--- title: "How to Prepare Your Company for a Private Equity Sale" description: "Prepare your company for a private equity sale: clean financials, a team that runs without you, spread customers and a data room. A 12 to 24 month plan." url: https://capstreet.multisites.ai/guides/how-to-prepare-your-company-for-a-private-equity-sale publisher: Capstreet phone: +1-713-332-2700 contact: https://capstreet.multisites.ai/contact --- # How to prepare your company for a private equity sale: a 12 to 24 month plan Start 12 to 24 months before you plan to sell. Clean up your financials, support every add-back, build a team that can run without you, spread your customer base and organize your records. Buyers pay more for earnings they can verify and a business that does not depend on one person. Owner guideUpdated November 10, 20267 min read ![Downtown Houston skyline, home of Capstreet](https://capstreet.multisites.ai/_astro/houston-skyline.CI1wBZKY_Z21lbxH.webp) ## Start early A plan of 12 to 24 months gives you time to fix issues, show a clean trend and avoid rushed choices. ## Prove your numbers Buyers ask for three years of revenue, net income and EBITDA, and they test every adjustment. ## Reduce key-person risk A leadership team that can run the company without you supports price and your options after closing. ## Know your goals first Decide how much cash you need, what role you want and what matters for your team. Then choose a buyer to match. ## 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. When Focus Key actions 24 to 18 months out Goals and baseline Set your goals, pick advisers, review last three years of financials 18 to 12 months out Numbers and team Monthly closes, support add-backs, name successors for key roles 12 to 6 months out Risk and records Spread customer risk, clean contracts, build the data room, consider a quality of earnings review 6 to 0 months out Story and process Write the growth plan, rehearse management presentations, prepare for buyer calls ## 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](https://capstreet.multisites.ai/deal-criteria) page. The table translates that list into preparation work. What buyers look for What it means for you How to prepare Solid financials Numbers that tie to records Monthly closes, support for every adjustment Defensive business model Customers who stay, recurring revenue Track retention, renewals and contract terms Untapped growth potential A believable plan to grow Write the plan with budgets and owners Competitive advantages Why customers choose you Document your edge in your niche A tenured team Leaders beyond the founder Build and name your leadership bench ## 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](https://capstreet.multisites.ai/glossary/ebitda), [add-backs](https://capstreet.multisites.ai/glossary/add-backs) and [adjusted EBITDA](https://capstreet.multisites.ai/glossary/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](https://capstreet.multisites.ai/guides/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](https://capstreet.multisites.ai/guides/retaining-management-and-key-employees) and the glossary entry for [incentive equity](https://capstreet.multisites.ai/glossary/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. Measure Why buyers ask Share of revenue from top 1, 5 and 10 customers Shows concentration Customer retention by year Shows how defensive the business is Contracted vs one-time revenue Shows how repeatable it is Contract end dates and renewal terms Shows when revenue could change Price changes over time Shows pricing power 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. Area Examples to gather Financial Three years of statements, monthly closes, tax returns, add-back support Customers Top customer contracts, retention data, pricing history Operations Org chart, key processes, vendor contracts, systems Tax Returns at federal, state and local levels, open notices People Employment agreements, benefits, incentive plans Legal Corporate records, licenses, litigation, intellectual property Our [due diligence checklist for owners](https://capstreet.multisites.ai/guides/due-diligence-checklist-for-owners) gives a longer list. See also [due diligence](https://capstreet.multisites.ai/glossary/due-diligence) and [data room](https://capstreet.multisites.ai/glossary/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. Adviser What they help with Lawyer Letter of intent, purchase agreement, rollover and employment terms Tax adviser Deal structure, tax on cash and rolled equity, estate planning CPA Financial clean-up, quality of earnings Investment banker Finding buyers, running the process, negotiating Wealth adviser Planning for proceeds Read [working with an investment banker or advisor](https://capstreet.multisites.ai/guides/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](https://capstreet.multisites.ai/guides/rollover-equity), [earnouts](https://capstreet.multisites.ai/guides/earnouts) and a [letter of intent](https://capstreet.multisites.ai/guides/letter-of-intent) will shape your answers. Capstreet states that “Entrepreneurs reinvest alongside Capstreet.” Our article [What Really Happens After Selling to Private Equity](https://capstreet.multisites.ai/insights/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](https://capstreet.multisites.ai/guides/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](https://capstreet.multisites.ai/deal-criteria) and our page on [selling your business to private equity](https://capstreet.multisites.ai/sell-your-business-to-private-equity). When you want to talk, start a confidential conversation at [/contact](https://capstreet.multisites.ai/contact), call 713-332-2700 or email [connect@capstreet.com](mailto:connect@capstreet.com). ## Frequently asked questions ### How early should I prepare my company for a sale? Start 12 to 24 months before you want to sell. That gives you time to clean up financials, test add-backs, build your management team and fix problems a buyer would find. Alpine Investors says it is never too soon to prepare, even if a sale is years away. ### What do private equity buyers want to see first? 