Once a founder has decided to sell a business, the next step is preparation. This stage determines whether they'll engage in a competitive, professionally-led M&A process, shaping which buyers engage and how they value the company, or simply respond to offers, with generally limited leverage to capture the true market value.
Preparation goes far beyond cleaning financial records or assembling a pitch deck. It requires coordination across your company to align operations, performance metrics, and messaging into a straightforward, defensible narrative.
At L40°, we help founders refine the business and shape a clear narrative that anticipates buyer questions and withstands scrutiny
Recommended: When to sell your business?
Financial statements optimization and readiness
Assuming you've set your financial goals and with internal alignment in place, the next critical step is financial optimization. Having clean and transparent records is more than a courtesy to potential buyers. It is, in fact, the foundation for trust, valuation credibility, and a seamless diligence process that helps buyers assess the financial health of your company.
Prospective buyers expect to see a well-organized financial story that aligns with the company’s narrative and performance metrics. At minimum, this includes:
- Audited financial statements: Demonstrates accounting transparency and historical performance.
- Tax returns: Includes sales tax filings to confirm compliance with state and federal tax regulations.
- Well-founded revenue projections: Emphasis on well-founded or grounded, these reflect your market position, expected cash flows, and underlying assumptions.
- Operating expense reports: Breaks down cost structure, profit margins, and financial nuances relevant to buyers.
- Employee and vendor contracts: Provides visibility into your business structure, obligations, and continuity risks.
- Legal documentation: Covers intellectual property rights, corporate structure, and any outstanding legal matters.
Gaps or inconsistencies in these documents can undermine buyer confidence and erode the negotiation process.
Common red flags in a business sale
- Inconsistent financial reporting across periods
- Unclear or shifting revenue recognition practices
- Incomplete or disorganized historical data
When business owners address these issues proactively, they protect the sale process and may positively impact the business valuation.
L40° Tip for business owners
- Set up an accounting platform like QuickBooks or Xero early, simply collecting payments through Stripe or tracking your metrics on ChartMogul might not be enough. Recording every transaction in a structured, auditable format will save time and reduce friction when compiling financial statements for due diligence.
Building compelling exit materials: The Teaser & the CIM
Once financial records are optimized, the next step is to develop professional exit materials. These documents are often a potential buyer’s first real interaction with the company, and they shape how seriously a deal is taken from the outset. Strong materials drive interest, influence perception, and guide early-stage engagement.
At the core are two foundational business assets:
- Short-form teaser: A brief, anonymized overview of the company, typically shared before the non-disclosure agreement (NDA).
- Confidential Information Memorandum (CIM): A comprehensive, in-depth document distributed under NDA that outlines the company’s operations, financials, growth story, and strategic rationale for the sale.
These materials help position the company in a way that aligns with the motivations of different buyer types, whether financial sponsors, strategics, or cross-border acquirers.
What makes exit materials effective when selling businesses?
The best exit materials tell a cohesive story backed by evidence. They anticipate buyer questions and highlight growth levers.
In this case, the experience of financial advisors, or investment bankers providing professional assistance is very valuable. They help shape the narrative because they understand what to emphasize, what to streamline, and how to present information that resonates with different market segments.
From a design and formatting perspective, consistency and professionalism matter. Buyers evaluate dozens of deals, and when they see a well-structured CIM with accurate data, clear visuals, and sharp messaging, it is a signal that a company is prepared and worth serious consideration.
L40° Tip to get the buyers' attention
A good teaser sparks curiosity. It should be specific enough to engage, but broad enough to protect confidentiality. Adjusting your teaser slightly to the buyer type can significantly improve response rates and lead quality. The best teasers should be able to fit on a one-pager that makes the buyer think: “I need to know more.”
In the next point, we'll expand on this.
Crafting a buyer-aligned narrative
A clear and compelling narrative is what ties together performance metrics, market potential, and strategic fit. This is where experienced investment bankers and M&A advisors create tangible leverage for founders.
Advisors help craft a storyline that’s not only accurate but aligned with the buyer’s perspective, highlighting the specific value drivers a buyer needs to see to engage seriously.
What makes a narrative effective?
A strong narrative addresses four core questions:
- What are the key drivers of growth?
