Business Valuation for Exit Planning: A 12-Month Plan to Improve Cash Flow, Reduce Risk, and Protect Deal Terms (Consult EFC Playbook)

If you want to sell your business in the next 12 to 36 months, your exit starts now, not when a buyer shows up. A Business Valuation isn’t just a price tag, it’s a clear map of what buyers will pay for, what they’ll discount, and what can trigger tough terms.

Going into 2026, buyers are active but more selective. They’re still shaped by higher borrowing costs, and they’re doing tighter checks on cash, contracts, customer risk, and how reliable your numbers are. Recurring revenue, clean accounts, and a low-risk operating model are getting the best attention.

This post sets out a practical 12-month plan, based on the Consult EFC playbook, to improve cash flow, reduce risk, and protect deal terms. It’s written for SME owners who want to grow the proper way, get paid fairly, and avoid surprises in due diligence. If you’re serious about an exit, this is the work that shifts both valuation and negotiating power in your favour.

What your valuation is really made of in 2026 (and what buyers will pick apart)

In 2026, a Business Valuation is less about a headline multiple and more about how much trust a buyer can put in your numbers, your cash, and your ability to keep trading without nasty surprises. Buyers still start with earnings, but they quickly move on to the parts that can break a deal: weak cash conversion, customer and supplier risk, founder dependence, and contracts that do not transfer cleanly.

If you want stronger terms, you need to think like a buyer. They are not paying for your effort. They are paying for repeatable profit, backed by evidence, with risks priced properly.

The number buyers trust, normalised EBITDA and clean proof

Most buyers anchor their offer to normalised EBITDA. In plain terms, it is EBITDA adjusted to show what the business would earn under a sensible, ongoing cost base after removing unusual or personal items.

A simple way to think about it is: your accounts show what happened, normalised EBITDA shows what should happen if the business keeps running without odd one-offs.

Common add-backs that are often accepted (if they are real and clearly evidenced) include:

• One-off professional fees: a legal bill for a dispute that is now settled, or a one-off consultancy project that will not repeat.
• Owner perks: personal vehicle costs, family travel, or non-business items run through the company.
• Non-recurring repairs or write-offs: a one-off equipment failure, or a bad debt from a customer that is no longer on the books.

Where sellers get caught out is trying to add back costs that are actually part of running the business. Buyers will often refuse:

• Ongoing contractor costs dressed up as “temporary”, when they are filling permanent roles.
• Under-market wages for owners or key staff that will rise after the sale (buyers will rebase pay to market).
• Missing overheads that the business has been ignoring (IT support, compliance, proper finance function, insurance, facilities costs).

Buyers also expect a clear bridge from statutory accounts to management figures. If your management numbers show a stronger story than your filed accounts, that is fine, but you need a clean explanation that ties out line by line. They will also check consistency with bank statements, VAT returns, and corporation tax filings. If those do not line up, they assume the worst and pricing becomes defensive.

Evidence buyers like to see is boring, which is the point. Keep it simple and provable:

• A schedule of add-backs with dates, supplier invoices, and short notes.
• 12 to 36 months of monthly management accounts, with the same chart of accounts.
• Bank feeds and reconciliations that match reported sales and margins.
• VAT returns and year-end filings that do not contradict trading performance.
• Customer and supplier lists that tie to revenue and cost lines in the accounts.

If you cannot prove the adjustment quickly, expect it to be excluded, and expect the buyer to build a lower “trust EBITDA” for the offer.

Cash matters more than profit, how cash conversion changes your multiple

A business can look profitable on paper and still feel risky if cash arrives late. Buyers care because they are buying a future stream of cash, not accounting profit. If cash conversion is weak, they start thinking about extra funding needs, surprise working capital injections, and whether earnings are being propped up by slow-paying customers.

The pressure points usually sit in working capital:

• Debtor days: if customers take 60 to 90 days to pay, your profit is trapped in invoices. A buyer may assume higher bad debt risk, or that discounts will be needed to speed up collections.
• Stock turns: if stock builds faster than sales, cash gets locked on shelves. Buyers will question obsolescence, write-downs, and ordering discipline.
• WIP and project billing (common in service firms): long projects with late stage billing can hide timing risk. Profit may be real, but the cash curve is fragile.

Buyers will test the pattern, not just the average. One month of strong cash does not fix nine months of slow collections. They will look for swings around quarter-end, seasonality, and any habit of pushing invoices out late or pulling cash in early.

When cash conversion is weak, it shows up in deal terms fast:

• Price chips: “Your EBITDA might be £500k, but we need to fund £300k of extra working capital, so the headline price drops.”
• Working capital adjustments: buyers set a “normal” working capital target. If you deliver below it at completion, the price is reduced pound for pound.
• Holdbacks: if cash collection is uncertain, part of the price can be retained until debtors convert.

If you want a stronger multiple, aim for earnings that turn into cash in a steady, predictable way. The best story is boring: stable debtor days, clear billing milestones, clean stock reporting, and no hidden WIP surprises.

Risk discounts, the big four that shrink deals fast

Even with strong EBITDA, buyers will discount hard if they see risks that can wipe out earnings quickly. In due diligence, four risks show up again and again, and each one links directly to lower price, tougher warranties, retention, or an earn-out.

