The 18-month business sale preparation timeline: what to do in each phase

This is for an owner who has never sold a business and wants to sell in about 18 months. By the end you will have a business sale preparation timeline you can put on the wall: what to do in each phase, in what order, and why a buyer will pay more if you do it. Most of the value in a sale is made in the first year, long before a buyer appears. We help owners through this at Acquisitions.com.

The timeline at a glance

Eighteen months sounds long. It is not. Phase 1 is where a buyer's doubts are removed, and doubts are what cut the price. If you start later, you skip the phase that pays best.

Months 18 to 12: clean the books

A buyer will believe your numbers only if three documents agree: the tax returns, the profit-and-loss statement, and the bank statements. Start here. Here is the order we use:

1. Match the tax returns to the P&L. Take the last three years. Where the tax return shows less profit than the P&L, write down why. A buyer values the business on the lower number unless you can explain the gap.
2. Take personal expenses out of the business. The family car, the home internet, the trip that was half holiday. Stop running them through the company now. Every month of clean figures makes the next step easier.
3. Document the add-backs. An add-back is an expense a new owner will not have: your above-market salary, a one-time lawsuit, the personal items above. List each one with the invoice or payroll record behind it. Our guide to add-backs shows which ones buyers accept.
4. Keep the records. The IRS says to keep business records for three years in most cases and employment tax records for at least four years (IRS, "How long should I keep records?"). A buyer will ask for the same years, so do not throw anything away.
5. Close the books every month. Accrual accounting, reconciled bank accounts, no "miscellaneous" line over a few hundred dollars. Monthly closes are what a diligence team will test.

If your bookkeeper cannot do this, change bookkeeper now, not in month six. A weak set of books is the most common reason a sale falls over.

Months 18 to 12: get ready for a quality of earnings review

A quality of earnings (QoE) report is an accountant's check on whether your profit is real and will repeat. Larger buyers order one. Since 1 October 2026 the SBA requires the lender to order one on SBA-financed acquisitions where the purchase price is $3 million or more, and the lender must use the QoE's earnings when it tests whether the loan can be repaid. CliftonLarsonAllen's note on SOP 50 10 8.1 says the cash proof covers the trailing twelve months and the last two fiscal years.

So that is what a reviewer will tie out. Prepare for it:

• Every month's revenue in the P&L traced to deposits in the bank.
• Every add-back backed by a document.
• Revenue split by customer, so concentration is plain.
• Accounts receivable aged, with bad debts written off.
• Inventory counted, not estimated.
• Related-party payments (rent to yourself, a spouse on payroll) listed and priced at market.

Some owners order their own sell-side QoE at this point. It does not replace the lender's report, but it finds the problems while you still have a year to fix them. We explain what the report contains in what is a quality of earnings report.

Months 18 to 12: make the business run without you

A buyer is buying future profit. If the profit leaves when you leave, they are buying a job, and they pay for a job. The fix takes time, which is why it sits in the first phase.

1. Name a second-in-command. A general manager, an operations lead, a head technician who can run a week without calling you. Give them real authority a year before the sale so a buyer can see it working.
2. Write the processes down. How a quote is made, how a job is scheduled, how a complaint is handled, how payroll is run. Short checklists beat long manuals.
3. Move the relationships. If the top five customers only talk to you, introduce your manager now and step back on purpose.
4. Take a real holiday. Two weeks with the phone off. What breaks is your to-do list for the next six months.

Buyers ask one question in the first meeting: "What happens when you are gone?" Phase 1 is where you earn a good answer.

Months 18 to 12: fix the contracts

Paper problems are cheap to fix now and expensive to fix with a buyer waiting. Go through four piles:

• Customer contracts. Are they signed, current and in the company's name? Do they allow assignment to a new owner, or does a change of control let the customer walk? Renew the big ones before you go to market.
• The lease. Most small-business sales need the landlord's consent. Check the term left, the renewal options and the assignment clause. A lease with two years left and no option is a problem for an SBA lender.
• Employee agreements. Offer letters, non-solicit terms where your state allows them, and clear ownership of anything staff created. Make sure contractors are really contractors.
• Licences and permits. List every licence the business needs and whose name it is in. If a trade licence is in your personal name, start moving a qualifier into place.

