How to prepare your company for sale: what the buyer reviews before making an offer

A sophisticated buyer does not buy what the seller says they have. They buy what they can verify.

Before making an offer, the buyer independently reconstructs normalized EBITDA, reviews customer concentration, evaluates owner dependence, and estimates transition risk. Everything they cannot verify becomes a discount — either in the multiple, in the consideration structure, or in conditions in the earn-out.

Preparation is not a formality. It is the only lever the seller has to control the outcome before the negotiation starts. A founder who enters the process with their business documented and risks anticipated comes to the table with an advantage. One who improvises during due diligence cedes that advantage to the buyer — and pays for it in pesos.

What does the buyer reconstruct before making an offer?

Before presenting an indicative offer, a serious buyer does four things independently:

1. Reconstructs normalized EBITDA. The buyer takes the financial statements the seller reports and builds their own normalization bridge. Every adjustment the seller claims but cannot document is excluded. Every cost the buyer considers understated is added. The buyer's normalized EBITDA is lower than the seller's — unless the seller has done the work first and documented it fully.
2. Maps customer concentration. Revenue by customer over 3 years: top 5, top 10, and share of total. The trend shows whether key customers are growing or shrinking as a share and whether there are contracts or the relationship depends on the founder. A business where the top 3 customers represent 65% of revenue with no contracts is priced differently than one with the same concentration covered by 3-year supply agreements.
3. Evaluates owner dependence. Identifies who the key relationships are — customers, suppliers, employees — and which live on the founder's phone and not in the company. The central question is what happens to revenue if the founder leaves on day 31: the buyer is not buying the founder, they are buying what survives without them.
4. Estimates transition risk. Measures how long it takes to transfer the business operationally and whether there is a management team that can run the business without the founder. Evaluates whether there are documented processes or everything lives in the owner's head. That transition risk is priced directly into the contingent tranche.

How to prepare normalized EBITDA before entering the process?

The seller who prepares the normalized EBITDA bridge before any conversation with buyers controls the starting point of the negotiation. The one who waits for the buyer to do it loses that control for good.

The bridge has four components:

1. Reported EBITDA. The figure in the financial statements. It is the starting point — not the valuation base.
2. Documented adjustments. Each adjustment with its rationale and supporting documentation. Common adjustments in Mexican SME transactions: owner compensation above market, personal expenses charged to the business, non-recurring items (one-off legal fees, extraordinary repairs, COVID-related costs), related-party transactions on non-market terms, institutional cost gap (costs a buyer would have to add: audit, compliance, insurance, professional management).
3. Normalized EBITDA. The adjusted figure that represents the business's recurring earnings capacity in the hands of a standard operator.
4. Support by line. Each adjustment must have an attached document — a payroll record, a receipt, a bank statement. An adjustment without support will be excluded by the buyer. At a 4x multiple, an undocumented adjustment of MXN $300K costs MXN $1.2M in enterprise value.

See normalized EBITDA and the EBITDA calculator to build this base.

How to prepare the data room before starting the sale process?

The data room is the physical evidence behind every claim in the CIM. A buyer who cannot find a document asks a follow-up question. A buyer who asks too many follow-ups loses confidence in the seller — and that lost confidence becomes price.

Eight folders every data room should have before the process starts:

• Financial — 3–5 years of statements, EBITDA bridge with support.
• Legal — Corporate structure, shareholder agreements, SAT compliance, IMSS/Infonavit history.
• Contracts — Agreements with customers and suppliers or documented relationship history.
• Labor — Headcount, compensation, PTU obligations.
• Assets — Register with condition and age.
• Operations — Customer concentration analysis, org chart, owner dependence profile.
• Permits — Operating licenses, sector compliance.
• Insurance — Policies and claims history.

The data room must be complete before the first NDA is signed — not assembled during due diligence under pressure.

How to anticipate and document risks before the buyer finds them?

Every risk the buyer discovers in due diligence that was not disclosed in the CIM becomes a negotiation weapon. The seller has two options: disclose and mitigate, or hide and get repriced.

Risks that appear in every Mexican SME transaction and should be addressed proactively:

• Customer concentration. Document it, explain it, mitigate it. Show contractual coverage, revenue trends by customer, and relationship history. 60% concentration disclosed with 3-year agreements and stable trend is manageable; the same concentration discovered in due diligence with no context is deal risk.
• Owner dependence. Build a transition plan before the process starts: who covers which relationships, in what timeframe, and with what incentive structure for key employees. A founder who presents a credible 12-month transition plan reduces the contingent tranche because the buyer's main risk is quantified and managed.
• Labor and tax liabilities. Obtain a favorable SAT opinion, confirm IMSS and Infonavit are current, and quantify any PTU exposure. A buyer who finds an undisclosed MXN $800K tax contingency does not only reduce the price by that amount — they also question everything else in the data room.
• Informal contracts. If key customer relationships operate on purchase orders or verbal agreements, document revenue history, relationship tenure, and any written communication that evidences the link. A substitute with context is better than a gap.

What is the difference between entering prepared vs not in a sale process?

Same business, two paths — a specialty chemicals distributor:

Preparation did not change the business. It changed what the buyer could verify — and that changed the price.

What should you have ready before starting the sale process?

What do founders ask most often when preparing their company for sale?

How long does it take to prepare a company for sale?

Between 3 and 12 months depending on the current state of finances and documentation. A business with clean 3-year financials, organized contracts, and a management team that operates independently of the founder can be ready in 3 months. One with informal accounting, no contracts, and total owner dependence needs 6–12 months at minimum — not to change the business, but to document what exists and mitigate the risks the buyer will find.

Do I have to normalize EBITDA before talking to buyers?

Yes — always. A founder who enters the conversation with buyers with only reported EBITDA hands the buyer a blank check to normalize conservatively. Every adjustment the buyer excludes reduces the valuation base. At a 4x multiple, MXN $500K excluded from normalized EBITDA costs MXN $2M in enterprise value. The seller who does the normalization first, with documentation, controls the starting point.

What if I don't have formal contracts with my main customers?

It is common in SME transactions in Mexico. The substitute is documentation of the relationship: purchase order history, revenue by customer over 3+ years, email correspondence, any written communication that evidences the relationship and its continuity. A buyer who sees 4 years of consistent revenue from a customer without a formal contract will price it differently than a buyer who finds a gap with no explanation.

Does preparation guarantee a better price?

It does not guarantee a specific price — the market sets the multiple range for your sector and size. What preparation does is maximize your position within that range and minimize the contingent tranche. An unprepared business at 3.5x with 40% contingent delivers less net consideration than one prepared at 4.2x with 20% contingent — even if EV looks similar on paper.