A well-run sale takes 6–9 months from engagement to closing. The preparation that determines the outcome takes 12–24 months and happens before any of that starts.
This guide walks the whole sequence: what to do in the preparation window, what each phase of the live process involves and how long it takes, how confidentiality is actually maintained, and where the process most often goes wrong.
The preparation window: 12–24 months out
Almost everything that raises a valuation is operational, and operational change takes quarters. None of it can be done during a live process.
Clean the financials. Reconcile to tax returns on a consistent basis. Build the add-back schedule as you go, with documentation attached, rather than reconstructing it from memory under time pressure. Most founder-led businesses have legitimate adjustments that are simply undocumented — and an undocumented add-back is one a buyer discounts.
Reduce owner dependence. The slowest item and the one that moves value most, after scale. If the business cannot operate for a month without you, a buyer is acquiring a job. Document processes, push decisions down, and build a second layer that can answer diligence questions without you in the room.
Address concentration. Customers above 20% of revenue attract discounts. So do supplier dependencies and, in collision repair, insurer DRP relationships that can represent 30–50% of shop revenue.
Resolve the known problems. Unresolved litigation, lease issues, licensing gaps, employment classification, environmental exposure in sectors where it applies. Every one of these surfaces in diligence. Discovered by a buyer, they cost more than they would have cost to fix.
Do not suppress capex. Deferred maintenance to flatter earnings is visible to buyers, and the adjustment they make usually exceeds what was saved.
The test: for each item, ask whether a buyer's analyst would find it, and what it would cost you when they did. That is the real return on fixing it early.
Phase 1 — Preparation and materials · 3–5 weeks
The live process begins. Financial analysis is finalized, normalized EBITDA is built and documented, and the equity story is written.
Two documents come out of this. The teaser is a blind one-page profile with no identifying detail, used for initial outreach. The confidential information memorandum is the full presentation of the business, released only after a buyer signs a non-disclosure agreement.
In parallel, the buyer universe is built: strategic acquirers, private equity platforms seeking add-ons, family offices, and in some sectors individual buyers with committed financing. A tighter, better-qualified list outperforms a broad one, because every additional party is an additional confidentiality risk.
Phase 2 — Outreach and indications of interest · 4 weeks
Buyers are approached with the teaser. Those who express interest sign an NDA and receive the CIM. Interested parties then submit indications of interest — non-binding, setting out a valuation range, proposed structure, financing source and timeline.
This is the phase that justifies running a process at all. A single buyer negotiating alone sets the terms. Several buyers competing set them against each other, and the difference is rarely marginal.
Phase 3 — Management presentations · 1–2 weeks
Shortlisted buyers meet the management team. These are working sessions, not pitches: buyers are assessing whether the business runs on systems or on you, and whether the growth story is credible from someone other than the owner.
Preparation matters here, and so does having a management team capable of presenting. It is one of the clearest signals a buyer receives about owner dependence.
Phase 4 — Letter of intent · 1–2 weeks
The preferred buyer submits an LOI setting out price, structure and key conditions.
Most provisions are non-binding. Some are not — typically exclusivity, confidentiality and expense allocation. Exclusivity is the one that matters: for its duration you cannot talk to anyone else, which means your competitive leverage is gone for the period it runs.
Negotiate hard on the terms that survive into the definitive agreement, and get the working capital definition and calculation period settled here rather than later.
Phase 5 — Due diligence · 6–10 weeks
The longest and most demanding phase. The buyer verifies everything: financial, legal, operational, HR, customer, and in some sectors environmental.
Diligence runs through a virtual data room — a structured, permissioned repository where documents are organized by category and access is logged. It replaces the ad-hoc email exchange that used to characterize this phase, and it is materially better for both confidentiality and speed.
Most buyers commission a Quality of Earnings report here: an independent accounting analysis testing whether reported earnings are sustainable and accurately stated. This is where an aggressive add-back schedule gets tested, and where sellers who prepared honestly are rewarded.
The advisor's job in this phase is to act as a buffer. Requests are triaged, batched and answered through one channel, so the owner keeps running the business — which matters, because performance is being watched throughout and a dip during diligence is itself a negotiating event.
Phase 6 — Definitive agreement and closing · 2–4 weeks
The purchase agreement is negotiated alongside the tail of diligence. The substantive items are representations and warranties, indemnification, escrow, and the working capital true-up.
Escrow holds back a portion of the price — commonly 5–15% for 12–24 months — as security against breaches of the representations. Reps and warranties insurance is an increasingly common alternative at the upper end of this market, transferring that risk to an insurer and letting the seller take more cash at closing.
Then funds flow, and the working capital adjustment is calculated and settled, usually with a true-up some weeks after closing.
Confidentiality, concretely
The most common fear owners raise is that employees, customers or competitors will find out. It is a manageable risk, and the mechanics are specific:
- Buyers see a blind teaser first — sector, size, geography, no identifying detail.
- Nothing identifying is released until an NDA is signed.
- The buyer list is deliberately limited. Every additional party is additional exposure.
- Sensitive material — customer names, pricing, employee detail — is staged, released late in diligence rather than early.
- Data room access is permissioned and logged, so what each party has seen is known.
- Management presentations are held off-site.
In a well-run process most employees and customers learn of a sale shortly before or after closing. The exceptions are usually self-inflicted: an owner telling someone informally, or a buyer list widened beyond what was necessary.
Where processes go wrong
Starting the preparation during the process. The single most common and most expensive error. By then the levers that move valuation are out of reach.
Going to market with one buyer. No competition, no leverage, and no benchmark to know whether the offer is good.
An aggressive add-back schedule. It gets tested in diligence, and when items fail, every other number in the file is treated with more suspicion.
Losing focus on the business. Buyers watch performance throughout. A soft quarter during diligence invites a re-trade, and the seller has the least leverage at exactly that point.
Ignoring working capital. Negotiated late, technical in definition, and one of the most common places value quietly disappears after the headline price is agreed.
Not engaging tax counsel early. Structure decisions with large tax consequences get made at the LOI stage. Advice afterwards is commentary.
Related
Short answers to process questions are on our FAQ. How the price is set is covered in How Lower-Middle-Market Businesses Are Valued, and the structural choices in Deal Structure and Tax. For a structured review of readiness, see the business readiness assessment.
This guide is for informational purposes only and does not constitute investment, financial, legal or tax advice. Timelines and terms vary with transaction complexity, sector and market conditions.