2. Prepare

Assess Your Goals, Your Projected Timeline, and the Value of Your Business 

“By failing to prepare you are preparing to fail.”

– Benjamin Franklin

Define your ideal outcome. Define your ideal buyer. Take proactive action to limit your exposure to identified and unidentified risks. Prepare the marketing strategy. Prepare financial records. Prepare mentally.

Financial planning – tax considerations, protection of capital, risk strategy.

Pre-Due Diligence

“If your books and records have not been prepared beforehand, it can drag your transaction out for months, lead to a diminution of trust between the buyer and seller, and reduce the eventual sales price.”

– BizEx

Once your business has found the right buyer, they will submit to you a Letter of Intent (LOI) to buy your business.

Once your buyer has submitted a LOI, your transaction will move into the due diligence stage.

Due diligence is your buyer’s opportunity to “look under the hood” of your business.


Depending on the size of your transaction, and the sophistication of your buyer, the requests for information can be exhaustive.

During the pre-due diligence stage, you will work with your transaction advisor, accountant, bookkeeper, and other stakeholders to verify your books and records information.

By preparing for due diligence in advance, you instill confidence in your buyer, when you ultimately meet their requests on time, and with clear and unambiguous reporting.

Likewise, moving into the due diligence stage without taking the time to prepare your books and records inevitably causes delays and can lead to errors that cause your buyer to lose trust.

Another benefit of pre-due diligence is that it is an opportunity for you to perform your own due diligence on your business.

By taking the time to audit and verify all of your information internally, you reduce the risk of last-minute discoveries that can have a material effect on the sale of your business.

Companies with an EBITDA greater than $2M will strongly want to consider retaining a CFO.

We work with a number of experts in their field and are happy to recommend bookkeepers, accountants, CFOs, and transaction attorneys upon request.

Another advisor that you may consider working with is a financial advisor.

Financial Planning

During the financial planning stage you will work with your M&A advisor, accountant, and CFO (when appropriate) to:

  • Determine the appropriate structuring for the sale of your business
  • Verify your exit goals

Transaction Structuring

When selling your business it is important to consider the tax implications associated with the sales of business assets.

One of your primary considerations should relate to the transaction structure and asset allocation of your business sale.

Asset Allocation

allocate the purchase price to various categories of assets for tax and accounting purposes

While specific rules need to be followed, it also requires creativity and finesse borne from education and experience.

The effect on the buyer and the seller may be different for each allocation category, and those differences can amount to significant tax and financial consequences for each party.

Pre- and Post Transaction Planning

During the assessment stage you worked with your M&A advisor and financial planner to determine attainable exit goals.

Having completed your pre-due diligence now is the perfect time to update your financial plans with any new or revised information.

At this stage you will work with your M&A advisor and financial planner to incorporate tax considerations based on expected asset allocation.

*Working with a financial planner is not a requirement. However, it is important to note that your M&A advisor is not a financial planning expert and cannot advise you on matters of financial planning

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