Customer concentration
If one customer makes up a big slice of revenue, the buyer assumes they are one phone call away from a profit drop.

• What buyers ask for: customer revenue by month, contracts and renewal history, pipeline by account, and proof of relationship depth beyond the founder.
• How it hits the deal: a lower multiple, or an earn-out tied to keeping that customer for 12 to 24 months. Sometimes there is a retention amount held back until renewals land.

Supplier dependence
If a single supplier controls pricing, lead times, or quality, your margin is not really yours.

• What buyers ask for: supplier agreements, price change history, alternative supplier quotes, and any exclusivity terms.
• How it hits the deal: tighter warranties on supply continuity and pricing, plus a lower headline price if gross margin could fall after completion.

Key-person risk (founder dependence)
If the business runs on your relationships, judgement, or personal effort, buyers worry about what happens when you step away.

• What buyers ask for: org chart, role descriptions, signed employment contracts for key staff, documented processes, and evidence that sales and delivery work without you.
• How it hits the deal: longer earn-out periods, higher retention requirements for key staff, and sometimes a lower upfront payment until the handover is proven.

Margin fragility
Thin or unstable margins scare buyers because small shocks (wages, energy, supplier price rises) can wipe out profit.

• What buyers ask for: margin by product or service line, pricing history, discounting logs, labour utilisation, and sensitivity analysis (what happens if costs rise 5 percent).
• How it hits the deal: lower multiple, more aggressive working capital terms, and detailed warranty packs around pricing, customer discounts, and cost liabilities.

Reducing these risks is not about polishing. It is about building a business that can absorb shocks and still produce cash.

Recurring revenue and contracts, why predictability gets paid

Predictable revenue gets paid because it reduces uncertainty. Buyers do not need explosive growth to offer a strong valuation if they can see stable income, clear renewal patterns, and low churn.

Recurring revenue can include:

• Subscriptions: monthly or annual plans with documented renewal behaviour.
• Service contracts: support, maintenance, managed services, retainers.
• Repeat purchase models with auto-renew or standing orders: where buying is habitual and trackable, not “hope-based”.

Contracts matter as much as the model. Buyers will read the clauses that control whether revenue is secure after completion, including:

• Contract length and renewal terms: longer does not always mean better if it can be cancelled easily.
• Termination rights: “termination for convenience” clauses can make revenue feel optional.
• Transfer and change-of-control clauses: if a customer can walk when you sell, your valuation is exposed.
• Price rise clauses: if you cannot increase prices in line with costs, margins get squeezed.

Proof is what turns “recurring” into bankable value. Buyers will want retention data and clean definitions of churn (logo churn, revenue churn, net revenue retention). If you can show stable renewals and low cancellations over 24 to 36 months, you have a stronger case for a higher multiple, even if growth is steady rather than dramatic.

A good analogy is rent on a well-let property. The building might be the same, but a long, enforceable lease with reliable tenants is worth more than empty rooms and promises. In exit planning, recurring revenue backed by solid contracts does the same job for your Business Valuation.

Month 1 to 3: Get a baseline valuation, then build a cash plan you can run weekly

The first 90 days set the tone for everything that follows. You’re building two things at once: a baseline Business Valuation you can defend, and a cash routine that stops surprises. In early 2026, UK SME buyers are still paying sensible multiples for good businesses (often in the 4x to 6x maintainable EBITDA range), but they’re quicker to discount anything that looks messy, risky, or cash hungry.

Treat this phase like laying foundations. If you skip it, you can still get an offer, but you’re more likely to accept the wrong structure, argue about working capital, and spend months firefighting due diligence questions.

Photo by RDNE Stock project

Set your exit target, price, timing, and what you will accept in terms

Before you talk about price, get clear on the exit you actually want. A full exit, a partial sale, or a phased handover can all be “good deals”, but they suit very different lives. If you don’t decide up front, you’ll get pulled towards whatever structure a buyer prefers, which often means more risk for you.

Start by choosing your exit shape:

• Full exit: you sell 100 percent and step away after a short handover.
• Partial exit: you sell a stake now, take some cash off the table, and keep upside.
• Phased exit: you sell in stages, often tied to performance or time.

Then write a simple “needs list”. Keep it blunt. This is your filter when offers start to look shiny.

Here’s what to include:

1. Cash at completion: the minimum amount you need on day one (after debt, fees, and tax planning).
2. Acceptable earn-out share: the maximum percentage of the price you’re willing to leave contingent (for many owners, anything over 20 to 30 percent starts to feel like working for money you already “sold”).
3. Time commitment after sale: how long you’ll stay, and in what role (advisory only, part-time, or full-time).
4. Risk limits: what you won’t accept, such as personal guarantees, open-ended indemnities, or unrealistic targets.

This protects you later. Without these lines in the sand, it’s easy to agree to a higher headline price with weak cash at completion, aggressive working capital targets, or an earn-out that shifts all the risk back onto you. A clean baseline valuation plus clear term limits keeps you in control of the conversation.

