Are you thinking about selling your business in a few years? Don’t make the mistake of waiting until the last minute to act. The owners who get the best price are those who began preparing their exit well before launching the sale process.
The value-building work, or business staging, can take three to five years—sometimes longer. Here are the essential levers to pull to maximize what you spent years building.
Start With an Honest Assessment
Before trying to increase the value of your business, you first need to know where it really stands. A rigorous assessment is essential: strengths and weaknesses across finances, operations, human resources and competitive positioning. Is your business stagnating, declining or growing? What are the risks a potential buyer will spot immediately?
This critical review—ideally conducted with the help of outside experts—allows you to draw up a list of priority actions and assess which ones offer the best return on investment. Is buying new equipment worth the expense if it doesn’t increase value enough in a buyer’s eyes? These are questions you need to answer well before you sit down at the negotiating table.
Set Expectations
How much is my business worth? It’s often the first question an owner asks when considering a sale. The EBITDA multiple (earnings before interest, taxes, depreciation and amortization) is a shortcut, but it’s the benchmark that buyers and the market use.
“In today’s market, the vast majority of transactions close between four and six times normalized EBITDA: that’s what we see on the ground, and in the major transaction databases,” explains André Lafontaine, CPA, CBV, a partner at EC2.
Higher multiples make the headlines, but they apply to specific profiles. The main differentiator is the size of the business, followed by recurring revenue, the sector, sustained growth and the type of buyer. “
Once this range is established as a reference point, a strategic question remains: is there a realistic prospect of changing certain parameters before going to market?
Beyond the Multiple: The Real Drivers of Value
The EBITDA multiple is useful as a reference point, but it tells only part of the story. To understand why two businesses with comparable EBITDA can sell for very different prices, you have to go back to the fundamentals.
In episode 62 of EC2’s podcast Au cœur de l’action, Mathieu Valcourt, a partner at RCGT, points out that two major factors determine the value of a business. First, its ability to generate—and to keep generating—cash flow in the future. Second, the level of risk tied to the likelihood of actually generating that cash flow. The higher the perceived risk, the more value tends to decline.
But once intrinsic value has been maximized, the work isn’t over. “A business-sale advisor can add two decisive levers to maximize the value of a transaction,” notes Alexandre Lacasse, LL.B., D. Fisc., a partner at EC2.
“First, putting in place a structured process that brings several qualified buyers to the table. The more real the competition, the better the terms you can negotiate—on both price and deal structure.”
“Second, targeting strategic buyers able to generate significant synergies with the business—through cost optimization, shared infrastructure, the integration of teams or systems, access to new markets, or a stronger competitive position. A strategic buyer will pay for the combined value, not just the target’s standalone value.”
Reduce Owner Dependence
This is one of the first red flags a buyer will look for: can your business run without you for several months? If the answer is no, you have a problem. A buyer who sees that all the value rests on a single person—one who will leave the business after the sale, or a few months later—will conclude that this value isn’t transferable.
Key relationships with clients and suppliers, knowledge of processes, decision-making: all of this must be documented and delegated. Building a strong management team that can take over is a must for achieving a high valuation.
What’s more, the issue goes beyond the multiple on offer. “Owner dependence shows up in two ways,” sums up André Lafontaine. “First, through a downward adjustment to the multiple offered. Second—and sellers often don’t anticipate this—through more cautious payment terms: larger vendor take-backs and holdbacks, earnouts, and an extended transition commitment.”
Clean Up and Document Your Finances
Serious buyers and their financial institutions will require quality financial statements. Well-kept books, reliable data, clear performance metrics: all of these build confidence and speed up the sale process.
“The quality of the information has a direct impact on how long the transaction process takes,” adds André Lafontaine—particularly during due diligence and when arranging the buyer’s financing.
Conversely, incomplete or unreliable data lengthens due diligence, weakens financing terms and hands the buyer levers to renegotiate downward—at the very moment when the seller has the least room to manoeuvre.
Analyze Profitability—Really
Do you know which clients actually generate your profits? The reality often goes beyond the 80/20 rule. In many sectors, some clients are outright unprofitable. A granular profitability analysis, product by product and client by client, will let you make informed business decisions before the sale: renegotiating certain agreements, repositioning certain products, or focusing your efforts where the margin is strongest.
This work directly improves your profitability, and can be reflected in the company’s market value.
Diversify Your Client Base and Revenue
A buyer will be nervous if a single client accounts for 40% or more of your revenue. This concentration creates a real risk: what happens if that client leaves after the transaction? Diversifying your client portfolio and, where possible, developing recurring revenue streams—subscriptions, long-term contracts, maintenance services—significantly improves your business’s appeal and its valuation.
Digitize and Structure Operations
A business whose processes are well documented, whose data is accessible and whose systems are up to date inspires confidence. Conversely, operations that rely on the memory of a single key employee, outdated software or a lack of management data raise questions that can slow down or jeopardize a transaction.
“In practice, buyers will assess the catch-up investments required and deduct them from the enterprise value,” explains André Lafontaine. “The impact on the price paid to the seller can reach several hundred thousand—or even a few million—dollars: an amount generally far greater than what the upgrade would have cost had the owner carried it out ahead of time.”
Plan Ahead: Time Is Your Ally
A well-prepared sale closes faster, attracts more qualified buyers and makes it easier for the buyer to obtain financing. The seller is then in a strong position to negotiate.
Conversely, a rushed sale—prompted by health problems, disputes between partners or financial pressure—almost always results in a price below the business’s true value.
Owners who begin this work well before the transaction reap the rewards not only at the time of sale, but throughout the years of preparation, thanks to a more profitable, stronger and more resilient business.
Considering Selling or Transferring Your Business?
Maximizing the value of your business before a transaction is a structured undertaking that calls for expertise, method and an outside perspective. EC2 supports owners at every stage of this process, from the initial assessment through to closing. Get in touch with our team of experts to start the conversation and begin building the exit your work deserves.
