How do I know if my business is ready to sell?

Short answer: Six factors determine business readiness: clean financials, a management team that runs without you, customer diversification, documented processes, a defensible EBITDA figure, and a clear buyer narrative. Most businesses with $10M or more in enterprise value have gaps in two or three of these. Identifying them now is worth far more than discovering them in due diligence.

The six readiness factors, with specifics

1. Three years of clean, accrual-based financials

Buyers and their lenders use the trailing three-year income statement as the foundation for valuation. Cash-basis books, mixed-year accounting methods, or financials that have never been reviewed by an independent CPA are red flags that slow or kill deals. A quality-of-earnings review will surface all of this. Running your own version of that review 12 to 18 months before going to market gives you time to clean it up.

2. A management team that runs without you for 90 days

Owner dependence is the single most common valuation discount in middle-market deals. Buyers pay less for businesses that stop functioning when the owner leaves. The test is simple: could you take a three-month sabbatical without the business deteriorating? If not, that gap is costing you multiple points at closing.

3. No customer representing more than 15 to 20 percent of revenue

Customer concentration is a due diligence flag that frequently causes price re-trading. A single customer at 30 percent of revenue creates a binary risk that buyers price in by cutting the multiple. Reducing any customer's share below 20 percent before going to market is one of the highest-return value-creation activities available in the two years before a sale.

4. Documented, repeatable operating processes

Buyers acquiring a business for $25M or more want to know that the business does not rely on undocumented tribal knowledge. SOPs for key roles, client onboarding, service delivery, and financial reporting are the minimum. They signal a business built to scale, not to accommodate one person's judgment.

5. A defensible adjusted EBITDA

Every owner adds back personal expenses, one-time items, and above-market compensation. What matters is whether those add-backs survive the buyer's quality-of-earnings review. Add-backs that are aggressive, inconsistently documented, or not business-standard will be cut, reducing the multiple basis. Know your defensible number before a buyer calculates it for you.

6. A story a buyer can underwrite

Financials tell what happened. The narrative tells why it will continue and grow. Buyers need to explain the acquisition to their investment committee, their lenders, or their board. A business with a clear market position, a documented growth path, and a competitive moat is underwritable. A business that grew because "the owner is great at sales" is not.

Quick self-assessment checklist

• Three years of reviewed or audited financials on accrual basis
• No single customer above 20 percent of revenue
• Second-tier management that can run operations without daily owner input
• Written processes for core business functions
• A documented add-back schedule that a CPA would defend
• Revenue growth of at least 5 to 10 percent annually over the last three years
• EBITDA margins above the industry median

Use the Business Readiness Scorecard to get a scored baseline across 20 buyer-facing factors. It takes about 10 minutes and identifies which gaps are most likely to affect your price.