Build a 13-week cash forecast and make it a weekly habit

A 13-week cash forecast is the simplest tool that makes you feel in charge again. Buyers like it because it shows discipline, and you like it because it stops “surprise” VAT bills and supplier runs landing like a piano.

Keep the template plain. One tab, one week per column, rows you can update fast:

• Opening cash: bank balance at the start of the week.
• Expected receipts: cash in from invoices, card takings, subscriptions, grants, other income.
• Payroll: wages, pensions, PAYE, bonuses (show the actual pay date).
• VAT and taxes: VAT payments, corporation tax, PAYE dates.
• Supplier runs: regular suppliers, stock buys, contractors, rent, utilities.
• Debt service: loan repayments, interest, asset finance, overdraft fees.
• Capex: kit, vehicles, software set-up costs (only include what will be paid, not what you “plan”).
• Closing cash: opening cash plus receipts minus payments.

The habit matters more than the spreadsheet. Set a 30-minute slot each week, same time, same day. Update three things only: what changed, what slipped, and what you now know.

Run it like this:

1. Roll forward one week and update opening cash to the bank balance.
2. Update receipts using your sales ledger and real customer promises (not hope).
3. Lock in payments you can’t avoid (payroll, VAT, critical suppliers), then decide on the rest.

After each week, add a simple forecast vs actual check. If your forecast is always wrong, that’s still useful because it shows where your process is weak (late invoicing, unclear credit control, spending without approval).

Finally, set triggers so you don’t debate decisions every week. For example:

• If cash cover drops below 4 weeks, pause hiring and non-essential spend.
• If two large debtors slip by 14+ days, escalate collections and freeze discretionary supplier orders.
• If VAT quarter is due within 6 weeks, stop treating it as “future you’s problem” and ringfence the cash.

Do this for 90 days and you’ll see patterns fast. That’s exactly what a buyer will test, and it’s a big part of making your Business Valuation feel real, not theoretical.

Tidy the books to ‘buyer-grade’, so your valuation stands up under stress

A baseline valuation is only as strong as the evidence underneath it. In early 2026, buyers are selective and diligence is tighter, which means messy books often turn into price chips, holdbacks, or longer earn-outs. “Buyer-grade” accounts don’t need to be fancy, they need to be consistent, reconciled, and easy to follow.

Focus on the clean-ups that move the needle:

Consistent revenue recognition
Make sure revenue is recorded the same way each month. If you do projects, be clear on when you recognise income (milestones, completion, or time-based). Inconsistent timing makes your EBITDA look jumpy and makes buyers nervous.

Clear gross margin by product or service line
Buyers want to know what really makes money. Split revenue and direct costs so you can show margin by line. If everything sits in one bucket, you can’t defend your pricing power or explain margin changes.

Reconciled balance sheet
Your bank, VAT control, PAYE, loans, and key creditor accounts should reconcile cleanly. If the balance sheet feels like a junk drawer, buyers assume there are more problems hiding.

Aged debtors and creditors you trust
Your receivables list should match reality, with old debts either collected, agreed, or written off. The payables list should show what you owe and when. This matters because working capital disputes often hit price at completion.

Documented add-backs (with proof)
If you’re presenting normalised EBITDA, keep an add-back schedule with invoices, dates, and a short note for each item. If you can’t prove it fast, expect it to be removed.

This tidy-up reduces friction. Diligence becomes a set of quick checks, not a forensic investigation. That protects your multiple because buyers pay more when they trust the numbers and can move quickly.

Do a risk scan like a buyer would, then pick the top five value blockers

Risk is where deals get re-written. A buyer doesn’t need you to be perfect, they need you to be honest, organised, and already fixing the obvious issues. The goal in month 1 to 3 is not to solve everything, it’s to spot what will most likely reduce your valuation or damage terms, then put it on a simple action list.

Run a buyer-style scan across a few areas: customers, contracts, legal, IP, people, suppliers, systems, and compliance. Then choose your top five “value blockers”. These are the items that could cause:

• a lower price (multiple discount),
• a worse structure (earn-out, retention, holdback),
• a delay (slow diligence),
• or a deal break (walk-away risk).

Turn each blocker into an action with an owner, a deadline, and a clear impact. A simple format works best:

• Issue: what’s wrong, in plain words.
• Owner: who will fix it (named person, not “team”).
• Deadline: a real date.
• Impact: either cash (how it affects profit or working capital) or risk (how it affects deal terms).

Examples that often show up fast:

• Unsigned customer contracts: move key accounts onto signed terms, and check change-of-control clauses. Impact is lower churn risk and fewer earn-out demands.
• Unclear IP ownership: confirm that code, designs, brand assets, and key content are owned by the company, not ex-contractors. Impact is reduced legal risk and fewer indemnities.
• Informal supplier terms: document pricing, lead times, and termination rights, and line up a credible backup supplier. Impact is improved margin confidence.

When Consult EFC helps clients through this phase, the win isn’t just fixing problems. It’s creating a clear paper trail that shows control. Buyers pay for that because it makes the business easier to own, and easier to finance.

