How to Prepare Your Business for Sale: From a CPA Who’s Had the Hard Conversations

Last Updated on December 24, 2025 by Ewen Finser

You’ve built something great after pouring your heart, soul, time, and money into it. And now, it’s a legitimate asset with cash flow, customers, and a life of its own. 

It’s at around this point that the same thought crosses every entrepreneur’s mind: “Is it time to sell and move on to the next big thing?”

But too many entrepreneurs wind up rushing this decision and never get around to actually setting themselves up for success and properly preparing for a sale. This is especially true for business owners who have a bad quarter or get burned out — these otherwise successful entrepreneurs are often too quick to throw in the towel and just want to wash their hands of their life’s work.

The thing is, if you don’t take the time to prepare your business for sale, you’ll only leave money on the table. I’ve seen this firsthand as a CPA: the messy QuickBooks files, the commingled bank accounts, and the creative accounting designed to lower tax bills.

If that’s you, now’s your time to act. Today, I’m walking you through exactly how to properly prepare for a sale — including the financial cleanup, the operational documentation, and the strategic positioning you need to get maximum value.

The Mindset Shift: Tax Minimization vs. Profit Maximization

Before going into concrete steps, there’s a certain paradigm shift you need to make: maximizing selling price vs. minimizing your tax liability. This is the hardest pill for most business owners to swallow because it usually takes money out of their pocket — at least in the short term.

For years, your goal has likely been to show as little profit as possible. You expensed your car, your home office, your cell phone, and maybe even that “business trip” to Disney World (as a CPA, please don’t do this). 

You did it to pay fewer taxes, and from a cash-flow perspective, that makes sense.

But when you sell a business, you’re paid based on a multiple of your profit using a metric called SDE (seller’s discretionary earnings) — essentially the total money the business generates for the owner. The math is brutal. If your business sells for a 4x multiple, every dollar you hide in expenses to save 30 cents in taxes effectively costs you $4.00 in the final sale price. 

Let’s say you run $10,000 of questionable personal expenses through the business this year. You might save ~$3,000 in taxes, but you also lower your SDE by $10,000. And, at a 4x multiple, you just lowered your sale price by $40,000.

So to prepare for a sale, you must stop thinking like a taxpayer and start thinking like an investor who wants to maximize their bottom line. This doesn’t mean you stop taking valid deductions, but it does mean that your books need to be defensible. If you can’t prove an expense is personal and should be added back to your profit, the buyer won’t pay for it.

With that in mind, let’s go step by step on what you need to do before selling. 

Step 1: The Financial Cleanup

Clean books sell businesses. It’s that simple.

After all, when a buyer looks at your business, they’re buying a stream of future cash flow. If they can’t clearly see that stream because your accounts are messy, they will perceive risk, which lowers valuation.

Switch to Accrual Accounting

Most small businesses run on a cash basis, where you record income when it hits the bank and expenses when you pay the bill. This is fine for taxes, but terrible for valuation because cash accounting causes lumpy P&L statements — if you buy $50,000 of inventory in November for the holiday rush, cash accounting makes November look like a massive loss. 

Accrual accounting, on the other hand, matches the expense of the goods to the month you actually sold them. This is good because buyers need to see the true profitability of the business month-over-month. So if you’re serious about selling, having your P&L converted to an accrual basis is non-negotiable.

Separate Personal and Business Expenses

If you’re still paying for your Netflix subscription with the company card, stop. Today.

Commingling funds is the fastest way to kill a deal during due diligence. It signals to a buyer that your internal controls are weak and forces them to question every single line item.

• Is this software subscription actually for the business? 
• Is this travel expense legitimate?

If it’s not 100% for the business, pay for it personally. It’s easier to pay yourself a distribution and buy the item personally than to explain a muddy expense report to a skeptical buyer six months from now.

Audit Your Subscription Creep

We all have them, whether it’s the extra seat on your project management software for an employee who quit last year or the SaaS tool you signed up for in 2021 that you haven’t logged into since 2022. 

But a $50/month wasted subscription is $600 a year. At a 4x multiple, that’s $2,400 of equity value you’re just lighting on fire. If you find ten of those, you’ve lost the price of a decent used car.

So audit your last 12 months of bank statements, canceling any dead weight.

Step 2: Understanding SDE and Add-Backs

You don’t need to be an accountant to understand SDE, but you do need to understand it if you want to get paid what you’re worth.

It’s simply your net income + add-backs, which are expenses on your P&L that wouldn’t necessarily transfer to a new owner. 

Common valid add-backs include:

• Owner’s Salary: If you pay yourself a $100,000 W2 salary, we add that back because the new owner keeps that money (or pays themselves).
• One-Time Expenses: Did you spend $5,000 on a trademark registration? That’s a one-time cost the new owner won’t have to pay again. Add it back.
• Personal Expenses: Health insurance, personal car leases, and cell phone bills.

Just be careful. This is where sellers lose the most credibility.

I’ve seen sellers try to add back everything. For example, I’ve seen them try to add back the cost of a conference they attended because “it wasn’t strictly necessary.” But if that conference brought in leads, it was necessary. 

If you try to claim ridiculous add-backs, the buyer will stop trusting your numbers.

