A Pre-Sale Checklist: Preparing Your Business for a Smooth and Successful Sale

For most business owners, selling the company you built is a once-in-a-lifetime event. It’s also one of the most complex financial transactions you’ll ever undertake. The process demands far more than finding a buyer and signing an agreement; it requires months, often years, of thoughtful preparation.

Starting early gives you time to strengthen financials, identify red flags, and position your business at a premium price. Buyers notice the difference between a company that is “ready” for sale and one that’s been rushed to market.

This guide offers a pre-sale checklist of the critical steps owners should take 12 to 24 months before going to market. Each area of preparation can influence valuation, tax exposure, and deal success.

1. Evaluate Financial Statements and Reporting

Buyers base their decisions on data. Clean, accurate, and transparent financial statements are the foundation of any successful sale. Before listing your business, work with your CPA or controller to:

Reconcile all accounts. Make sure income, expenses, assets, and liabilities are correctly recorded.

• Standardize accounting methods. If you use cash-basis accounting, consider switching to accrual so buyers can better evaluate profitability.
• Remove personal or nonrecurring items. Buyers want to understand normalized earnings, what the business makes under ordinary circumstances.
• Ensure documentation is complete. Proper records should support every transaction, loan, and asset.
• Consider commissioning a review or audit by an independent CPA firm. An outside audit
  provides buyers with confidence and accelerates due diligence later on.

2. Clean Up Tax Filings and Resolve Exposure

Tax issues can stop a deal in its tracks. Unfiled returns, unpaid liabilities, or uncertain state nexus positions are major red flags for buyers and their advisors. A pre-sale tax review should cover:

• Federal and state income tax compliance. Confirm that all filings are current and consistent with accounting records.
• Sales and use tax exposure. If your company operates in multiple states or sells online, check whether you have unregistered nexus or unpaid obligations.
• Payroll and employment taxes. Ensure employee classifications and withholding are correct; missteps here can be costly.
• Entity structure review. Evaluate whether your current legal structure (C corporation, S corporation, partnership, etc.) is still optimal for a sale.

Your tax advisor may recommend restructuring, merging entities, or converting ownership well before the transaction. These moves take time and often have waiting periods before they deliver full tax benefits.

3. Identify KPIs

Buyers are drawn to businesses with strong, predictable performance. Establishing and tracking KPIs helps demonstrate the company’s value beyond the financial statements.

Examples include:

• Revenue growth rate
• Customer acquisition cost and retention rate
• Gross and net margins
• Inventory turnover or production efficiency
• Recurring vs. one-time revenue ratios

Reliable KPI data tells a story of consistency, scalability, and future potential. If metrics are missing or poorly tracked, invest in better reporting systems before going to market.

4. Review Contracts, Leases, and Compliance

Contracts reveal the operational backbone of a business. Reviewing them early can prevent
last-minute legal snags. Focus on:

• Customer and vendor agreements. Identify which contracts are assignable or require consent to transfer.
• Employment agreements. Confirm clarity around compensation, benefits, and noncompete provisions.
• Leases and property arrangements. Ensure all real estate or equipment leases are current and accurately reflected on the balance sheet.
• Licenses and regulatory filings. Verify that all business licenses, permits, and industry-specific registrations are current.

Address any missing documents, expired agreements, or inconsistent terms before a buyer’s attorney flags them.

5. Tidy Up the Balance Sheet

Your balance sheet reflects the financial health of the company. Cleaning it up can make your business look stronger and reduce buyer concerns.

• Collect old receivables. Write off uncollectible accounts and improve cash flow.
• Reduce or restructure debt. Pay down high-interest obligations or convert short-term debt into longer-term arrangements.
• Clear out obsolete inventory or unused assets. Buyers prefer a streamlined operation with no dead weight.
• Document owner loans and personal expenses. Reclassify any personal transactions and eliminate gray areas that could raise questions.

6. Unwind Owner Perks and Personal Expenses

Private businesses commonly blend personal and business spending over time, company cars, travel, insurance, or memberships. These “owner perks” may reduce taxable income now but complicate valuation later.

Start disentangling personal expenses at least a year before going to market. Document legitimate business add-backs that can increase EBITDA but remove the ongoing costs buyers won’t want to inherit. A clean separation makes it easier to present normalized earnings and avoids buyer skepticism.

7. Strengthen Management and Operations

Buyers value companies that can operate independently of the owner. If the business relies heavily on you, it is worth developing a stronger management team and operational structure.

Actions to consider:

• Delegate key responsibilities to senior staff.
• Establish written procedures and workflows.
• Cross-train employees to reduce key-person risk.
• Review retention strategies to keep top talent post-sale.

This improves valuation and reassures buyers that the transition will be smooth.

8. Assess Legal and Risk Management

Potential legal exposure can derail even the most promising deal. Work with your legal counsel to:

• Conduct a liability audit, including pending litigation, insurance coverage, and contingent liabilities.
• Review intellectual property rights and confirm registrations are current.
• Ensure compliance with privacy, data, and employment laws.

Buyers often hire outside counsel to conduct thorough due diligence. Taking these steps first shows professionalism and minimizes unpleasant surprises.

9. Estimate Value and Set Realistic Expectations

Understanding what your business is worth, and what drives that value, helps set expectations before negotiations begin. A professional valuation can reveal how buyers are likely to view your company, including your industry's strengths and weaknesses, as well as comparable sales.

Even if you don’t commission a formal appraisal immediately, consult your CPA or financial advisor to understand likely valuation multiples, key value drivers, and how adjustments to operations could increase the sale price over time.

10. Create a Timeline and Assemble Your Advisory Team

Selling a business is a process. A realistic timeline helps you manage each stage without feeling rushed. A typical sales cycle includes:

1. Preparation and cleanup (12–24 months)
2. Marketing and buyer outreach (3–6 months)
3. Due diligence and negotiation (2–4 months)
4. Closing and transition (1–3 months)
   
   

Along the way, you’ll need a strong team:

• A CPA or tax advisor for compliance and structuring
• A transaction attorney for negotiations and documentation
• A financial advisor or planner for post-sale wealth management
• Possibly a business broker or investment banker to identify buyers

Coordinating these professionals early allows tax and legal strategies to work together, rather than in isolation.

The Payoff of Early Planning

Preparing for a sale 12 to 24 months in advance may feel premature, but it’s one of the smartest investments an owner can make. Cleaning up the financials, resolving tax issues, and strengthening operations can directly translate into a higher valuation and faster close.

More importantly, early planning gives you control. Instead of reacting to an unsolicited offer or market pressure, you decide when and how to sell.

By following this pre-sale checklist, you’ll enter the transaction confident, organized, and positioned to capture the full value of your life’s work.