Exit Readiness: What to Fix 12 Months Before You Sell

Last updated October 2026.

The short answer

Exit readiness 12 months before you sell means fixing what a buyer will read in your monthly numbers, not rewriting your history. Close every month on time on an accrual basis, reconcile every balance sheet account, stop running personal costs through the business, and document every add-back with proof. Measure what a year cannot change, like customer concentration, and explain it before a buyer finds it. In lower middle market deals the sale itself averages 11 to 12 months, so start now.

Why does 12 months feel like plenty but is not?

Twelve months is tight because the sale process eats most of it. The International Business Brokers Association and M&A Source Market Pulse survey for Q2 2026 found that lower middle market deals averaged 11 to 12 months from engagement to close, and Main Street deals took six to 10 months. The same survey found that between 60 and 90 percent of sellers, depending on deal size, had done less than one year of exit planning or none at all.

So if "sell" means the day you sign with an advisor and go to market, you have one year of preparation. If it means the day the money lands, the process itself is already starting. Either way, the months you close from here on are the months a buyer will price.

The other reason it is tight: a buyer prices your trailing twelve months, meaning the most recent 12 months of results, and keeps re-reading each new month through diligence. A fix you make in month 11 shows up as one good month. A fix you make in month 1 shows up as a year of proof.

What can you still fix in 12 months, and what can you only explain?

Use a simple rule: fix it, document it, or disclose it. If a problem can show at least six clean months of results before a buyer reads your numbers, fix it. If it cannot, document it so a buyer can verify the story. If you cannot document it, disclose it yourself before diligence turns it up. Six months is our working rule, not an industry standard, but a fix with one or two months behind it reads as window dressing.

What does weak add-back proof cost at the closing table?

Weak add-back proof costs a multiple of itself, because a buyer pays a multiple of the earnings it accepts. An add-back is an expense you remove from earnings because it will not continue under a new owner, such as an owner salary above market or a one-time legal bill. Buyers and their quality of earnings providers accept add-backs they can verify and tend to reject the ones they cannot.

Here is an illustrative example. Every figure is round arithmetic, not a benchmark or a client result.

The 5.8 multiple is the average the Market Pulse survey reported for $5 million to $50 million deals in Q2 2026. Your multiple depends on your industry, size, growth, and risk, and the final price depends on the deal terms. The point holds at any multiple: each $100,000 of earnings you cannot prove can cost several times that in price. A year is enough time to build the proof file. Our guide to documenting add-backs that survive diligence covers what each type needs.

What should you do in each quarter of the year?

The year runs in four stages, and each one depends on the one before it. If you only get through the first stage, you are still far ahead of most sellers.

1. Months 1 to 3: foundation work. Get on accrual basis for your management reports, set a close calendar, and reconcile every account. Separate personal costs from business costs. Count inventory and tie it to the books. Pull three years of financial statements and line them up against filed returns, and have your CPA explain any differences. Start an add-back file with the proof for each item.
2. Months 4 to 6: reporting a buyer can use. Build margin by product, customer, channel, or job. Track working capital at every month end. Produce a customer concentration report showing each customer's share of revenue. Write down who does what, so the business reads as a team and not as one person.
3. Months 7 to 9: test it like a buyer would. Have someone outside your team read the numbers cold and ask the questions a buyer will ask. Build data room folders for financials, contracts, payroll, and debt. Answer the hard questions in writing now, while you have time.
4. Months 10 to 12: keep every month clean. Close on the same date every month with no late adjustments. Do not change accounting methods, auditors, or systems in the middle of a process. Do not cut maintenance, marketing, or staff to dress up a quarter, because a buyer will see the next quarter too.

If you have more than a year, the two-year financial readiness plan adds the work that needs a longer runway.

Which numbers will a buyer argue about?

A buyer will argue about the numbers the purchase agreement turns into dollars, and how each argument ends depends on the agreement, not on a general rule. Three come up in almost every deal:

• Normal working capital. Many deals set a target level of working capital the seller delivers at closing, often based on a trailing average, with a price adjustment above or below it. How the target is set, measured, and trued up depends on the letter of intent and the purchase agreement. Twelve months of clean month-end balances gives you evidence for that conversation. How your balance sheet decides working capital walks through it.
• Debt and debt-like items. What counts as debt and comes out of your proceeds depends on the agreement. Know every loan, lease, deferred payment, and customer deposit before you sign a letter of intent.
• Quality of earnings findings. If the buyer uses SBA financing, SBA SOP 50 10 8.1 requires the lender to obtain a quality of earnings report on initial acquisitions with a purchase price of $3 million or more, for applications received on or after October 1, 2026. A report you commission as the seller does not satisfy that requirement. Our post on whether the SBA requires a quality of earnings report covers the details.

What you keep after tax is a separate question with real money in it. Thryve does not answer tax questions; bring that one to your CPA early, because the answer can change how the deal should be structured.

Where Thryve fits

Thryve Accounting & Advisory in McKinney, Texas does the finance side of sale preparation for founder-led businesses between $1M and $50M in revenue. That means the foundation work on your books, a monthly close a buyer can trust, and the CFO-level reporting that turns your add-backs, margins, and working capital into evidence. For existing clients, we do sell-side preparation. We do not also provide the lender's independent quality of earnings report for a company we already work with, because that report has to come from someone with no prior relationship.

Thryve is not the right fit if you need someone to find buyers, value the business, or negotiate the deal. That is the job of an M&A advisor or business broker, and your attorney handles the agreement. Tax planning around the sale belongs with your CPA, and we are happy to coordinate with them. If you are not sure where your books stand today, a QuickBooks health check is a low-commitment place to start, and our bookkeeping and monthly accounting team can carry the close every month after that.

Talk to us about what your numbers should be telling you.

FAQ

Is 12 months enough time to get a business ready to sell?

Twelve months is enough time to make your financials clean, current, and provable, which is the part of exit readiness most likely to cost you price or delay a closing. It is usually not enough time to change customer concentration, build a management team from scratch, or show a long growth trend, so those items need documentation and an honest explanation instead. The IBBA and M&A Source Market Pulse survey for Q2 2026 found lower middle market sales averaged 11 to 12 months from engagement to close, so starting a year ahead of going to market gives you a real margin. More time is better, and what matters most depends on your industry and buyer.

Do I need a quality of earnings report before I sell my business?

A seller is rarely required to commission a quality of earnings report, but a sell-side review can find problems before a buyer does and can shorten diligence. Separately, for SBA-financed acquisitions, SBA SOP 50 10 8.1 requires the buyer's lender to obtain an independent quality of earnings report on initial acquisitions of $3 million or more for applications received from October 1, 2026, and a seller-commissioned report does not satisfy that rule. Whether a sell-side review is worth it for you depends on your deal size, your likely buyers, and how clean your books already are, so ask your advisor and lender early.

Should I switch from cash to accrual accounting before selling my business?

Most buyers and lenders read accrual-basis financials, because accrual shows revenue and expenses in the month they happen, so management reports on an accrual basis usually make a business easier to evaluate. Switching how you keep your books is an accounting change, and how it interacts with your tax filings is a separate question for your CPA, not something to decide from a blog post. Make the change early in the 12 months so a buyer sees several clean accrual months, and avoid changing methods in the middle of a sale process. Your accountant should confirm the approach for your specific situation.