By Christopher Clepp, ChFC® · Building Towards Wealth
What Should I Consider Fixing Before I Sell My Business to Help Increase Its Value?
The fixes that may have the greatest impact on a buyer’s perception of your business are usually not the ones you notice every day. Clean financials, reduced owner dependence, a diversified customer base, and documented systems can be important factors buyers consider when evaluating a business.
When owners decide it’s time to boost the value of the business before a sale, their first instinct is almost always to grow. Sell more, book a bigger top line, make the number look impressive. It’s the instinct that built the company, so of course that’s where they reach.
But another year of revenue growth is often not where the money is. The things that move what a buyer will pay are quieter and less satisfying to work on. Cleaning up the books. Getting the business to run without you. Fixing a lopsided customer list. Writing down what only lives in your head. None of that shows up on a billboard. All of it may be considered by a buyer when evaluating the business.
Here’s the good news. Every one of these fixes is inside your control, and not one of them requires you to go land a whale of a new customer. They just require time and the willingness to do unglamorous work.
Start with the financials
The fastest way to give away leverage in a sale is to hand a buyer a messy set of books. Buyers often place significant value on predictability and may view unexpected issues identified during due diligence unfavorably. That work takes longer than owners expect, which is exactly why it shouldn’t wait until an offer is on the table.
This is CPA territory, and as you get closer to a sale it becomes investment-banker or M&A-advisor territory too. Run a documented valuation alongside the cleanup — it gives you a baseline to track progress against. Business Owners Should Have a Valuation of Their Business makes that case in full.
Take yourself out of the business
If there’s one fix that buyers often view as particularly important, it’s this one. When the business can’t run without you, then you are the business, and a buyer is not really buying a company. They’re buying you, and you’re leaving.
The work to fix it is straightforward and slow:
- Build a second tier of leadership that makes real decisions instead of just carrying out yours
- Get the judgment that lives in your head onto paper
- Hand off the customer relationships that are keyed personally to you
- Make yourself replaceable, on purpose, before a buyer does it for you at a discount
Simple does not mean easy, and this is a two-to-five-year project, not a six-month scramble. A business that can stand on its own may be viewed more favorably by prospective buyers and can make ownership transitions easier.
“The owners who prepare early are often better positioned for the sale process than those who swung for a home run in the final year.”
Diversify your customer base
Customer concentration is a common factor considered in business valuations and is often an area owners can address prior to a sale.
Fixing it is deliberate sales work. Broaden the base before you list. Get the relationship management off of you personally. And where the model allows, convert your biggest customers to longer-term contracts or recurring arrangements so you can show a buyer stability instead of hope.
The nice part is that this one can benefit you twice — it may help reduce buyer concerns when you sell, and it can help reduce risk right now, whether or not a sale is anywhere on the horizon.
Document the systems no one writes down
The knowledge sitting in your head is something buyers often focus on, because the day you leave, that knowledge may leave with you. The procedures, the vendor relationships, the pricing logic, the reasons behind the decisions. Most owners assume their team already carries all this informally. They usually don’t.
The goal isn’t a perfect playbook. The goal is enough that someone competent could run the place. A few good starting points:
- A one-page operations summary
- A written customer onboarding process
- Your pricing methodology on paper instead of in your gut
- A vendor list with primary and backup contacts
- The stuff that only exists as something you’d explain out loud, finally written down somewhere a stranger could follow it
The 24-month pre-sale checklist
Treat it as waypoints, not gospel. The right work for you depends on facts your professional team should weigh in on.
For more on pulling full value out of a sale, A Quick Guide To Getting The Most Value From The Sale Of Your Business is worth the read, and for the wider frame on the whole exit, Everything You Need to Know About Selling Your Business covers it.
None of this is exciting. That’s kind of the point. The owners who prepare early are often better positioned for the sale process than those who swung for a home run in the final year. There’s never a wrong time to do the right thing, and many of these fixes can benefit the business whether you sell next year or never.
Let’s talk
If you’re looking at a possible exit in the next two to five years and want to know which of these fixes actually deserve your attention, that’s the kind of planning conversation I have with owners through the Abundant Wealth Process.*
*Our ‘Abundant Wealth Process’ is a planning framework designed to help clients define and pursue their financial goals.
Disclosure: This article is provided for general educational and informational purposes only and is not personalized tax, legal, accounting, or investment advice. Examples involving dollar amounts are hypothetical and illustrative only; individual results vary based on specific circumstances. Tax laws and IRS thresholds change frequently; current-year figures should be verified before reliance. Christopher Clepp, ChFC®, is a financial advisor and not a CPA or attorney and does not provide tax advice. Consult with qualified tax, legal, and accounting professionals regarding the application of any strategy to your specific situation. References to internal blog content are educational only and do not constitute a solicitation. Business valuations and transaction outcomes depend on numerous factors, including market conditions, industry trends, buyer demand, and company-specific circumstances. No increase in business value or transaction outcome can be guaranteed. Securities offered through The O.N. Equity Sales Company, Member FINRA/SIPC, One Financial Way, Cincinnati, Ohio 45242, (513) 794-6794. Investment Advisory services offered through O.N. Investment Management Company.
