How to prepare your company for sale: the 12 month plan that sets the price
Preparing a company for sale takes about twelve months, in four phases: reduce owner dependence, normalize the numbers, secure the contracts and legal base, then build the data room and plan the tax. A business that reaches due diligence without this groundwork typically loses 10 to 30% of its price, when the deal does not collapse outright. Done well, the same preparation adds hundreds of thousands to the valuation: a normalized EBITDA that moves from 400,000 to 550,000 euros, at a multiple of 5, is worth 750,000 euros of extra price.
The value of a company is not created on signing day. It is built in the twelve months before it. Most SME and startup owners come to us too late. They already have an interested buyer, sometimes a letter of intent, and then due diligence surfaces problems that should have been fixed a year earlier. The result is a price cut of 10 to 30%, or a deal that falls apart. Twelve months of exit readiness is not about dressing the business up. It makes it genuinely transferable, and that is exactly what a buyer pays for.
Months 12 to 10: get the business out of your head
The first risk a buyer sees is you. When the key customers, the suppliers, the passwords, the real margins and the strategic calls all live in the owner’s head, the business is not an asset. It is a job, and a job does not sell. The test is simple. You step away for eight weeks with your phone off, and the business keeps running without you: yes or no? If the answer is no, you have a dependency problem to fix before anything else.
- Document the critical processes: sales, production, invoicing, key account relationships. Not a 200 page manual, but procedures someone else can actually run.
- Formally hand off at least one function you carry alone today (purchasing, sales, the banking relationship) to someone on the team.
- Reduce customer concentration. If one client is worth more than 25% of revenue, that is a major negotiating point. Start to diversify, or lock that client in by contract.
A buyer does not buy what the business did with you. They buy what it will keep doing without you.
Months 10 to 7: clean up the numbers
The value of an SME or a startup is almost always set as a multiple of normalized EBITDA. The word that matters is normalized. Your accounts probably carry private expenses, an owner salary that has nothing to do with the market, rents between related companies, one off items. The job is to rebuild the real, recurring profitability of the business and then document it so it holds up. An EBITDA that moves from 400,000 to 550,000 euros after justified adjustments, at a multiple of 5, adds 750,000 euros to the price. None of this is cosmetics. A normalized profit where every adjustment rests on a document holds up in due diligence; the version built on assertions gets stripped out the moment the buyer starts checking.
- List every normalization adjustment, the so called add backs, with a supporting document for each one. An add back you cannot evidence will be thrown out in due diligence.
- Make gross margin reliable by product, client or service. A buyer wants to know where the money comes from, not just how much of it there is.
- Take the non operating assets off the balance sheet (private car, property, surplus cash) so it is clear what is actually being sold.
- Build twelve to twenty four months of clean figures. You cannot credibly restate the last year on its own.
Months 7 to 4: secure what holds the value
Once the numbers are clear, the question becomes the legal and operational solidity of what you are selling. This is where the bad surprises of due diligence sit: a customer contract that can be cancelled at any time, a lease that runs out in six months, a key employee with no non compete clause, a dispute waiting to surface, intellectual property held in your own name rather than the company’s. Found late, each of these turns into a price holdback or a broader warranty the seller is asked to give.
- Check that the key customer and supplier contracts are written, current, and ideally assignable or renewable.
- Secure the people who matter: clear contracts and, where it helps, a retention arrangement for the transition period.
- Put intellectual property, software licenses, domain names and trademarks in the company’s name.
- Find every dispute, tax or social security liability, or compliance gap, and either provision for it or resolve it, before the buyer finds it.
Months 4 to 1: build the file and plan the tax
In the final quarter you move from the business to the file. The buyer will ask for a data room: articles, accounts, contracts, org chart, key metrics. A complete, well ordered file speeds the deal up and earns trust. An incomplete one feeds doubt and pulls the price down. Tax has to be handled in parallel. In Switzerland, the line between a tax free private capital gain and taxable income depends on how the deal is structured, and some structures have to be set up months ahead, not at signing.
Paying out surplus cash beforehand, clarifying exactly what is being sold, and discussing the deal form (a share sale or an asset sale) early with a tax adviser can be worth tens of thousands of euros in net proceeds. Once the letter of intent is signed, these choices are no longer reversible.
What preparation actually buys you
With our clients, the difference shows up first in the terms, not just the headline price. A prepared business does not only sell for more. It sells faster, with fewer conditions to satisfy, less of the price deferred and tied to future performance, and fewer warranties that bind the seller after they walk away. That is the difference between banking 80% of the price at signing and collecting half of it, spread over three years and contingent on results you no longer control.
Before you launch this plan, the most useful thing is to know where your business stands today on each front: dependence on the owner, quality of the numbers, legal solidity, readiness of the file. A structured exit readiness assessment tells you exactly which workstreams to open first, so these twelve months show up in the sale price.
Key points
- Value is built in the twelve months before signing, not on the day of the sale.
- The first risk a buyer sees is the owner: a business that cannot run eight weeks without you is a job, not an asset.
- Price is a multiple of normalized EBITDA; any adjustment you cannot evidence gets stripped out in due diligence.
- Legal surprises (cancellable contracts, IP held personally, latent disputes) come back as price holdbacks or wider warranties.
- The tax structure, share sale or asset sale, is decided months ahead and becomes irreversible at the letter of intent.
Frequently asked questions
How long does it really take to prepare a company for sale?
Plan for twelve months to run the four phases without rushing. Six months can work if the business already depends little on the owner and the accounts are clean. Under three months, all you can really do is tidy the file; the levers that actually move value need time to take effect.
What if my sale is only three months away?
Nothing is lost, but the room is tight. Put the energy into the data room and the best documented EBITDA adjustments, because those are what move the price in the short run. Owner dependence and customer concentration do not get fixed in a quarter, so it is better to present them honestly than to try to hide them.
When should I tell my employees about a possible sale?
As late as possible for most of the team, and as early as possible for the two or three key people you will need through the transition. A premature leak unsettles customers and your best staff, usually at the worst moment. In practice you secure those key people first with a retention arrangement, then tell the wider team once the deal is close to certain.
Share sale or asset sale, which one should I choose?
It mostly comes down to tax and to which risks pass across. In Switzerland a share sale often gives the seller a tax free private capital gain, which is why sellers tend to prefer it; buyers frequently prefer an asset purchase so they take on only what they choose. Settle it with a tax adviser well before the letter of intent, because after that it is irreversible.
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