M&A Exit Readiness Checklist
Most business owners who want to sell in the next 2-3 years are less ready than they think. This checklist covers the areas buyers scrutinize most — and where sellers most often get tripped up.
Key Takeaways
- ✓Financial cleanliness is the most common deal killer — start with clean books
- ✓Customer concentration above 25% from one client is a major red flag for buyers
- ✓Management depth matters: buyers worry about key-person dependency
- ✓Legal housekeeping (IP, contracts, employment) often takes longer than expected
In this guide
1Financials: the foundation everything else rests on
Clean, audited or reviewed financials for 3 years. Buyers want to see CPA-prepared statements, not internal spreadsheets. If you don't have them, start now — getting 3 years of clean financials ready takes time.
Adjusted EBITDA reconciliation. Know your add-backs and be ready to defend them. Owner's salary, one-time expenses, and personal items run through the business all need to be documented.
No unexplained revenue spikes or drops. Be ready to explain every material variance. Buyers will ask.
If your books are on QuickBooks and have never been reviewed by a CPA, budget 6-12 months to get them into shape before a sale process. This is the most common timeline-killer we see.
2Customer base: concentration and quality
Customer concentration below 25%. If one customer represents more than 25% of revenue, buyers will either reprice the deal or walk. If you're above that threshold, spend 12-18 months before your sale process diversifying the base.
Multi-year contracts where possible. Contracted recurring revenue is worth more than project-based or transactional revenue. Even 12-month agreements help.
Customer retention data. Know your churn rate, average customer tenure, and net revenue retention. Buyers will build a model around these numbers.
3Operations: can it run without you?
Documented processes. The business should be able to operate if you take a 3-week vacation. If it can't, that's a key-person risk that buyers will price in.
Management team depth. Identify which roles would need to be backfilled if the owner left, and either hire into those gaps or document transition plans.
Technology and systems. Modern, transferable systems are a positive. Outdated or owner-built custom software that only one person understands is a liability.
One of the most effective things a seller can do 12-18 months before a process is start removing themselves from day-to-day decisions. Give your team the authority and document the fact that the business runs without you.
4Legal: get the housekeeping done early
IP ownership is clear. All software, trade names, patents, and proprietary processes should be formally owned by the company — not the founder personally.
Employment agreements and non-competes. Key employees should have signed agreements. Buyers will ask.
No pending litigation. Disclose early. Buyers find out in diligence, and surprises at that stage kill deals or result in significant price adjustments.
Clean cap table. Know exactly who owns what. Any informal agreements or side letters need to be formalized before a process.
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