Month 4 to 6: Lift cash flow fast, without harming the business you are selling

At this point you’re not trying to “look good” for a buyer, you’re trying to behave like a well-run business every week. Months 4 to 6 are about quicker cash conversion, fewer nasty surprises, and cleaner working capital. Done properly, this supports a stronger Business Valuation because buyers can see cash arriving on time, margins holding up, and risk going down.

Photo by Karolina Grabowska www.kaboompics.com

Fix debtors and billing, shorten the time between doing the work and getting paid

Most cash problems in otherwise healthy SMEs come from one gap: you did the work, but the money is still sat in someone else’s bank account. Buyers see slow collections as risk, and risk shows up as price chips, earn-outs, or aggressive completion accounts positions.

Start with the basics that stop the rot.

Tighten payment terms and make them real. If you invoice on 30 days but routinely accept 60, your true terms are 60. Put standard terms in writing, make them part of the quote or order confirmation, and stop “special terms” being agreed on calls.

Use credit checks for new accounts and larger orders. You don’t need to be heavy-handed, but you do need a rule. For example, any new customer asking for credit, any order over a set value, or any customer in a higher-risk sector gets checked. If the check is weak, switch to deposits, pro-forma invoices, or staged payments.

Speed up invoicing. A common leak is waiting until month-end. Invoice as close to delivery as possible. If you can invoice the same day, do it. If your team needs a trigger, make it a process: job completed equals invoice raised within 24 hours.

If you do projects, move to milestone billing. Waiting until the end is like funding your customer’s project for them. Split the job into clear milestones that tie to value delivered, not internal effort. A simple pattern works for many SMEs:

• Deposit to secure the slot or start date.
• Milestone invoices at agreed stages.
• Final invoice on sign-off, with a tight payment window.

Deposits are not just cash, they’re qualification. Customers who won’t pay a sensible deposit are often the same ones who argue later.

Handle disputes fast and calmly. A “query” can become a slow-pay excuse. Set a rule that any invoice dispute must be raised within a short window (for example, 7 days), and it must be in writing with a clear reason. Internally, assign a single owner to resolve it, and separate genuine service fixes from payment delay tactics. Buyers like this because it shows control and reduces bad debt risk.

A simple debtor action cadence keeps it from becoming emotional or random. You want routine, not drama:

Rhythm	What to do	Outcome you want
Daily	Flag overdue invoices, confirm new invoices were sent, check promised payment dates	No invoice “lost in the system”
Weekly	Call top overdue accounts, confirm payment date and method, send written recap	Fewer “I’ll pay next week” loops
Monthly	Review aged debt, set credit holds, write off or escalate formal recovery	Clean ledger, fewer surprises at sale

This stabilises working capital and reduces completion accounts fights because you’re building a track record of reliable cash conversion. When a buyer sets a “normal working capital” target, stable debtor days and a clean ageing report make it harder for them to argue you’re under-collecting, over-stating debtors, or dressing the balance sheet for completion.

Prune low-margin revenue and stop serving customers that drain cash

Not all revenue is good revenue. Some sales look healthy on the top line but quietly eat time, create errors, trigger returns, and delay cash. Keeping that revenue can lower your Business Valuation because it drags margin, creates stress in delivery, and makes cash less predictable.

The hard truth is this: a smaller, higher-quality book often sells better than a bigger book full of friction. Buyers prefer earnings they can repeat without drama. They also underwrite operational capacity. If your team is busy but profit is thin, buyers worry the business is one surprise away from a bad year.

To spot bad revenue quickly, don’t start with opinions. Start with a basic view by customer and by product or service line:

• Gross margin: Who consistently sits below target?
• Time-to-serve: Which accounts take the most staff time per pound of revenue?
• Returns, rework, and credits: Which lines create the most fixes and write-offs?
• Late payment and disputes: Who pays late, argues invoices, or needs repeated chasing?

You don’t need perfect data to take action, just consistent signals. In Consult EFC client work, we often find a small group of customers create most of the chasing and most of the “emergency” work. Those accounts also tend to be the ones pushing for discounts.

Once you’ve identified the culprits, choose the cleanest fix:

Raise prices where the value is clear and demand is steady. If the customer stays, you’ve improved margin and cash. If they leave, you’ve freed capacity for better work.

Change the service level. Some customers don’t need the premium version, they just consume it because you’ve never defined the standard package. Put boundaries in writing: what’s included, what’s extra, and what response times look like.

Stop selling the product or service that can’t meet a sensible margin, unless it has a strategic reason (like pulling through high-margin work). Buyers will ask why you keep it. Have an answer, or remove it.

Exit the worst customers politely. Give notice under the contract, finish commitments, and move on. The aim is to reduce noise and improve cash reliability.

The valuation logic is simple. If pruning lifts gross margin, reduces bad debt risk, and makes delivery calmer, you’re improving maintainable earnings quality. Buyers may pay more for that, even if reported revenue is lower, because the profit is more believable and less fragile.

Renegotiate supplier terms and remove cost surprises

Buyers don’t only check customers. They also test whether your margin can survive supplier changes, lead time shocks, and sudden price rises. In 2026, supply chain resilience still matters because disruption risk hasn’t vanished. It has just changed shape, with geopolitics, shipping volatility, and uneven input costs still creating surprises.

