Selling your business: an 18-month checklist that gets beyond tidying the accounts

Imagine a buyer asks for your monthly profit by customer, the terms of your largest contract and a forecast that shows what happens if that customer leaves.

The information exists, roughly. Finance can produce the sales figures. Your operations director knows which jobs make money. The contract is somewhere in your email. You can explain the forecast, although a few assumptions need updating.

Getting a coherent answer together will take several people and most of a week.

That is a useful place to start when you are preparing to sell a business. How much of the company's value can you explain clearly, support with evidence and hand over to someone else?

An 18-month preparation period gives you time to work on that question. It is a planning framework, not a promise that a sale will complete on schedule. Some businesses need longer, particularly where management, contracts or ownership arrangements need substantial changes. Others receive an approach before they have done any preparation at all.

If you are starting now, I would work through the following sequence.

First, establish what a successful exit means to you.

Before anyone produces a valuation, write down what you want to happen after completion.

Do you want to leave completely? Would you stay for a defined handover? Could you accept some payment later? Are you willing to retain shares? How much does the future of the team or company name influence your decision?

These answers affect which buyers and deal structures are worth considering. An attractive headline offer might require three more years running the business. If your main objective is to stop running it, that condition deserves attention early.

Bring the other shareholders into the conversation. An owner who wants immediate cash and one who wants to keep a stake can have different views of the same offer. Discovering that disagreement after buyers have invested time in the process is avoidable.

Ask your tax and legal advisers to examine the proposed route at this stage. Ownership, company structure and personal circumstances can affect the outcome, and eligibility for some tax reliefs depends on conditions being met over time. A looming completion date limits your options. HMRC explains the qualifying conditions for Business Asset Disposal Relief.

Between eighteen and twelve months out, make the business explainable.

Start with the information you already use to run it. Can someone reconcile the monthly management accounts to the year-end accounts? Can they trace an important balance to the records beneath it? Are changes in accounting treatment documented?

I would take one recent month and follow the main numbers all the way through. Pick a material sale: where is the contract, what was delivered, when was revenue recognised, when was it invoiced and when did the cash arrive? Repeat the exercise for stock or work in progress if those matter to your business.

This can expose more than a reporting problem. A disagreement over when a job is complete may reveal why invoices are delayed. An unreliable stock figure may be hiding obsolete products. Fixing the underlying process makes the information more useful to management now.

Give one person responsibility for each recurring problem. A list of issues without an owner will still be a list of issues next quarter.

Examine profit at the level where decisions are made.

Company-wide margin can conceal a lot. A growing customer may use disproportionate management time, demand expensive delivery terms or generate repeated rework. Revenue can increase while the work becomes less attractive.

Consider an illustrative services business with two large customers. Customer A generates £1m of revenue and £350,000 after directly attributable delivery costs. Customer B generates £1.4m and £210,000 on the same basis. That makes their contribution margins 35% and 15%, before shared overheads.

Those figures do not tell you to drop Customer B. They tell you where to investigate. Is pricing wrong? Is the work genuinely strategic? Is unused capacity making the contract worthwhile? Have support costs been allocated sensibly?

A buyer can ask those questions too. Prepare an answer grounded in what you have changed and what happened afterwards.

Build a record of unusual items affecting profit. Keep the underlying evidence, explain why an item is unusual and record whether it is likely to recur. An adjustment that increases earnings needs to survive the same scrutiny as one that reduces them. BDO's discussion of normalised EBITDA explains why these judgements matter.

Find out where the business still waits for you.

Owner dependence is often easiest to see in a diary.

For two weeks, record the decisions, introductions, approvals and exceptions that reach you. Then ask why. Does the team lack authority, information, experience or confidence? Do you keep taking decisions back after delegating them?

Replacing each dependency requires a different response. A pricing problem might need clear limits and a margin report. A relationship problem might need months of shared customer meetings. A judgement problem may need a stronger manager.

Writing a process document will help with some of this. It will not transfer a customer's trust or teach someone to negotiate a difficult renewal.

Run a planned absence test once the arrangements are in place. Agree what genuinely requires escalation, step away for a suitable period and review what happened. The missed decision is useful information. Quietly answering every message from holiday defeats the exercise.

Between twelve and six months out, build a record of improvement.

A new management pack is a start. Several months of management using it is stronger evidence.

Track a small number of measures that reflect the business: customer retention, contract renewals, job margins, cash collection, utilisation, recurring revenue or order-book conversion. Choose the measures because they help explain performance, and keep definitions consistent.

Do the same with forecasts. Save each version, record its assumptions and compare it with what happened. If the forecast missed, explain why. A model becomes more credible when its author can distinguish a change in trading from a mistake in the model.

For example, a sales forecast might be correct in total while cash collection is persistently late. The next version needs a better collection assumption. Repeating the optimistic assumption does not make the forecast more ambitious; it leaves a known weakness unresolved.

Give working capital its own preparation plan.

Understand how much cash the business needs between paying for work and collecting from customers. Look across the year, including the seasonal peaks.

If you have improved collection, show whether the improvement has lasted. If inventory has fallen, explain whether better purchasing caused it or whether you are running short of stock. Distinguish a sustainable operating change from a favourable month-end photograph.

This matters during negotiation because the amount of working capital delivered with the business can affect the amount shareholders receive. The target and definitions are agreed for the transaction; there is no universal figure that every buyer must use. BDO explains the relationship between working capital and sale proceeds.

Delaying supplier payments to make the bank balance look healthier may create another liability or operating problem. It also gives you an awkward explanation to make when someone examines the payment history.

Build the data room around questions a buyer will ask.

Start an index of financial, commercial, legal, employment, property and technology records. Assign responsibility and note what is missing or outdated.

For material customer and supplier contracts, ask your lawyer to identify the provisions relevant to a sale, including any consent, assignment or change-of-control requirements. Do this before the transaction timetable depends on obtaining a particular signature.

Keep a consistent record of the documents you provide. If three versions of a customer schedule circulate, someone has to explain which one is correct and why the others differ.

AI can assist with indexing documents, locating references and suggesting gaps. Check its output against the originals. A confident summary of a contract is only useful if it describes the contract accurately. Use systems approved for the information involved and keep a human responsible for the review.

In the final six months before your intended exit, decide whether the business is ready to enter a process.

The date is a prompt to assess readiness. An unresolved problem may justify changing the timetable.

By now, you should have a clear view of the proposed sale, the financial evidence, the management team's capacity and the major issues a buyer is likely to raise. Appoint the appropriate transaction advisers early enough for them to challenge the preparation, rather than first meeting them when an offer arrives.

Agree who will run the company while diligence is underway. Someone needs to protect sales, service delivery and cash collection. Someone also needs to coordinate responses to advisers. If both roles default to the founder, the plan is missing a resource.

Create a short weekly trading update during the process. Explain meaningful changes promptly and consistently. A deteriorating order book is a business problem even when everyone is excited about the sale.

The practical checklist I would use looks like this:

You do not have to complete every line before speaking to an adviser. You do need an honest account of what remains unresolved.

For this month, choose three tasks: trace one month's numbers, record where decisions depend on you, and hold the shareholder conversation about what an acceptable exit would involve. Those tasks will tell you considerably more than another speculative valuation.

Northbound's exit and succession work starts with understanding what needs to change inside the business. If an exit is on your horizon, bring us the timetable and the questions you have not yet resolved.