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. They also look at revenue by customer and customer type. Have these ready in a clear format before the first call. ### What does Capstreet look for in a company? Capstreet states it looks 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. It states criteria of $3 to $15 million of EBITDA. ### Do I need a quality of earnings report before I sell? Not always, but many owners find it helpful. KMCO, a CPA firm, says a sell-side quality of earnings report can surface problems before you go to market, which can prevent price cuts in diligence. Ask your CPA and banker whether it fits your timeline and company. ### Do I need an investment banker or advisor? Many owners use one, and a good lawyer and tax adviser matter in every sale. Altair Advisers says private equity deals can fall apart quickly. An adviser can run the process, find buyers and help you compare offers. Read our guide on working with an investment banker to decide. ### What happens to my team if I sell to private equity? It depends on the buyer and the deal. First Citizens notes a PE sale can bring professional management and reduce a company's dependence on the owner, but also changes in control and culture. Ask each buyer how it treats management, and what plans it has for your team, before you sign. ## Terms on this page - [Quality of Earnings](https://capstreet.multisites.ai/glossary/quality-of-earnings) - [Incentive Equity](https://capstreet.multisites.ai/glossary/incentive-equity) - [Letter of Intent](https://capstreet.multisites.ai/glossary/letter-of-intent) - [Adjusted EBITDA](https://capstreet.multisites.ai/glossary/adjusted-ebitda) - [Rollover Equity](https://capstreet.multisites.ai/glossary/rollover-equity) - [Private Equity](https://capstreet.multisites.ai/glossary/private-equity) - [Due Diligence](https://capstreet.multisites.ai/glossary/due-diligence) - [Add-Backs](https://capstreet.multisites.ai/glossary/add-backs) - [Data Room](https://capstreet.multisites.ai/glossary/data-room) ## Sources 1. [Alpine Investors: What to Know Before Selling your Business to Private Equity](https://alpineinvestors.com/resource/selling-your-business/) 2. [Alpine Investors: What to Know Before Selling your Business to Private Equity (financial data)](https://alpineinvestors.com/resource/selling-your-business/) 3. [Alpine Investors: What to Know Before Selling your Business to Private Equity (valuation)](https://alpineinvestors.com/resource/selling-your-business/) 4. [First Citizens Wealth: What to know before selling your business to private equity](https://www.firstcitizens.com/wealth/insights/business-planning/selling-your-business-to-pe-firms) 5. [First Citizens Wealth: What to know before selling your business to private equity (owner dependence)](https://www.firstcitizens.com/wealth/insights/business-planning/selling-your-business-to-pe-firms) 6. [KMCO: 7 Benefits of a Sell-Side Quality of Earnings Report](https://www.kmco.com/insights/7-benefits-of-a-sell-side-quality-of-earnings-report/) 7. [KMCO: 7 Benefits of a Sell-Side Quality of Earnings Report (early fixes)](https://www.kmco.com/insights/7-benefits-of-a-sell-side-quality-of-earnings-report/) 8. [Auxo Capital Advisors: Quality of Earnings (QoE) in M&A, What Buyers Flag](https://auxocapitaladvisors.com/qoe-what-buyers-flag/) 9. [CapitalPad: Lower Middle Market EBITDA Multiples (smaller companies)](https://capitalpad.com/lower-middle-market-ebitda-multiples/) 10. [CapitalPad: Lower Middle Market EBITDA Multiples (preparation)](https://capitalpad.com/lower-middle-market-ebitda-multiples/) 11. [Altair Advisers: 5 Things to Know About Selling Your Business to Private Equity](https://altairadvisers.com/5-things-to-know-about-selling-your-business-to-private-equity/) Written by Capstreet and checked against the sources above on November 10, 2026. Market figures and deal practice change, and nothing here is legal, tax or investment advice. Ask your own advisers before you act. ## Keep reading - [How to sell your business to private equitySelling to private equity means a firm buys most of your company, usually with a mix of cash at close and equity you keep. You work through an intro call, a data request, a letter of intent, diligence and a close. Most owners stay on and invest alongside the buyer.](https://capstreet.multisites.ai/sell-your-business-to-private-equity) - [Capstreet deal criteria: the companies we look forCapstreet looks for entrepreneur-owned business services companies with $3 to $15 million of EBITDA. We make primarily majority investments, and entrepreneurs reinvest alongside Capstreet. We want a tenured team, solid financials, a defensive business model, untapped growth potential and a niche advantage. We invest across 12 industries.](https://capstreet.multisites.ai/deal-criteria) - [The due diligence checklist for owners selling to private equityDue diligence is the buyer's check of your business after you sign a letter of intent. Private equity firms review five areas: financial (quality of earnings), operations, tax, HR and benefits, and legal. Owners who gather clean records before the process starts shorten it and face fewer surprises.](https://capstreet.multisites.ai/guides/due-diligence-checklist-for-owners) - [The letter of intent: what it says, what binds you and what to negotiateA letter of intent (LOI) is a short document where a buyer states the price and main terms it proposes. Most terms are non-binding. A few, usually exclusivity and confidentiality, do bind you. Signing starts diligence and takes your company off the market, so negotiate it with a lawyer.](https://capstreet.multisites.ai/guides/letter-of-intent) - [Retaining management and key employees when you sellKeep your management team by planning early: map key people, tell them at the right time, and give them a reason to stay, such as incentive equity, a retention bonus or a bigger role. Buyers study management depth closely, because a team that can run without you supports both price and the plan.](https://capstreet.multisites.ai/guides/retaining-management-and-key-employees) - [Is Your Company Ready for Private Equity? A ChecklistYour company is ready for private equity when it has solid financials, a defensive business model, untapped growth potential, a competitive edge in its niche, and a tenured team that wants a majority capital partner. Test each point against the checklist below before you take a first call.](https://capstreet.multisites.ai/insights/is-your-company-ready-for-private-equity) ## Ready to get started? Let’s talk. Tell us about your company and what you want next. Conversations are private, and there is no obligation. [Start a conversation](https://capstreet.multisites.ai/contact) [(713) 332-2700](tel:+1-713-332-2700)[connect@capstreet.com](mailto:connect@capstreet.com) ![Capstreet team members at a Houston elementary school for Houston Reads Day](https://capstreet.multisites.ai/_astro/houston-reads-day.DxNd9bIr_tggWP.webp)