Your goal in months 4 to 6 is to turn supplier management into something predictable.

Start with payment terms. If you pay suppliers in 7 days but collect from customers in 45, you’re funding the whole chain. Ask for longer terms on the suppliers that matter most, using a calm, commercial approach. Bring evidence: order volume, history of on-time payments, and forecasts. Even moving a key supplier from 14 to 30 days can reduce working capital strain.

Build dual sourcing for critical items. This doesn’t mean splitting every order. It means you can credibly say to a buyer, “If Supplier A fails, we have Supplier B approved, priced, and ready.” Buyers like options. Single points of failure lower value.

Use price locks where possible. If your pricing to customers is fixed but your supplier costs float, your margin is at risk. For key lines, aim for fixed pricing for a set period, or agree a pricing formula and notice period for changes. Even a 60 to 90-day notice clause helps you reprice your own customers.

Revisit minimum order quantities and delivery schedules. Buying in bulk might earn a discount, but it can also trap cash in stock. If you’re selling the business, buyers won’t thank you for a warehouse full of slow-moving items. Negotiate smaller minimums, or staged deliveries against the same price.

Remove “cost surprises” with simple controls. Ensure you have written terms for freight, surcharges, return rules, and lead times. Then track supplier performance monthly: late deliveries, price changes, quality issues, and credit notes. It’s boring, which is why it works.

This all reduces risk, and risk is part of valuation. Buyers will see fewer reasons to push holdbacks or argue that the business needs extra working capital after completion.

Build simple recurring revenue offers that buyers can underwrite

Recurring revenue is attractive because it makes the future less guesswork. It also changes the tone of diligence. Instead of arguing about whether next quarter will be “good”, you can show contracted income, renewal rates, and a clear retention process.

Keep it simple. The point is not to invent a complex subscription business overnight. It’s to package what customers already need into a repeatable offer with clear terms.

Examples that work well:

For product businesses, consider maintenance plans, extended warranties, consumables subscriptions, or support packages. If you sell equipment, a service plan can turn a one-off sale into an ongoing relationship. If you sell consumables, a standing order can remove ordering friction.

For service businesses, consider monthly retainers, support hours bundles, compliance packages, or training bundles. Many SMEs already provide ongoing help informally. Packaging it makes it measurable and billable.

Pricing should be easy to explain. Use one of these approaches:

• A clear monthly price tied to a defined scope (what’s included, what isn’t).
• Tiered packages (basic, standard, premium) with clear limits.
• A minimum term with a fair exit, so customers don’t feel trapped.

Contract length matters. If you want buyers to underwrite it, don’t rely on handshake renewals. Aim for 12-month terms where possible, with auto-renewal unless cancelled with notice. Keep the cancellation clause reasonable, and avoid anything that makes revenue feel optional.

Build a renewal process that runs without you. Set a simple timeline: 90 days before renewal, confirm usage and outcomes, share the renewal quote, and get confirmation in writing. If you leave renewals to the last week, you’re inviting churn.

Track retention in plain metrics that you can share with a buyer without a long explanation:

• Monthly recurring revenue (MRR): total recurring fees per month.
• Churn rate (logo churn): percent of customers who cancel in a period.
• Revenue churn: how much recurring revenue you lost in a period.
• Retention rate: percent of customers who stayed over 12 months.

You don’t need perfect dashboards. A clean spreadsheet updated monthly is enough if it’s accurate. Over time, this strengthens your Business Valuation story because the buyer can see contracted cash flow, a repeatable offer, and a process that doesn’t depend on founder memory.

Month 7 to 9: Reduce buyer risk so you keep the headline price and avoid earn-outs

By months 7 to 9, you’re no longer “improving the business”, you’re removing the reasons a buyer will protect themselves with earn-outs, retentions, and heavy warranties. This is the part of exit planning where a strong Business Valuation becomes more than a spreadsheet, because the buyer can see that cash flow, customers, and delivery will hold up after you step back.

Think of it like selling a house. Fresh paint helps, but buyers pay properly when the roof, wiring, and paperwork are sound. In a sale, the “roof” is owner independence, diversified revenue, repeatable delivery, and clean governance. Fix those, and you keep more cash at completion.

Remove founder dependence, make the business run without you

An owner-dependent business can still sell, but it nearly always sells with strings attached. If the buyer thinks revenue and delivery sit in your head, they will ask you to stay, then tie payment to performance after completion.

Owner-independent doesn’t mean you vanish. It means the business has clear roles, clear decision rights, and a credible second-in-command who can run day-to-day without checking everything with you.

Start by writing down what “you” actually do. Not your job title, the real work:

• Which customers only deal with you.
• Which suppliers only respond to you.
• Which approvals only you can give (pricing, hiring, refunds, scope changes).
• Which problems always bounce back to your desk.

Then turn that into structure:

Documented roles and responsibilities
Create role profiles for key positions, even if they’re short. Include outcomes (what good looks like), recurring tasks, and key metrics. Buyers like this because it shows the business is organised, not improvised.

Appoint a second-in-command (even if part-time at first)
This is your operational “shock absorber”. They don’t need to be a mini-founder, they need to run weekly rhythm: priorities, resourcing, customer issues, and performance reporting.

