Why the Next 180 Days Are Significant When Preparing to Sell Your Business

By Jarrett Davidson
Published: September 5, 2016 | Last updated: March 21, 2024
Key Takeaways

If you’re preparing to sell your business, you’ll want to spend the next 180 days updating contracts, financial reporting and human resources.


When business owners are preparing to sell their business, the next 180 days is a critical time frame required to execute all significant changes that may be essential to improve the business valuation and how smoothly a sale can be executed.


The 180 days is broken down into three 60-day time periods. A 60-day time period is roughly the amount of time it takes to effectively implement, execute and monitor one significant change in a business to achieve the desired result. It is extremely difficult to execute a change within two weeks and impossible to do it in one.

Days 1 to 60

Update Contracts

In the first 60 days, all material contracts that the business is party to need to be organized and executed. These might include legal agreements with customers or vendors, banking agreements and/or any type of loan document that would require the owner’s signature. Other items, such as leases for equipment, photocopiers, trucks and the premise need to also be signed.


Over the course of running a business, contracts can remain unsigned or expire. All contracts need to be signed and/or updated. For example, if the business has agreed to provide a service or a product to a customer at a stated price, that contract needs to be formally signed by both parties to make that contract valid in the eyes of a business buyer. An unsigned contract will not stand up in due diligence. A worst case scenario has a buyer discounting the purchase price by the value of that unsigned contract.

Formalize Employee Agreements

It is important to have all employment agreements signed. Sometimes owners avoid formal agreements and believe a handshake will do. They may have the notion or assume that a particular employee will always remain loyal and employed with them and that they will keep their information confidential, including the amount of compensation they will be paid.

When selling a business, an employment agreement must clearly dictate the compensation an employee is going to be paid. The acquirer of the business needs to know exactly what that employee is compensated for. Post-closing, the acquirer does not want to be in the position of forcing employees to sign something, or worse, renegotiating an employment contract. This can affect the relationship between the new buyer and that particular employee.


Get Organized

In order for a seamless deal to occur, all material contracts and agreements need to be signed and/or updated well in advance so they can be disclosed to the buyer. This can be a daunting administrative task that will take 60 days to complete.

It helps if documents are organized in a digital folder by client and/or contract name. When a deal is near closing, retrieving relevant material contracts quickly and efficiently is very important. The more organized the business is, the easier it is to get through the due diligence period.


Days 61 to 120

Improve Financial Reporting

In the next 60 days, from day 61 through day 120, the business owner will need to improve, if they haven’t already done so, financial reporting. One of the things that is very important in due diligence and crucial in establishing and defending the valuation of the business, is how quickly, accurately and repeatable the accounting department can produce the financial reports for the business.

A buyer will want reports that may have never been produced from the financial reporting system in the past. For example, they will want a report in a manufacturing business that will illustrate the gross profit/margin of every product sold by customer, by state/province and by country for the last three years. If the financial reporting system cannot produce a report like that promptly, then immediately find a way to re-engineer the financial reporting system to be able to produce that report.

Inevitably, ad hoc reports will be requested, analyzed and reviewed by the buyer of the business from the first day value is discussed, to the day after closing. It is important to have a robust financial reporting system that can be accessed immediately to produce valuable reports that give a buyer insight to the business. It is always important when dealing with a financial reporting system to determine the goal of what the owner is looking to accomplish and what types of reports are needed in order to do that. The business also needs a system in place to analyze various reports, such as a daily, weekly and monthly management discussion.

What the business owner wants to avoid is asking the CFO or controller to start producing a number of reports that they have never produced before, a month before closing. That tends to cause eyebrows to raise and make employees uncomfortable because they can sense that something odd or different might be happening with the business. However, if CFOs are generating those types of reports far in advance of selling the business or closing the deal, it would just be thought of as part of their job and not out of the ordinary.

Ultimately, this practice benefits the owner of the business and the managers of the divisions if weekly or, at the very least, monthly reports can be easily printed and analyzed. This provides the owner with better information about their business and they can track and monitor progress.

Where to Start

It is going to take 60 days to determine what reports need to be printed, how to build report analysis into management discussions and the capability of the current financial reporting system. To determine what reports a business might need, start with the income statement and balance sheet on a weekly basis. Every business will have certain key performance indicators that should be established as important. It could be quantity of units sold every week. It could be dollar expenses in a certain department or geography.

Every business will be different, but there should be no more than four or five important KPIs that a business needs to track on a weekly basis that can give insight into performance. To assist business owners in establishing the relevant and important KPIs for their business, the use of outside advisors or financial experts can be useful. It is more important to nail the best four or five indicators rather than having 50 somewhat important numbers. Too often, business owners are handed a one-inch thick stack of monthly reports from their accounting department that leads to analysis paralysis…and nothing gets analyzed or acted upon.

The other element of what is important to be able to print and analyze in the context of selling the business might be best collaborated on with a merger and acquisition advisor. If a buyer is looking for information, an M&A advisor can help bridge the gap between what a buyer might think is important and what the CEO might think is important. It is important to print and analyze reports that acquirers of the business deem important.

Days 120 to 180

Reassess Your Team

In the final 60 days of the 180-day “makeover,” the business owner would want to make sure that they are doing the best they can to improve their team. In any acquisition, the buyer will assess the quality of the employees, management and leadership team, and will ultimately pay a fair market price or a premium for the business if the employees are strong. If this is not the case, they will certainly discount the purchase price.

In every transaction, the key employees will be interviewed by the buyer. If some of those employees are not going to be hired by the acquirer because they are not strong enough, the cost of turning over that person is going to come out of the owner’s pocketbook. If the business owner states that the sales manager is strong but the buyer has an opposing view, the cost of recruiting, training and implementing a new sales manager is going to cost that buyer money.

Every business owner looks for improvements in their business to help elevate their sale price and valuation. Assessment of employees is a very important one. If an owner has not taken stock of their employees, including their leadership and management teams, this final 60-day period will be an important time to do so.

An owner needs to ask, “If I was to do this all over again, would I hire this person?” If the answer is anything but “absolutely,” they should be looking to upgrade with a new employee. If the buyer is the one that has to replace that person and recruit someone new, they will discount the business price, usually by deducting the severance package from the purchase price. Changes may not have to be made in the 60 days, but owners need to identify these changes if they are required.

A business owner needs to be realistic about how strong their team is. The stronger the team, the higher the selling price of the business will be, so it is very important to start that process early.

Taking the First Step

If today is Day 1 for you and your business in the decision to sell, then congratulations! Making that decision may have been difficult, so that’s one step closer you’ve put yourself in planning your exit strategy. Your work may not be over yet, but follow these steps for Day 2 through 180 and you’ll experience a smooth(er) sale process.

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Written by Jarrett Davidson

Jarrett Davidson
Jarrett Davidson is the principal and co-founder of Score Capital Partners Inc. He is an experienced corporate finance professional who has advised private companies in all areas of corporate finance, including M&A, financial structuring, financing, valuations, business planning and strategic options.

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