How to prepare your company for a private equity sale: a 12 to 24 month plan

How early should you start preparing to sell?

Start 12 to 24 months before you want to sell. That gives you time to fix problems, show a clean trend and make choices without pressure. Even earlier is fine. A rushed sale usually costs you price and terms.

Alpine Investors, a private equity firm, writes in a 2025 article: “Even if selling your business is years away, it’s never too soon to prepare for a future exit.” It also says selling “isn’t just about price. It’s about timing, judgment, and who you trust to carry the business forward.”

The table below shows a sample timeline. Adjust it to your company.

What do private equity buyers look for?

Buyers look for earnings they can trust, a business that does not depend on one person, customers who stay and a clear way to grow. Capstreet states its own list in plain words.

Capstreet says: “We look for businesses that have a tenured team of owners or managers seeking a majority capital partner, with solid financials, a defensive business model, untapped growth potential, and competitive advantages within their market niche.” Capstreet also states it looks for “$3 to $15 million of EBITDA,” and that its investments are “Primarily majority investments.” Read the full list on our deal criteria page.

The table translates that list into preparation work.

How do you get your financials ready?

Get your financials ready by closing the books every month, supporting every add-back and building a clear earnings bridge from net income to adjusted EBITDA. Buyers test each number, so give them records, not explanations.

Alpine Investors says most private equity buyers ask for revenue over the last three years, split by service or product, plus net income and EBITDA. It also looks at revenue by business line and by customer, and at customer type. Learn each term in our glossary: EBITDA, add-backs and adjusted EBITDA.

KMCO, a CPA firm, makes a point worth repeating. Preparing for a sale means “identifying and correcting financial potholes before a letter of intent (LOI) is ever signed.” Its reason is plain: “Having a buyer identify issues during their due diligence creates doubt.”

Your financial checklist:

1. Close the books within a few weeks of each month end.
2. Reconcile reports to the general ledger.
3. Write your revenue recognition policy and follow it.
4. List every add-back with proof. See quality of earnings.
5. Break revenue down by customer, product and contract type for three years.
6. Compute working capital by month.
7. Clean up old receivables, unused inventory and unrecorded liabilities.
8. Move personal expenses out of the business well before the sale.

Auxo Capital Advisors tells owners to prepare the earnings bridge, revenue policies, add-back support, working capital schedules and cash conversion analysis before buyers gain exclusivity. After exclusivity begins, you have less room to fix things.

How do you reduce your dependence on you?

Build a leadership team that can run sales, operations and finance without you. A buyer values a company that keeps working when the founder steps back, and it values you more as a partner than as a single point of failure.

First Citizens notes that a private equity sale can reduce a company’s dependence on the owner by bringing in professional management. Buyers prefer to see some of that in place. CapitalPad adds that smaller companies often trade at lower multiples because buyers must account for concentration, management depth and the work required to support growth.

Ask yourself these questions:

• Who owns each major customer relationship besides you?
• Who can approve pricing, hiring and spending?
• Who would a buyer call if you were out for three months?
• Which jobs need a hire before a sale?
• Have your key people been told, and are they paid to stay?

Plan for retention. Read our guide on retaining management and key employees and the glossary entry for incentive equity.

How do you reduce customer and revenue risk?

Spread your revenue across more customers and more contract types, and document what you have. Buyers look at your top customers first. A single large account that can leave is a risk they price in.

CapitalPad’s framework lists revenue quality as a main driver of value: repeat demand, retention, pricing power and a diverse customer base, against dependence on one account or owner relationship. Start by measuring.

If one customer is too large, look for ways to add others before you go to market. Do not rush into new risk, such as deep discounts, to win accounts. Buyers see through that.

What records should be ready for diligence?

Have contracts, tax filings, employee records and policies in one organized place before a buyer asks. A tidy data room shows that you run the company with care and shortens the buyer’s work.

First Citizens warns that diligence “is often rigorous and can consume a considerable amount of time from you and your executive team.” CapitalPad says a seller who can explain customer retention, reconcile earnings and document working capital reduces uncertainty during diligence.

Our due diligence checklist for owners gives a longer list. See also due diligence and data room in the glossary.

Which advisers do you need?

Most owners need a lawyer who handles company sales, a tax adviser and, in many cases, an investment banker. Choose them early. They shape structure, price and the terms that follow.

Altair Advisers warns that private equity transactions “can fall apart quickly and often do not play out as intended.” An experienced team helps you avoid that. Ask your own tax adviser and lawyer about structure, taxes and estate planning before you accept any offer, because those points depend on your facts.

Read working with an investment banker or advisor to decide what fits your size.

How should you set your goals before the first call?

Decide how much cash you need, what role you want and what your team needs before you meet a buyer. Those answers decide which structure fits. Without them, price alone drives your choice.

Write down answers to these questions:

1. How much cash do I need at closing, and how much can I leave invested?
2. Do I want to stay and lead, step back slowly or leave?
3. What do I want for my employees and my brand?
4. How would I feel about a partner who controls the board?
5. What is my timeline?

Terms such as rollover equity, earnouts and a letter of intent will shape your answers. Capstreet states that “Entrepreneurs reinvest alongside Capstreet.” Our article What Really Happens After Selling to Private Equity describes what comes after closing. To compare partners, use our guide on how to choose a private equity partner.

What mistakes should you avoid while you prepare?

Avoid changes that look like window dressing, delays that burn your timeline and secrets that surface in diligence. Buyers forgive problems you disclose early. They do not forgive surprises.

• Cutting costs that hurt the business. A buyer will see the damage in later months and may reverse your gain.
• Adding aggressive add-backs. Fewer well-supported adjustments are stronger than a long list of weak ones.
• Telling your team too early or too late. Plan who learns what, and when, with your lawyer.
• Running a sale on the side. Keep the company on plan. A dip in results during the process can change the price.
• Hiding known issues. Raise them yourself and explain the fix.

Next step

Review our deal criteria and our page on selling your business to private equity. When you want to talk, start a confidential conversation at /contact, call 713-332-2700 or email connect@capstreet.com.