Decision rights that don’t bottleneck
Write a simple authority matrix so the team can act without waiting for you. Keep it practical: who can discount, who can sign a contract, who can approve spend, who can hire. If everything routes through you, the buyer sees risk.

A handover plan that looks real
Set out a 30, 60, 90-day plan for post-sale. Include what you’ll train, what you’ll introduce, and what you will stop doing. This reduces the buyer’s fear of “handover drift”, where you end up staying longer because nobody else can run it.

A simple test that exposes founder dependence fast is the four-week holiday test. Imagine you are offline for four weeks, no calls, no Slack, no rescues. What breaks?

• Leads stop coming in because only you network.
• Quotes don’t go out because only you price.
• Projects stall because only you solve escalations.
• Invoicing slips because only you know what’s billable.
• Cash control weakens because only you watch it weekly.

Each “break” is also a buyer’s term request. Fixing them reduces retention demands for staff and reduces pressure for earn-outs tied to your continued involvement. When you can show consistent trading while you step back, your valuation moves from “founder story” to “business asset”.

Diversify revenue and protect against customer concentration

Customer concentration is one of the fastest ways to lose negotiating power. Buyers don’t just look at your largest customer, they model what happens if you lose them, or if they cut spend. If the downside case hurts profit badly, the buyer protects themselves with a lower multiple, deferred consideration, or an earn-out linked to keeping that account.

In practice, buyers often run a simple sensitivity view: “If Customer A goes, what happens to EBITDA?” If the answer is “it halves”, they will not pay you as if that risk doesn’t exist.

You don’t need to eliminate concentration overnight. You need to show momentum away from it, and controls that make revenue more resilient.

Practical actions that work for SMEs:

Broaden lead sources, not just lead volume
If your pipeline relies on one channel (referrals through you, one partner, one platform), it’s fragile. Add at least two more sources you can track. The win here is not marketing creativity, it’s reducing single points of failure.

Adjust pricing and packaging to reduce reliance
If your biggest customer gets the best price “because they’re big”, you’re paying for concentration risk with margin. Tighten discount rules, introduce paid add-ons, and remove bespoke extras that only exist for one account. A buyer will treat margin discipline as proof you can protect earnings.

Introduce multi-year contracts with smaller clients
One large account can feel safe, until it isn’t. A base of smaller customers on 12 to 24-month agreements often underwrites value better. Keep terms reasonable, with clear scope and renewal dates, and avoid overly generous termination for convenience clauses where you can.

Build a simple pipeline report you can defend
Buyers trust what you can show monthly. Keep it basic and consistent: lead source, stage, expected close month, expected value, and probability. Over time, it becomes evidence that sales don’t depend on your memory.

A helpful internal benchmark is to watch your top customer percentage each quarter. If it drops from 38 percent to 30 percent, that can change buyer tone. Even small shifts can improve terms because the buyer’s downside case becomes less scary, which supports a stronger Business Valuation and a cleaner structure.

Make your processes repeatable, so growth is believable

Buyers don’t just buy what you earned last year, they buy what they believe you can repeat. If results depend on hero effort, or on people “just knowing what to do”, your numbers look less reliable. That uncertainty shows up as a lower multiple or performance conditions.

The fix isn’t fancy software. The fix is simple documentation and reporting that proves control.

Focus on the processes buyers expect to see written down:

Sales process (from lead to cash)
Document the steps: lead qualification, discovery, proposal, pricing approvals, contract issue, handover to delivery, invoicing trigger, and credit control cadence. If you can’t describe your sales process in one page, it’s probably living in people’s heads.

Delivery checklists and quality checks
Create a checklist for your core service or product delivery. Include the few steps that prevent rework, complaints, and margin leakage. Add a simple QA sign-off, even if it’s just a named person and a tick box.

Customer onboarding
Write the onboarding steps that make customers stay: setup, access, initial meeting, responsibilities, first deliverable, first invoice timing, and review points. Buyers like this because it reduces churn risk after acquisition.

KPI dashboard that’s boring and consistent
A buyer wants to see you run the business by numbers, not vibes. Keep a monthly dashboard that covers:

• Sales: leads, win rate, average deal value, pipeline coverage.
• Delivery: utilisation or throughput, on-time delivery, rework levels.
• Finance: gross margin, debtor days, cash balance, working capital trend.
• Customers: churn, renewals due, NPS or complaint volume (if you track it).

A useful standard is: if you can’t produce these within 48 hours, your reporting isn’t yet buyer-grade.

Why this supports a higher multiple is simple. Repeatable processes reduce execution risk. If a buyer believes they can add resources and grow without breaking delivery, they pay more for the same level of EBITDA. They also ask for fewer protective mechanisms, because the business looks like it runs on method, not memory.

Strengthen governance and compliance, so due diligence does not stall

Due diligence delays are expensive. They drain energy, create doubt, and give buyers time to negotiate harder. Most stalls come from gaps in basic governance and compliance, not from complicated legal battles.

At an SME level, the goal is to get your “house file” in order. You want a buyer to feel that nothing is being hidden, and that risks are known and contained.

