Five phases, and where the time goes
A sale has five phases. The first is the longest and the one owners compress; the last is the one they underestimate. Everything in between depends on the first being done properly.
| Phase | Duration | Ends when |
|---|---|---|
| 1. Preparation | 3–24 months | Materials are complete and the price is set |
| 2. Marketing | 4–12 weeks | You have serious, qualified interest |
| 3. Negotiation | 2–4 weeks | An LOI is signed |
| 4. Diligence | 4–8 weeks | The buyer has finished asking |
| 5. Closing | 3–6 weeks | Funds move and keys change hands |
Going to market before the diligence package exists. It feels faster — you are 'out there' sooner — but you then assemble documents while a buyer waits and your leverage decays. Every week of silence during diligence is a week the buyer reconsiders. Preparation done first is the same work at a moment when it costs you nothing.
Phase one — preparation
The only phase with no external deadline, which is why it gets deferred and why it determines the outcome. If you have twenty-four months, the first four items below are where the money is.
Reduce owner dependence
Hire or promote the person who runs operations. This needs a year of evidence behind it to count for anything with a buyer.
Stop suppressing profit
The three years a buyer will examine start now. Decide that these are the years being sold.
Address concentration
Grow the accounts that are not your largest; get the large ones under contract with sensible terms.
Document operations
Processes written down, a second person covering each critical role, credentials out of one person's head.
Legal housekeeping
Corporate records, IP assignments, lease term, contract assignability. Slow, unglamorous, and it stops closings.
Normalise the financials
Three years plus TTM, add-backs documented with support, statements reconciling to filed returns.
Value and price
A defensible range, then an asking price modestly above its centre, with the reasoning written down.
Write the materials
Teaser, memorandum, and the data room index. Assembled, not promised.
Phase two — marketing
Four to twelve weeks. The work here is filtering, not persuading — most enquiries will not be qualified, and the discipline is protecting your time and your information.
| Task | Timing | Note |
|---|---|---|
| Build the target list | Week 1 | Named parties, not just a listing. Competitors, customers, suppliers, prior approaches |
| Publish the teaser | Week 1 | Anonymous. Industry, region, size band, headline earnings |
| Handle enquiries | Weeks 1–8 | NDA before anything identifying. No exceptions |
| Release the memorandum | On NDA | Watermarked per recipient, and logged |
| Qualify buyers | On interest | Proof of funds or a pre-qualification letter. Ask early |
| First meetings | Weeks 3–8 | You are assessing them as much as the reverse |
| Review at six weeks | Week 6 | No serious enquiry means the price or the materials are wrong |
Talking to one buyer at a time is slower and weaker. Parallel conversations create genuine optionality, which is the only real leverage a seller has, and it is entirely legitimate provided you have not signed exclusivity. A single interested party knows they are the only one.
Phase three — offers and the LOI
Two to four weeks. The LOI sets the frame everything afterwards works within, and terms conceded here are almost impossible to recover later.
- Compare on what is certain, not the headline. Cash at closing, escrow, seller note and earnout are different kinds of money.
- Verify funding before granting exclusivity. A pre-qualification letter or proof of funds. This is the single highest-value check in the whole process.
- Keep exclusivity short. Thirty to sixty days, tied to diligence actually progressing. Longer periods carry the buyer's optionality at your cost.
- Agree the structure now — asset or stock. Leaving it open defers a decision with large tax consequences to a moment when you have less leverage.
- Settle the working capital target, or at least its calculation method. Post-closing true-ups are where six figures move.
- Read the binding provisions. Exclusivity, confidentiality and expenses bind you even though the price does not.
It is the day before you sign the LOI, and it declines from there. Anything you want — structure, transition length, escrow size, non-compete scope — is cheapest to obtain now. After exclusivity, you are negotiating with someone who knows you have no alternative in play.
Phase four — diligence
Four to eight weeks, and the phase where deals die. The buyer is verifying everything you said; your job is to make verification fast and to have no surprises waiting.
| Workstream | What they examine | Have ready |
|---|---|---|
| Financial | Returns, statements, add-backs, bank records | The bridge, with support per line |
| Quality of earnings | An accountant re-deriving your earnings | Consistent figures across every document |
| Legal | Contracts, corporate records, litigation, IP | Assignability confirmed in advance |
| Operational | Systems, suppliers, capacity, staff | Process documentation and an org chart |
| Customer | Concentration, retention, contracts | Anonymised until late in the process |
| Lender | Appraisal, valuation, underwriting | Runs in parallel and takes longest |
Momentum is the asset in this phase. A question that takes you a week to answer costs more than the answer is worth, because it signals disorganisation and gives the buyer time to reconsider. Set aside real hours each week for this; it is not something to fit around a busy day.
Phase five — documentation and closing
Three to six weeks, and consistently underestimated. Most of it is other people's timetables — counsel, lenders, landlords, escrow — and the tasks run in parallel rather than in sequence.
Definitive agreement drafted
From the agreed term sheet. If structure is still being argued at this stage, the LOI did not do its job.
Third-party consents
Landlord, key customers, franchisor, licensors. Started early, because each is on their own clock.
Lender conditions cleared
Appraisal, valuation, insurance, entity documents. Questions arrive in waves; answer each within a day.
Disclosure schedules
Every exception to the representations. Tedious, and the place to surface anything you would rather not.
Payoff letters and lien releases
Written, dated, with per-diem interest. Lenders take one to three weeks.
Employee and customer plan
Who is told what, and when. Usually at or immediately after signing.
Funds flow, keys transfer
Choreographed: payoffs, terminations filed, escrow funded, documents exchanged.
Transition begins
On the terms already agreed in writing, not on terms negotiated afterwards.
Almost every task in phases three to five is easier if the corresponding task in phase one was done. That is the whole argument for preparing early.