The eighteen months before a sale are worth more than the sale itself. Not because of what happens in those months, but because of what cannot happen after them.
What buyers actually see
By the time a buyer is reading the offering memo, the financials are fixed. Three years of tax returns, the trailing twelve months, customer concentration, owner dependency, all of it has already happened. Negotiation can move the multiple. It cannot move the underlying business.
That is what the eighteen-month window is for. It is the last period during which the business you are selling is still being shaped.
The four things that move price
Working with families who have sold businesses, the same four levers come up almost every time. Customer concentration. Owner dependency. Quality of earnings. Recurring revenue.
A business that depends on the owner sells for less. Not because buyers say so, but because lenders say so.
Each one of these has a window during which it can be improved. Each one has a point at which the improvement no longer registers as authentic.
When the window closes
Customer concentration is the easiest to illustrate. A business with one customer representing forty percent of revenue cannot reduce that to twenty percent in a quarter. It can do it in eighteen months. After the sale process starts, every new customer looks suspicious to a careful buyer, even if it is legitimate. The window for that work closes long before the deal closes.
What we tell owners
Start the conversation eighteen months before you think you need to. If you are wrong and decide not to sell, you will have a stronger business. If you are right, you will have a different deal.