Make Sense to Someone Else
This is the number one reason deals die.
Founders often say:
“I know my numbers.”
Buyers don’t care what you know. They care what can be verified.
What buyers expect to see
At a minimum:
Last 3 years of P&Ls
Year-to-date P&L
Balance sheet
Cash flow statement (even basic)
Revenue broken down by customer, product, or channel
If your books are mixed with personal expenses, “owner add-backs,” or random one-off costs with no explanation, that’s fine — but it must be clearly documented.
A buyer is not allergic to messy founders.
They are allergic to uncertainty.
Real example
In our North River Supply scenario, the founder was running personal vehicle expenses, meals, and travel through the business. Totally normal.
The deal didn’t die because of that. It almost died because none of it was labeled. Once those expenses were clearly categorized as add-backs, the profit picture became clearer — and the price actually went up.
2. You Need Clean Proof of Revenue (Not Just Totals)
Revenue totals are meaningless without context.
Buyers will want to know:
Who pays you
How often
How predictable that revenue is
What happens if one customer leaves
Documents buyers often request
Customer list (sometimes anonymized at first)
Revenue by customer
Contracts or agreements (if they exist)
Subscription or repeat purchase data
Churn or retention metrics (even informal)
If 40% of your revenue comes from one customer, that doesn’t kill the deal — but it absolutely affects price and structure.
In our example, North River Supply had:
One customer at 22%
Top five customers at 48%
That’s not a deal-breaker. But it meant the buyer pushed harder on price and requested a short earn-out to reduce risk.
3. The Business Has to Work Without You
This part hurts for a lot of founders.
If the business falls apart when you step away, you don’t have a company — you have a job.
Buyers will look for:
Who handles sales?
Who runs operations day-to-day?
Who deals with customers?
What systems exist without you?
You don’t need a massive management team. But you do need:
Documented processes
Clear roles
Evidence the business doesn’t freeze when you take a week off
Reality check
In our scenario, the founder handled all vendor relationships personally. The buyer didn’t walk away — but they required a six-month transition period where the founder stayed involved.
That changed the deal structure significantly.
4. Legal Structure Matters More Than You Think
This is where small issues become big problems.
Before selling, buyers will verify:
Entity formation documents
Ownership percentages
Operating agreements
Cap table (even for small businesses)
Any outstanding disputes or liabilities
If ownership isn’t clear, the deal pauses immediately.
I’ve seen founders assume “it’s 50/50” only to realize nothing was ever signed. Fixing that mid-deal creates delays, distrust, and renegotiation.
5. Intellectual Property Should Actually Belong to the Company
This one sneaks up on people.
If you:
Built software
Created a brand
Own a trademark
Have proprietary processes or content
Buyers will want proof that the company, not you personally, owns those assets.
That means:
IP assignment agreements
Trademark registrations (or at least filings)
Domain ownership in the company’s name
Software developed under proper agreements
In our example, the company name and domain were owned personally by the founder. Easy fix — but it had to be fixed before closing.
6. Pricing a Business Is Not Just a Multiple
This is where founders get confused.
They hear:
“Businesses sell for 3x or 5x.”
That’s not wrong — but it’s incomplete.
What buyers are actually pricing
They’re pricing:
Risk
Predictability
Transferability
Growth potential
How much work remains after closing
Most small to mid-sized businesses are priced off:
Seller’s Discretionary Earnings (SDE) or
EBITDA
But the multiple is adjusted constantly based on the factors above.
Back to our example
North River Supply generated $320k in profit.
On paper, a 4x multiple would suggest a $1.28M valuation.
But:
Customer concentration lowered the multiple
Founder involvement lowered the multiple
Strong margins raised the multiple
The final valuation landed closer to 3.5x, with part of the price paid over time.
7. Expect Due Diligence to Feel Personal (It Is)
Once you agree on price, diligence begins.
This is where buyers verify everything.
They will ask for:
Bank statements
Tax returns
Payroll records
Vendor contracts
Lease agreements
Insurance policies
Debt schedules
Legal correspondence
This is normal. It’s uncomfortable. And it’s where unprepared sellers get frustrated.
The smoother this process is, the more confident the buyer feels — and the less likely they are to retrade the deal.
8. Records You Should Have Ready Before a Buyer Appears
If you want to be truly prepared, have these organized ahead of time:
Last 3 years tax returns
Monthly financial statements
Customer list with revenue
Vendor list
Employee/contractor agreements
IP ownership documents
Insurance policies
Debt obligations
Key metrics tracked consistently
You don’t need perfection. You need clarity.
9. How Deals Actually Fall Apart
It’s rarely dramatic.
Deals usually fall apart because:
Financials don’t reconcile
Revenue isn’t as predictable as presented
Key dependencies were hidden
Documentation takes too long
Trust erodes during diligence
Most buyers don’t mind bad news.
They mind surprises.
10. Selling Is a Process, Not an Event
Here’s the truth most founders don’t hear:
The best time to prepare for a sale is long before you plan to sell.
When your financials are clean, your processes documented, and your business transferable, something interesting happens — you gain leverage. Buyers come to you. Conversations are calmer. Prices improve.
Even if you don’t sell, the business becomes easier to run.
Final Thought
Selling a company isn’t about squeezing every last dollar out of a buyer. It’s about reducing risk, increasing clarity, and making the business make sense to someone who didn’t build it.
If someone asked tomorrow whether you’d consider selling, could you confidently say:
“Yes — let’s talk”?
If not, now you know what to work on.
And that preparation alone often makes the business more valuable than any growth hack ever could.