Selling your company can feel like the finish line after years of hard work, but the real race starts long before a buyer appears.
In CPMT’s recent podcast, attorney Jeff Leonard explains that most owners don’t realize how much value early preparation can add: “When I meet with a business owner who’s thinking about selling,” says Jeff, “my first question is what they’ve done to prepare for the sale.”
Jeff explains that too often, the answer is “not much,” and by that point, key opportunities have slipped away.
Why Planning Ahead Matters
If you wait to start really thinking about selling until a letter of intent lands on your desk, you’re already behind because you’re reacting to someone else’s timeline.
Once you’ve reached the LOI stage, you may no longer have time to polish your financials, streamline operations, or tackle estate and tax planning – all of which can make a big difference for your final price.
Jeff gives the example of past clients who were prepared and, in fact, were able to sell for “50 to 75 percent higher than what they first would’ve accepted”!
Build Transferable Value
For a buyer, the assumption is that a business will continue generating revenue after you leave, so Jeff urges owners to “build transferable value that doesn’t rely on the owner being in the business.”
Documented processes, accurate books, and a capable leadership team reassure buyers that the operation can thrive without your daily oversight.
This is especially important if private-equity money is in play; those firms, Jeff notes, “want clean financials, a strong management team, and established processes” before they’ll pay a premium.
Understand Your Likely Buyers
Private equity often acquires smaller companies at four to six times EBITDA and later resells the combined group at 10 to 14 times.
That spread is their profit motive – and a reminder that you should enter negotiations with eyes wide open.
Growing EBITDA quickly may involve cost-cutting, which can reshape culture.
Jeff explains that he has seen founders pivot away from private equity buyers for that very reason, choosing instead to sell to senior employees who will honor the legacy and keep jobs in the community.
Assemble the Right Team Early
Maximizing outcomes means surrounding yourself with professionals: legal counsel, a tax advisor, a financial planner, and, in many cases, a mergers and acquisitions firm to run a strategic sale process.
Their fees come out of the purchase price, but Jeff has repeatedly seen such firms “bring enough extra value to more than cover their cost.”
Imagine bumping an $8 million offer to $10 million because your advisors orchestrated real competition – with that kind of difference, the cost of investing in a firm to help run the sale isn’t such a hardship.
If you’re even thinking about selling, now is the moment to start preparing.
Reach out to CPMT today, and let’s make sure your next chapter is every bit as successful as the one you’re writing now.