Why You Must Start 12–36 Months Before Selling a Business

Short version: Selling is not “listing”. Selling is getting paid for a verifiable, transferable, financeable asset. That asset is built over time. If you start when you feel ready to escape, you are already late—because buyers will still require proof, and proof requires a track record.

1) The Two-Clock Problem: Sale Time vs Value Time

Owners think selling is an event. Buyers treat selling as a verification process.

• The sale clock is the visible process: listing/marketing, calls, offers, LOI, diligence, financing, closing.
• The value clock is the invisible process: making earnings provable, making the business run without the founder, cleaning contracts, and removing surprises (working capital, liabilities, compliance gaps).

If you start “exit planning” after you list, you force yourself into one of two bad positions:

• Over-disclose too early (panic sharing) and give buyers reasons to chip price; or
• Under-disclose and lose trust, momentum, and buyers.

2) What the Market Data Says About Timing

There are two hard facts owners ignore:

• Deals take months. Even after you “decide to sell”, you still face LOI, diligence, financing, and closing mechanics.
• Most owners plan late. Data from broker market surveys shows planning is often “none” or “less than a year”, even for larger small businesses.

2.1 Sale timelines are measured in months

Broker market data reports an average sale timeline in the range of months and indicates that a meaningful part of that time is spent in diligence after LOI. If your documents are not ready, that diligence window becomes a price chip factory.

2.2 Many owners do little planning before going to market

In broker survey data, the largest share of owners report either no exit planning or less than one year. The “2–3 years” group is small. This matters because buyers are not surprised by your weak preparation. They price it.

3) “The Best Business to Sell Is the One You Don’t Want to Sell”

This is not motivational. It is negotiation mechanics.

• When you do not need to sell, you can wait. That destroys the buyer’s pressure advantage.
• When performance is stable, numbers are clean, and the business runs without you, buyers can finance it and justify paying more.
• When you are burnt out, the business usually shows it: messy reporting, loose contracts, key staff risk, and owner-only knowledge. Buyers smell it.

The buyer’s mental model is simple

• “Can I verify earnings?” If not, earnings are discounted.
• “Will earnings survive without the founder?” If not, value moves into earnouts/holdbacks.
• “Can I finance this?” If not, buyer pool shrinks and terms worsen.

4) Why Most Businesses for Sale Are Tired Assets

Most listings are not built for sale. They are put on the market because the owner wants out.

Broker survey data frequently shows predictable “push” reasons for going to market: retirement, burnout, and life constraints. These reasons correlate with late planning and weak readiness.

What buyers do with tired assets

• They reduce the price to cover unknown risk (“price chips”).
• They shift value into structure: earnouts, holdbacks, seller notes, longer transition, tighter indemnities.
• They demand proof for every claim: add-backs, customer stability, supplier terms, and margin sustainability.

5) What Actually Takes 12–36 Months (The Workstreams)

12–36 months is not a magic number. It is the time required for changes + proof cycles. Buyers do not pay for plans. They pay for demonstrated reality.

5.1 Financial proof (not just bookkeeping)

• Clean, consistent P&L and balance sheet discipline.
• Clear separation of personal vs business spend.
• Schedules that explain working capital, debt, leases, and unusual items.

Why it takes time: you need consistent monthly behaviour and clean reporting cycles, not a last-minute tidy-up that looks artificial.

5.2 Normalisation and add-backs that survive diligence

• Add-backs only count if they are documented and non-recurring post-close.
• A buyer-grade “valuation bridge” from reported profit to normalised earnings.
• An evidence log for every adjustment (invoice/contract/ledger/bank line).

Why it takes time: many owners discover late that their “add-backs” are opinions. Evidence takes time to assemble and reconcile.

5.3 Owner dependency reduction (transferability)

• Remove the founder as the bottleneck in sales, approvals, delivery, and crisis handling.
• Document the critical workflows so they can be run by others.
• Prove independence: the business performs without the owner in the loop.

Why it takes time: you need to hire/train/delegate and then demonstrate stability over multiple cycles (not a single week without you).

5.4 Customer and supplier concentration reduction

• Reduce the share of revenue from top customers where it creates fragility.
• Reduce single-supplier dependency or tighten terms and contingencies.
• Prove retention: churn/renewal discipline with documented drivers.

Why it takes time: diversification is a growth and contract problem; it does not change overnight.

