From EBITDA to Earn-outs, here’s what buyers expect you to know.

Let’s say you’re about to list your business for sale. You’ve got a great product, solid customers, and decent margins. 

Unfortunately, that’s not always enough.

When buyers come knocking, they expect proof. And not just any proof, they need to see well-organized, audit-ready proof that builds their confidence and reduces risk.

Today, you’ll learn all about what you need to gather and what you need to understand if you want to attract serious buyers and walk away with a deal you’re proud of. 

The Sell-Side Checklist

This part isn’t glamorous, but it’s essential, so you will need to do it sooner or later. Start assembling these materials now so you’re not scrambling when you need it.

1. Financial Records (3-5 Years Minimum)

This includes income statements, balance sheets, and cash flow statements. If they’re audited or prepared by a professional accountant, even better. Buyers want to see trends over time, not just a good quarter, or year.

2. Customer Lists & Revenue Breakdown

Which customers account for what percentage of revenue? High customer concentration can be risky, so know your numbers and be ready to explain them.

3. Supplier Info

If you rely on key vendors or exclusive partnerships with you as the owner, buyers need to know. They’ll want supplier contracts, pricing history, and a sense of how replaceable those relationships are.

Quick Guide to Key M&A Terms

Mergers & Acquisitions has its own language and if you don’t speak it, you may miss something important or leave money on the table. Here are some key terms to know:

NDA (Non-Disclosure Agreement)

Before you share sensitive info, the buyer should sign this. It protects your business secrets while letting you explore the deal.

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)

This is a key metric buyers use to value your business. Think of it as your business’s raw earning power.

Adjusted EBITDA or Seller Add-Backs

This is your opportunity to add back one-time expenses, owner perks (like meals or high-ticket price items you billed as company expenses), and non-operational costs to show the true earnings. 

SDE (Seller’s Discretionary Earnings)

Often used for smaller businesses. It’s your profit plus your salary and personal expenses run through the business. SDE helps show what a new owner could potentially pocket.

 IOI vs. LOI (Indication of Interest vs. Letter of Intent)

An IOI is a non-binding document from a buyer saying “we’re interested.” An LOI is more serious. It outlines proposed terms and typically comes before due diligence. It’s not a final contract, but it’s a big step forward.

Reps & Warranties / Holdback / Insurance

These are the seller’s guarantees about the business. Buyers often hold back a portion of the purchase price or require insurance, in case anything goes wrong post-sale.

Earn-Out

Part of the purchase price is paid later if performance targets are met. It’s great if you believe in your business’s future, but risky if you’re hoping to cash out and disappear.

Roll-Over Equity

Instead of getting paid all cash, you keep some ownership in the new company. This can be a great way to stay involved and benefit from future growth, but the value of your shares can fluctuate if the company is later sold or its performance changes.

Purchase Agreement & Schedules

This is the legal backbone of your deal. The contract itself, plus exhibits and schedules with all the details. 

Due Diligence

Once an LOI is signed, buyers dig deep to protect their investment. They’ll review finances, legal issues, environmental compliance, HR records, you name it. Essentially, nothing is off the table.

Quality of Earnings (Q of E)

A third-party report that validates your numbers. If you’re serious about selling, get ahead of this. It shows you’ve done your homework and builds buyer trust.

Environmental Phase (I, II, etc.)

Especially important for industrial businesses or properties. These reports assess environmental risk and liability. Don’t overlook it. It can kill a deal if problems surface too late.

Understanding these terms can help you make informed decisions, protect your interests, and navigate your business exit with confidence. If you’re still feeling unsure about any part of the process, working with a qualified M&A advisor can help you speak the language and break this all down to you when needed.

If you want expert and comprehensive guidance from a trusted advisor: 

👉Book a call with an M&A advisor

In the next post, we’ll talk about your “deal team,” the people who you need in your corner, and what role each player serves in protecting your interests.