Your best bet is to rely on a brokerage like Quiet Light to clean things up and keep them kosher. They can categorize add-backs into levels, from the obvious (salary) to the gray areas. They’ll also work with you before you list to identify which add-backs are defensible and which ones will make you look like you’re just padding the numbers.

Step 3: Operational Documentation

If you were hit by a bus tomorrow (or, more optimistically, won the lottery and moved to Fiji), would the business survive without you?

If the answer is no, you don’t have a business; you have a high-paying job. And no one wants to buy your job. Buyers want an asset that generates returns without requiring 80 hours a week of genius-level intervention. 

To achieve this, you need standard operating procedures.

Document Everything

You likely have a dozen processes that are stored only in your brain: How you negotiate with suppliers, how you update the website, how you handle a customer support crisis, the list goes on.

Get them out of your head and onto paper.

• Customer Service: Templates for common questions
• Fulfillment: Step-by-step guides on how orders are processed
• Marketing: Questions to answers like how do you set up an ad campaign? What is the cadence for email newsletters?

Delegating Your Tasks

If you’re the face of the brand, start introducing other team members. If you’re the only one who knows the password to the server, share it. If you’re the only one who talks to the supplier in China, introduce a manager to that relationship.

The goal here is transferability. A buyer needs to believe that after the sale, the keys will work, the engine will turn over, and the car will drive just as well without you in the driver’s seat.

Step 4: Reduce Concentration Risk

Risk is the enemy of valuation — when a buyer assesses your business, they are looking for points of failure.

Supplier Concentration

Do you rely on a single manufacturer for 90% of your product? You might be doing well right now, but what happens if they go out of business or raise prices? No buyer would want to take on that risk.

So diversify your supply chain. Even having a backup supplier vetted and ready (even if you don’t use them yet) is a massive trust signal to a buyer.

Traffic Concentration

Does 100% of your traffic come from Facebook Ads? If so, your revenue just might go to zero when Zuckerberg changes the algorithm again.

Does 100% of your revenue come from Amazon FBA? If so, the business is dead in the water if Amazon mistakenly suspends your account.

That’s why buyers pay a premium for stability. A business with 40% SEO traffic, 30% email traffic, and 30% paid ads is worth significantly more than a business that has 15% more revenue but is 100% dependent on one channel.

Step 5: Clean Up Your Legal House

Not much kills a deal faster than a “Wait, you don’t actually own that?” moment.

• Intellectual Property: Do you own your trademarks? Are they registered in the correct classes?
• Contracts: Do you have written agreements with your suppliers and contractors? Handshake deals don’t transfer, so get all your contracts in writing.
• Employee Agreements: Do your key employees have non-compete or confidentiality agreements? A buyer wants to know that your lead developer isn’t going to quit the day after the sale and start a competitor.

Step 6: Timing the Market vs. Timing the Business

In business sales, trends matter more than absolute numbers. 

If your business made $500k last year, $500k this year, and is projected to make $500k next year, it’s a flat asset and will sell for a lower multiple.

If your business made $300k last year, $500k this year, and is trending toward $700k, it’s a rocket ship that buyers will fight for.

That’s why waiting until the business plateaus to sell is a massive mistake. You’ve ridden the growth all the way to the top, get bored or tired, let things slip, and only then decide to sell when the numbers start to dip. And selling on that decline is an awful idea because you’ll be stuck defending why the numbers are down rather than selling the vision of where they are going.

The ideal time to sell is when you have just finished a major cleanup/optimization and the arrow is pointing up. If you can show a buyer a clear path to doubling the business (even if you don’t have the energy to do it yourself), that is valuable.

Step 7: The Pre-Sale Valuation

You shouldn’t wait until you’re desperate to talk to a broker. In fact, the best time to talk to one is six to 12 months before you actually want to list. 

A firm like Quiet Light can look at your business today and tell you what it’s worth. But more importantly, they can tell you what it could be worth if you fixed X, Y, and Z. They can look at your P&L and say, “Your inventory turnover is too slow, which is tying up cash. If you fix that over the next six months, you could increase your valuation by $100k.”

Or they might spot that your COGS are messy, and helping you clean them up now can prevent a deal from falling apart during due diligence later.

Getting a valuation early acts as a compass. It gives you a target. You aren’t just “running the business” anymore; you’re polishing an asset for a specific exit price.

The Biggest Takeaway: Start Now

If you get nothing else from this guide, it’s that you should start preparing now — not when you’re burned out after a bad quarter.

It’ll take longer than you think anyway because it requires a strategic pivot: you need to clean your financials, diversify your income streams, and document your operations so the business survives without you. 

And if you start cleaning your books, documenting your SOPs, and diversifying your risks today, you win either way.

1. If you sell: You get a higher multiple, a smoother due diligence process, and a faster close.
2. If you don’t sell: You have a more efficient, profitable, and easier-to-run business that relies less on you.

It’s the ultimate win-win.

So don’t wait for the burnout. Treat your business like the valuable asset it is. Then, when you’re ready to hand over the keys, you’ll be handing over a machine that commands the price you deserve.

Related Read:

• 8 Tips for Selling a Business Online
• Best Brokers for eCommerce Exits Over $1M