5.5 Contracts, pricing, and renewal discipline

• Replace informal agreements with enforceable contracts.
• Clarify pricing logic and discount policy.
• Reduce “owner relationship risk” by institutionalising renewal process.

Why it takes time: contract clean-up and renewal cycles require customer coordination and time to prove stickiness.

5.6 Management depth and “run without you” evidence

• A credible second layer: GM/ops lead/sales lead/finance lead (appropriate to business).
• Clear roles, KPIs, and decision rights.
• Reduced key-person risk beyond the founder.

Why it takes time: hiring/training, trust building, and performance proof takes quarters, not days.

5.7 Operational systems, KPIs, and quality control

• Standard operating procedures for the “money workflows”.
• KPIs that explain performance drivers, not vanity metrics.
• Quality control and complaint/returns discipline if relevant.

Why it takes time: systems only become credible when they are used consistently and survive staff turnover and busy periods.

5.8 Deal mechanics: working capital, debt, liabilities

• Understand what “normal working capital” looks like across months.
• Eliminate hidden liabilities and deferred obligations where possible.
• Prepare a clean debt/lease schedule and clarify what stays vs leaves.

Why it takes time: working capital is seasonal and operational. Buyers will model it. You need evidence across cycles.

5.9 Clean data room, disclosure order, narrative control

• A buyer-grade data room index: not a dump, a structured proof pack.
• Staged disclosure so you do not overshare too early.
• A controlled narrative: what is true, what is proven, what is being fixed.

Why it takes time: assembling documents is work; assembling them into a buyer-proof story with evidence standards is higher-skill work.

6) The 12–36 Month Exit Plan (3 Phases)

This is the simplest practical structure that matches buyer behaviour.

Phase 1: Months 36–18 (build the asset)

• Decouple owner dependency in at least one critical area (sales, delivery, approvals).
• Fix reporting discipline: monthly pack, clean categorisation, clear schedules.
• Contract discipline: tighten customer/supplier terms and renewal cadence.
• Start diversification if concentration is high.

Phase 2: Months 18–6 (build the proof)

• Demonstrate repeatable performance without founder heroics.
• Build the add-back evidence log and valuation bridge.
• Prepare working capital story and remove surprises.
• Assemble a staged data room with clear disclosure order.

Phase 3: Months 6–0 (run the sale clock)

• Decide buyer type strategy (strategic vs financial vs operator-buyer).
• Run offers/LOI process with controlled disclosures.
• Survive diligence without collapse: proof pack and transfer plan ready.
• Negotiate terms from strength because uncertainty is lower.

7) What to Prepare Now (Minimum Data Room Checklist)

You do not need perfection. You need access and truth. Missing items become tasks. The biggest risk is pretending things exist when they do not.

• Corporate: ownership/shareholding records, group structure, licences/permits, key policies.
• Financial: multi-year P&L and balance sheet (where available), trailing period, general ledger export if possible.
• Bank/tax artefacts (where available): bank statements, tax filings, VAT/GST filings, payroll filings.
• Working capital schedules: AR/AP ageing, inventory reports (if relevant), debt schedule, leases, capex/fixed assets list.
• Revenue detail: customer list with revenue by customer, top customer terms/contracts, pricing model, retention/churn indicators if tracked.
• Supplier detail: top suppliers, key terms, dependency risks, any rebates/side agreements.
• People: org chart, payroll list, contractors, incentives/bonuses, and the list of what only the owner does.
• Operations: SOPs (if any), KPIs (if any), delivery flow, quality control, warranty/returns policy if relevant.
• Legal & risk: material contracts, disputes history, insurance policies/claims, compliance records, IP/trademarks.
• Systems: key software stack, admin access policy, data backup approach, reporting sources.

If you want the buyer-grade version of this checklist, the Exit-Readiness Audit outputs a staged data room index, evidence standards, and “what the buyer will ask next” sequencing.

8) How the Exit-Readiness Audit Compresses Time and Protects Terms

If you are late, you do not fix lateness by “trying harder”. You fix lateness by focusing on what buyers actually price.

What changes after the audit:

• You stop guessing what buyers will punish. You see it in a buyer-grade scorecard.
• You stop arguing about valuation. You build a valuation bridge with evidence standards.
• You stop hoping the business is “transferable”. You measure dependency and build a transfer plan.
• You stop being surprised by deal mechanics. You pre-map working capital and liabilities.
• You stop wasting time. You execute a prioritised 100-day plan tied to buyer confidence.