- Why is the business defensible or competitively advantaged?
- Where is future growth headed and why is now the right time to buy?
- How can the buyer benefit from acquiring the business?
This last point is where personalization matters. A curated outreach strategy—grounded in research about the buyer’s strategy and interests—can dramatically improve engagement quality. Tailoring the positioning based on who’s on the other side of the table increases your business attractive.
L40° Tip to influence a business valuation
If a business provides online upskilling software at the intersection of edtech and HR tech, it may be more effective to position it as an HR tech opportunity, subject to the targeted buyer’s strategy or investment thesis. Why? Valuations in that vertical are typically stronger. Adjusting your narrative to align with where business valuation is highest, while remaining truthful, can change the entire tone of the conversation with buyers.
Strategic buyer curation and confidentiality
Not every buyer is the right buyer. Identifying and curating the right set of potential acquirers is one of the most strategically sensitive steps in preparing for a business sale. Done well, it ensures alignment with your company’s trajectory, reduces execution risk, and maintains strict confidentiality throughout the process.
Experienced M&A advisors understand not only who is in the market but also which buyers are credible and strategically suited to the opportunity.
Key criteria for buyer selection
- Strategic alignment: Does the buyer’s business model or investment thesis match your value proposition?
- Execution certainty: Does the buyer have the capital, structure, and track record to close?
- Confidentiality risk: Could outreach to this buyer leak sensitive information or trigger competitive consequences?
L40° Tip to select buyers
Buyers engage when the opportunity aligns with a clear motivation, typically either financial (e.g., revenue growth, margin potential) or strategic (e.g., customer synergies, tech acquisition). If a buyer doesn’t meet those criteria, they’re unlikely to participate seriously or at all. That’s why a focused, well-structured process is essential, as it avoids wasted effort and keeps momentum where it matters
Sequencing and outreach strategy
Once the right buyers have been identified, the next step is managing the outreach sequence and structure. It is a strategic process that influences the competitive tension and the leverage founders retain throughout the sale.
Advisors manage this sequence carefully to preserve confidentiality agreements and momentum. When executed well, strategic outreach can signal scarcity and urgency, prompting buyers to act quickly and decisively.
Key steps in a controlled outreach process:
- Teaser distribution – Sent first, anonymized, to gauge interest while maintaining confidentiality.
- NDA signing – Ensures legal protections before sharing sensitive company information.
- CIM distribution – Provides buyers with the full picture after they’ve demonstrated genuine interest.
L40° Tip to reach out and attract buyers
One founder came to us after receiving an inbound offer from a competitor. Rather than respond directly, we helped design a competitive process by curating a strategic buyer list, pacing outreach deliberately, and creating a structured bidding environment.
The result: the original buyer remained the frontrunner, but in a more competitive context, and their offer ended up increasing significantly.
This outcome likely wouldn’t have been achieved without an advisor guiding the process. What initially seemed like a strong standalone offer proved to be a starting point.
Preparing for due diligence
The diligence phase is where assumptions are tested, and any red flags in the financial or legal documents that stand out can influence valuation, deal terms, or timing.
Key diligence readiness steps include:
- Organizing documentation across all core areas: financials, legal, operational, HR, and technology.
- Preparing clear answers for common buyer questions around metrics, customer contracts, compliance, and competitive positioning.
- Creating a secure, logically structured data room to streamline review and reduce back-and-forth.
L40° Tip to prepare due diligence
Anticipating buyer concerns before they arise can materially reduce friction during diligence. For example, if a business is trending just below 100% net revenue retention (NRR), having a clear explanation for churn and a data-backed plan for improvement can increase buyer confidence. The goal isn’t to eliminate every risk, but to demonstrate that you understand them and have a rationale behind the numbers.
Ready to go?
By the time your company reaches the market, much of the outcome might have already been shaped.
At L40°, we view preparation as the first phase of execution. It’s where we help founders shift from reactive to proactive, clarifying the business story and managing process dynamics to support stronger negotiations and better outcomes.
Strategic preparation, including a solid exit strategy, influences who shows up, how they value your company, and what your next chapter looks like once you've accomplished a successful transaction. Contact us.