Also tidy the entity itself: minute book, ownership records, trademarks registered to the company and not to you.

Months 12 to 6: advisor, value, CIM and buyer list

Now the business is ready to be shown. This phase is about how it is shown and to whom.

Choose an advisor. An advisor or broker runs the process, keeps it confidential, and keeps you running the business while they run the sale. Ask how they find buyers, how they price, what their fee is, and for owners they have sold for. Acquisitions.com is an advisory firm, not a broker-dealer or a lender.

Agree a value. Small businesses are priced on seller's discretionary earnings (SDE) or EBITDA times a multiple. The multiple moves with the industry, the trend, the owner dependency and the quality of the books, which is why phase 1 matters. Our business valuation calculator gives you a starting range before the advisor's view.

Write the CIM. The confidential information memorandum is the document a serious buyer reads after signing an NDA: history, services, customers, team, financials with add-backs, and the growth a new owner could go after. Everything in it will be checked in diligence, so it must match the books. See what is a CIM.

Build the buyer list. Individuals using an SBA loan, competitors, private equity add-ons, search funds. Each pays for different things. The advisor's list and your own "who would want this" list go together.

Market confidentially. A short blind teaser with no name, sent to the list and posted where buyers look. Staff, customers and suppliers should not learn of the sale from a listing.

Months 6 to 3: NDAs, meetings, offers and the letter of intent

Interested buyers sign an NDA and get the CIM. Then the process narrows:

1. Screen the buyers. Proof of funds or a lender pre-qualification letter before any meeting. A buyer who cannot pay wastes the months you cannot get back.
2. Hold buyer meetings. Usually a call, then a site visit after hours. You tell the story; the advisor handles the price talk.
3. Collect offers. Ask for them by a date so you can compare. Look past the headline price: how much is cash at closing, how much is a seller note or an earn-out, and what is being bought (assets or shares).
4. Sign a letter of intent. The LOI sets the price, the structure, the diligence period and an exclusivity period in which you stop talking to other buyers. Most of it is non-binding, but it frames everything after. Read what is a letter of intent before you sign one.

Keep running the business hard through this phase. A dip in sales during exclusivity is the most common reason a buyer asks for a lower price.

Months 3 to 0: diligence, agreement, financing and close

The last phase is the buyer proving what the CIM said, and the lawyers writing it down.

Due diligence. Financial, legal and operational. You will be asked for the records from phase 1: tax returns, bank statements, contracts, licences, payroll. A prepared owner answers in days; an unprepared one in weeks, and each week is a chance for the buyer to cool.

Purchase agreement. This replaces the LOI. The negotiation is about representations and warranties (what you promise is true), indemnities (what happens if it is not), the non-compete and your transition role. Get a lawyer who does business sales, not your family lawyer.

The buyer's financing. If the buyer uses an SBA 7(a) loan, the SBA's maximum is $5 million (SBA, 7(a) loans). The lender will order its own valuation and, at $3 million and up, the QoE above. Ask the buyer in the LOI when they applied and which lender they are with; a buyer who has not yet spoken to a lender will not close in three months.

Working capital peg. The agreement sets a normal level of working capital (receivables plus inventory minus payables) that must be in the business at closing. Above it you get paid more; below it the price drops. Agree the formula early, from your monthly books. See what is a working capital peg.

Close and transition. Money moves through escrow, the lease and licences transfer, staff are told. Your transition period is written into the agreement. Do what you promised, introduce the buyer to everyone, and then let go.

If you have less than 18 months

Start with the parts that change price the most: books that match the tax returns, documented add-backs, and a manager who can run the business. Then fix the lease and the biggest customer contracts. Everything else can run alongside the sale. For a shorter view of the whole process, read how to sell a business. If you want a plan for your own business, book a call and we will build the timeline with you.