Preparing for the sale of a business

How to ensure sale readiness

Shareholders who have already gone through an equity raise process can reflect on what went well and what caused issues during the process. If this is your first time going through a transaction, consider engaging an advisor early (ideally 12 - 24 months in advance). A good advisor can guide you on how to implement necessary changes to reduce execution risk and maximise value.

Evaluating the “readiness” of your business for sale means examining it through a financial, operational, commercial and legal lens to assess it for potential red flags and areas for improvement. Sellers must be able to articulate not just trends in their historical financial performance and competitive positioning but also be able to convey a robust growth plan which supports their financial projections and which is ultimately what investors will be ‘buying into’.

Documenting key risks and having a robust business plan in place will ensure that you can stay in control of a process and maintain momentum.

Much of the “heavy lifting” involved in preparing for a sale will be handled by an advisor, allowing you to focus on the most important task: running the business and achieving your financial goals.

Five steps to assess your sale readiness:

1. Identify and address key risks – including customer concentration, supplier dependencies, “key-man” risk or regulatory exposure. Stay ahead of potential areas of concern before investors identify them.
2. Review financial performance, forecasts and data – ensure your financial model is robust and your projections are supported by sensible assumptions that reconcile with your growth narrative. Organise supporting schedules for all key balances across the historical review period.
3. Strengthen internal processes and controls – buyers will assess the quality of your systems, reporting and governance.
4. Organise legal and commercial documentation – ensure customer contracts, IP ownership, employment agreements and compliance records are up-to-date and in order.
5. Develop a compelling equity story – be able to clearly communicate your value proposition, market opportunity and strategic rationale for the sale.

Common challenges impacting sale readiness

1. Inconsistent financial reporting: A lack of clarity or accuracy in financial statements can erode buyer trust and reduce valuation. A business should aim to have at least three years of monthly management accounts (three statement accounts) with an itemised reconciliation to the audited financial statements as necessary.
2. Weak financial forecasting models: Buyers want to see financial projections supported by robust and credible assumptions and data.
3. Unclear ownership of IP or assets: Legal ambiguity around key assets can delay or derail a deal.
4. Overreliance on key individuals: A business that can’t operate without its founder or a few key people is a risk for buyers. It is essential to have a strong management team in place that can ultimately deliver on the growth plan following the transaction.
5. Lack of strategic clarity: If your business lacks a clear vision or market positioning, it’s harder to justify a premium valuation.
6. Poor data room preparation: Disorganised or incomplete documentation and schedules can slow down due diligence and frustrate buyers.
7. Unresolved disputes or liabilities: Outstanding legal, tax or regulatory issues can become deal-breakers.

Maintaining sale readiness

Ultimately, getting “sale ready” isn’t just about preparing for a transaction; it is about building a better business. The same disciplines that attract investors will drive long-term value.

• Conduct regular strategic reviews to ensure the team is aligned around key performance metrics.
• Invest in scalable systems and processes that reduce reliance on manual workarounds.
• Establish robust monthly reporting procedures.
• Build a strong management team that can operate independently from shareholders and founders, such that founders are only providing strategic guidance.  
• Engage with advisors early to identify gaps and assist in building out a robust business plan.
• Keep your house in order from contracts to compliance.

By embedding best practices such as these, you'll not only improve business performance, but you’ll also be ready to capitalise when opportunity knocks.