What exit readiness means
Exit readiness is how well a business stands up to a buyer’s questions. A buyer reads the filed accounts, asks for the management accounts, tests every adjustment to profit and then works through contracts, people and records in due diligence.
It is separate from valuation. A valuation estimates a price; readiness is whether the figures behind any price can be checked. The valuation vs readiness guide covers why the second usually has to come first.
Most items on the checklist below take time rather than money: a year of clean management accounts, a contract renewed on better terms, a manager who has run the business for a month. That is why timing matters.
When owners usually start
Unbiased, a service that matches people with financial advisers, suggests starting to prepare a business for sale about two years in advance, and allowing at least six to nine months for the deal itself. The guide to how long a sale takes goes through the stages.
Some items have their own clock. Buyers typically ask for three years of figures, so a change made now shows in the record only as the years pass. Some tax reliefs also depend on conditions being met for a period before the sale, covered in the tax section below.
The checklist
| Area | Ready usually looks like | What a buyer asks if not |
|---|---|---|
| Filed accounts | Three years filed on time at Companies House | Why a year was filed late or restated |
| Management accounts | Monthly, and they agree with the filed accounts | Which figure is right, and why they differ |
| Add-backs | Each one listed, with a document behind it | Whether a cost called one-off comes back every year |
| Director’s loan account | Small, explained and moving in a pattern | What the money was for, and whether it will be repaid |
| Customers | No single customer dominant, contracts in place | What happens if the largest customer leaves |
| Owner dependence | The business has run without the owner for weeks | Who holds the relationships and makes the decisions |
| People | Written contracts for everyone, key staff likely to stay | Who might leave on a sale, and on what notice |
| Property | Leases signed, with break and renewal dates known | Whether the business can stay where it trades |
| Company records | Registers, share ownership and IP all current | Who owns what, and whether it can be transferred |
Not every row applies to every business, and a gap is not always a problem. What buyers tend to react to is a gap they find themselves rather than one the seller has already explained.
Profit a buyer can verify
The profit figure carries more weight than anything else on the list, because it is usually the basis for any offer. Buyers start from the profit in the accounts and adjust it for costs a new owner would not carry, giving a figure often called adjusted or normalised EBITDA.
Illustrative example, invented round numbers: an owner’s accounts show £250k of operating profit and the owner lists £100k of add-backs. £40k is a one-off legal bill with an invoice; £35k is the owner’s salary above what a replacement manager would cost; £25k is ‘consultancy’ that has appeared in each of the last three years. A buyer is likely to accept the first, discuss the second and challenge the third, so the profit they work from may sit well below the £350k the owner had in mind.
The common preparation is to list every add-back, attach the invoice or payslip behind it, and remove the ones that recur. The EBITDA add-backs guide goes through the usual categories.
Customers, people and the owner
After profit, buyers look at what the profit depends on. The two questions that come up most are how much revenue sits with a few customers, and how much of the business sits with the owner.
Customer concentration is common in owner-managed businesses and is not a barrier in itself. What buyers want to see is the contract behind a large customer, how long the relationship has run, and whether someone other than the owner manages it. Spreading revenue across more customers is slow work, so owners who want to reduce concentration usually start well ahead of a sale.
Owner dependence is harder to see from the inside. A simple test is to list the decisions, relationships and passwords that only the owner holds, then ask who would handle each one during a month away. Buyers often ask the same question directly, and a business that has already run for a few weeks without its owner gives a ready answer. Things buyers commonly look for here:
- A second person who knows each key customer and supplier.
- Written processes for the tasks only the owner does today.
- Key staff on written contracts, with any incentives to stay through a sale agreed in advance.
- Bank mandates, software accounts and domain names held by the company, not by the owner personally.
Tax and structure
Tax is a common reason to start early. Business Asset Disposal Relief reduces Capital Gains Tax on qualifying disposals; GOV.UK sets the rate at 18% for disposals from 6 April 2026. For shares, the conditions include being an employee or office holder and, in most cases, holding at least 5% of the shares and voting rights, with the company a trading company (or the holding company of a trading group), all for at least two years before the sale.
Whether a sale is of shares or of the business’s assets also changes what the buyer takes on and how the proceeds are taxed. These are questions for an accountant or tax adviser, and owners commonly take that advice before any changes to shareholdings or structure, since conditions often have to be met over a period.
Checking where you stand
An accountant or corporate finance adviser can review readiness against a particular sale, and many offer exit planning as a service. Owners also use the checklist above to find the obvious gaps first.
Two tools on teasr help with the figures side. The free readiness check takes nine numbers from memory and lists what a buyer will question about them. The Exit Readiness Report reads your filed accounts, and your management accounts if you have them, checks each figure wherever it appears, gives each add-back you list a status showing how a buyer is likely to read it, and ends with a 90-day plan; see a sample report for a fictional business, and pricing for the cost. Neither is a valuation or an audit.
Questions
- What is exit readiness?
- It is how well a business stands up to a buyer’s questions: whether its accounts agree, its add-backs are evidenced, and its customers, people, contracts and records hold up in due diligence. It is not a valuation.
- How early do owners start preparing for a sale?
- Unbiased, a service that matches people with financial advisers, suggests about two years before a sale. Some items, such as three years of clean figures or tax relief conditions, take that long to show.
- Is an exit readiness check the same as a valuation?
- No. A valuation estimates a price, while a readiness check looks at whether the figures and records behind any price can be verified by a buyer.
- What is the most common gap a buyer finds?
- Figures that don’t agree between filed and management accounts, and add-backs without evidence, are among the most common, along with a business that depends on its owner day to day.
Sources
- Unbiased: Your step-by-step guide to selling a UK business — Unbiased matches people with financial advisers. Source of the two-year preparation and six-to-nine-month sale figures.
- GOV.UK: Business Asset Disposal Relief — Source of the 18% rate from 6 April 2026 and the two-year, 5% and trading company conditions for shares.
teasr is software. It is not authorised or regulated by the Financial Conduct Authority and gives no advice on price, structure or terms. Take advice from your own advisers before acting on anything here.