Prioritise these areas:

Customer and supplier contracts
Make sure key contracts are signed, stored, and easy to find. Check change-of-control clauses, termination terms, renewal dates, service levels, and liability caps. If contracts are missing or unclear, buyers often respond with price reductions or special indemnities.

IP ownership and usage rights
Confirm that the company owns what it sells. That includes software code, designs, content, trademarks, domains, and key documentation. If contractors created assets, ensure agreements assign IP to the business. Loose IP is a common reason for buyers to hold money back until it’s fixed.

Licences and permissions
If you operate in a regulated area, keep evidence of licences, renewals, and compliance checks. Buyers don’t want to discover post-completion that a licence is non-transferable or out of date.

GDPR basics
You don’t need a perfect compliance programme, you need the basics done and provable: privacy notice, data processing agreements where required, a record of key systems holding personal data, and a clear approach to access and deletion requests. If data handling looks sloppy, buyers worry about fines and reputational damage.

Employment documentation
Have signed contracts for staff, clear role titles, notice periods, and up-to-date policies where needed. If key people are on informal arrangements, buyers may require retention packages, or they may insist you fix contracts before completion.

Insurance cover
Ensure you have appropriate, current policies (such as employers’ liability, public liability, professional indemnity where relevant, and cyber cover if you rely heavily on systems). Gaps can trigger lender concerns, which can slow funding and weaken your position.

When these areas are weak, the buyer’s legal team will widen the warranty pack, ask for longer claim periods, or request specific indemnities. Each of those shifts risk back onto you, even if the headline price looks good. Clean governance keeps diligence moving, reduces last-minute renegotiation, and helps you protect cash at completion.

Month 10 to 12: Get deal-ready and protect terms before the buyer arrives

Months 10 to 12 are where value becomes collectable cash. You are no longer “improving the business”, you are making it easy to buy, easy to fund, and hard to chip. Buyers will still negotiate, that’s their job, but you can remove most of the reasons they use to push price down or shift risk onto you.

Think of this phase like preparing a car for sale. A clean body helps, but the service history, mileage proof, and MOT matter more. Your goal is a tidy data room, a clear valuation story, and deal terms that don’t quietly give back what you thought you sold.

Build a simple data room and your ‘proof pack’ for buyers

A data room doesn’t need to be fancy, it needs to be complete, logical, and consistent. If a buyer can’t find what they need fast, they assume you’re hiding problems (even when you’re not). That slows diligence, increases legal noise, and gives them room to ask for holdbacks or price reductions “because it’s taking longer”.

Start with a simple folder structure that mirrors how buyers run diligence. Keep file names consistent and date-stamped, and lock version control early. One “final” file beats five near-identical versions, especially for management accounts and forecasts.

Your proof pack should include, as a minimum:

• Last 3 years’ statutory accounts, including notes and any audit or review reports.
• Monthly management accounts (ideally 24 to 36 months), with the same chart of accounts throughout.
• Customer contracts and key terms (renewals, termination, change-of-control, pricing clauses).
• Supplier contracts, including rebates, exclusivity, and price change rules.
• Sales pipeline report, with stages, values, expected close dates, and definitions.
• KPI trends (monthly), covering sales, margin, delivery, retention, and cash metrics.
• Cash forecast history, including forecast vs actual, so buyers can see discipline.
• Cap table (shareholders, options, share classes, shareholder agreements).
• Debt schedule (loans, overdrafts, asset finance, covenants, security, repayment dates).
• Tax filings: VAT returns, PAYE records, corporation tax computations, R&D claims if relevant.
• Key policies: GDPR, IT and security, HR handbook, health and safety, anti-bribery (where relevant), expenses policy.

Two practical rules keep this under control:

1. Single source of truth: one owner internally (and one backup) controls uploads and naming.
2. Change log: if you replace a file, note what changed and why, so you can answer questions fast.

When Consult EFC supports this stage, the aim is simple: remove back-and-forth. If diligence becomes a quick tick-box exercise, you protect both your Business Valuation and your timetable.

Tell a clear valuation story, why the number is justified and repeatable

A good valuation story isn’t a sales pitch, it’s a repeatable profit story with receipts. Buyers pay for what they can trust, model, and keep after you step away. If your narrative is vague (“we’re growing” or “the market is strong”), they will anchor on downside risk and use it to push terms.

Build your story around drivers that buyers recognise and can verify:

• Margin trend: what improved, why it improved (pricing, mix, supplier terms, waste reduction), and why it will hold.
• Recurring revenue: what proportion repeats, under what contracts, with what renewal and churn history.
• Retention: customer churn, net revenue retention (if you track it), and what you changed to improve stickiness.
• Cash conversion: debtor days, stock discipline (if relevant), billing cadence, and how profit turns into bank cash.
• Risk fixes completed: founder dependence reduced, key contracts signed, compliance tightened, key roles filled.

Then give the buyer a simple bridge from baseline to today’s run-rate. Keep it clean enough that it fits on one page, and back each line with evidence in your data room.

A practical format looks like this:

1. Baseline maintainable EBITDA (from normalised management accounts).
2. Add confirmed improvements that are already in the run-rate (not hopes), such as price rises that have been billed and collected, or cost changes already implemented.
3. Remove one-offs that won’t repeat, on both sides (extra costs and extra income).
4. Resulting run-rate EBITDA, with a clear “as at” date and supporting months.

