A business owner tells you: “Look I’m thinking about selling my company.” What happens next? For a wealth advisor, CPA, attorney, or other trusted advisor, this conversation can be the beginning of a multi-year planning process – or the beginning of a transaction that is much closer than the owner realizes.
The challenge is that “ready to sell” doesn’t have a single definition. A business can be financially attractive but operationally unprepared. An owner can be personally ready but financially unprepared. A company can be ready for a transaction even though the owner hasn’t fully decided what comes next.
Before discussing buyers or valuation, advisors should consider five different dimensions of readiness.
1. Financially Ready – Is the Founder Financially Ready?
Selling a business fundamentally changes an owner’s financial picture. Beyond the question of a valuation of the company, an advisor has to ask “what does the owner’s financial life look like after the transaction?” That means considering liquidity needs, lifestyle, taxes, investment strategy, estate planning, charitable goals, and the amount of wealth the owner actually needs from the transaction.
An owner may have a valuable company and still not be financially ready to sell if too much of their future wealth depends on the transaction producing a particular outcome.
For advisors, this is often where the conversation should begin.
2. Personally Ready – Is the Founder Personally Ready?
This is the question that can be easiest to overlook and in our opinion the most important. For many entrepreneurs, the business is their “baby”. It’s where they’ve spent 20 or 30 years building relationships, solving problems, making decisions, and defining their identity.
So ask: “What do you want to do after you sell?”
The answer doesn’t have to be retirement. It might be starting another company, investing, working with the business in a different capacity, consulting, spending more time with family, or simply taking a break. If an owner hasn’t thought about what comes next, they may be less prepared for a transaction than their financial statements suggest.
The financial plan and the personal plan should develop together.
3. Business Ready – Is the Business Ready?
Is the business ready and marketable at this point? Does it need a few more years to achieve certain milestones? Can 3-5 more years be on the table to make the company more valuable?
Some considerations include:
- Strong management team in place
- Steady or healthy growth in revenue
- Long term relationships and contracts in place
- Consistent and sustainable profitability
- Scalable systems and processes in place to support future growthClear opportunities for continued growth that a buyer can realistically underwrite
4. Transaction Ready: Are the Founder and the Company Transaction-Ready?
A business doesn’t need to be perfect before entering a sale process but owners should understand what a buyer is likely to examine.
That can include:
- Financial statements and tax returns
- Customer concentration
- Contracts
- Employees and compensation
- Intellectual property
- Insurance
- Working capital
- Legal matters
- Recurring versus non-recurring revenue
- Owner-related expenses
An advisor doesn’t need to conduct the diligence themselves but recognizing that a client has significant gaps can be an important signal that more preparation is warranted before going to market.
5. Is the Market Ready?
Even a well-run company isn’t automatically ready to sell simply because the owner wants to exit. Broader market and industry considerations are key.
- Is there a lot of acquisition appetite for this particular industry?
- Who could logically acquire the business?
- Would strategic buyers have a reason to pay a premium?
- Could private equity be interested?
- Are market conditions ripe for an acquisition?
- What would make a buyer want this particular business?
Understanding the likely buyer universe early can help an owner make better decisions before launching a formal process. It’s about building the business that a broader group of buyers will want to own.
The 10 Questions Advisors Can Ask
When a client says, “I’m thinking of selling” or “I’m thinking of retiring” these questions can help determine how serious – and how prepared – the client actually is:
- Why are you considering a sale now?
- What would you need financially from a transaction?
- What do you want to do after selling?
- Could you wait two or three years before selling or do you want out as soon as possible?
The Advisor’s Role Doesn’t End When the Sale Begins
A business sale touches nearly every part of an owner’s financial life.
The M&A advisor may lead the transaction, but the owner’s broader advisory team can play an important role before, during, and after the process.
The CPA can help address tax considerations and financial reporting.
The attorney can advise on legal and transaction matters.
A fractional officer can focus on strengthening financial and operational matters.
The wealth advisor plans out translating a business asset into a long-term wealth plan.
The strongest outcomes often come when those advisors are involved before the process becomes urgent.
The Best Time to Have the Conversation
When a client says, “I’m thinking of selling,” the goal is to help the client understand whether they are financially, personally, operationally, and strategically prepared to make that decision.
And sometimes the most valuable advice is simply: “Before you decide, let’s figure out what needs to happen first.”