The key discipline is not to sell future plans as if they’re already real. Buyers discount plans, and they’re right to. If you want credit for improvement, show it flowing through: invoice evidence, gross margin reports, retention logs, and bank lines that match the story. That’s how a Business Valuation becomes defensible under pressure.

Protect deal terms, reduce completion account pain and avoid hidden give-backs

Many owners focus on the headline price, then lose money in the small print. Term risk is where value disappears quietly: working capital targets, debt-like items, and “adjustments” that seem reasonable until they hit your completion statement.

Start with the big one: working capital. Buyers often propose a “normal” level of working capital you must deliver at completion. If you deliver less, the price drops pound for pound. You need to agree:

• The exact definition (what’s included and excluded).
• The target (how it’s calculated, over which months).
• The timing (month-end vs average, seasonality adjustments, and what happens if trading is growing).

Next, get ahead of debt-like items. These are balance sheet items that a buyer treats like debt, even if you don’t. Common examples include:

• VAT and PAYE liabilities.
• Accrued bonuses or commissions.
• Lease liabilities and asset finance.
• Customer deposits and deferred revenue (especially in service and subscription models).
• Unpaid supplier rebates or contractual obligations.

This is why quality of earnings checks matter. They spot earnings that look fine on paper but won’t convert, or liabilities that sit off to the side until someone asks. The usual surprise list includes VAT issues, holiday pay accruals, and deferred revenue. None of these are unusual, but they become costly when they appear late.

Then watch for common term traps that shift risk back to you:

• Earn-outs: Payment depends on future performance. Protect yourself with clear metrics, control limits (so the buyer can’t change the rules), and sensible timeframes. If the buyer controls pricing, spend, or strategy post-completion, your earn-out becomes a bet.
• Holdbacks and retentions: The buyer keeps cash back “just in case”. Tighten the reasons, the time period, and the release conditions.
• Warranties: Statements you make about the business. Wider warranties mean more claims risk. Push for fair disclosure and reasonable claim caps and time limits.
• Indemnities: You pay pound for pound if a known risk happens (tax, legal disputes, IP). Keep them specific, capped, and time-bound where possible.
• Non-competes and restrictions: Normal in many deals, but they must be realistic. Don’t accept terms that block you from earning a living in your own sector for years.

Good terms are not about being difficult, they’re about aligning risk with reality. If you fixed risks in months 1 to 9, use that work to justify cleaner terms now.

Pressure-test the deal before you sign, what Consult EFC would challenge

When an offer lands, it can feel like relief. That’s when owners stop questioning the structure, and that’s when hidden give-backs slip in. Pressure-testing means taking the buyer’s proposed terms and asking: “If things go slightly wrong, do I still get paid fairly?”

Consult EFC would challenge the deal with a short set of red-flag questions, aimed at the areas where sellers most often lose control:

• What has to go right for the earn-out to pay out? If it requires perfect trading, perfect integration, and no customer churn, it’s not a plan, it’s a hope.
• What control does the buyer have after completion? If they can change pricing, cut marketing, reassign staff, or alter reporting rules, they can also accidentally (or deliberately) kill your earn-out.
• What happens if key customers leave? Is there a price adjustment, an earn-out rebase, or a warranty claim risk? Get clarity before you sign.
• How are disputes handled? Define who decides, what evidence counts, and how long resolution takes. If the process is vague, you’ll be arguing later when you have less power.

Finally, set walk-away points tied to the exit target you set in month 1. Put them in writing for yourself. Examples include:

• Minimum cash at completion after debt and fees.
• Maximum earn-out percentage you will accept.
• Maximum warranty and indemnity exposure (caps and time limits).
• Non-negotiables on working capital definitions and debt-like items.

A deal is only “good” if you can bank the value with manageable risk. This last quarter is where you protect the number you worked for, and stop the buyer from rewriting it after you’ve already agreed the headline.

Expert Insight: Navigating the 2026 UK Exit Landscape

As we move through 2026, the window for tax-efficient business exits is narrowing. The increase in Business Asset Disposal Relief (BADR) from 14% to 18%, effective from 6 April 2026, has fundamentally shifted the math for SME founders. To maximise net proceeds, owners must look beyond simple turnover and focus on normalised EBITDA and recurring revenue quality.

Current M&A trends show that buyers are increasingly selective, with a distinct valuation premium placed on companies that can demonstrate AI-resilience and robust working capital management. Whether you are considering a Share Sale to capitalise on remaining BADR limits or exploring a Management Buyout (MBO), your valuation bridge must be defensible under 2026 due diligence standards. Early preparation – ideally 24 months before disposal – remains the most effective way to optimise your multiple and ensure a seamless transition in a high-interest, high-scrutiny market.

Conclusion

A stronger Business Valuation comes from two things buyers can trust, cash that shows up on time, and risk that stays under control. Over 12 months, the Consult EFC playbook tightens both, so your multiple improves and you protect deal terms, not just the headline number.

Months 1 to 3 set the baseline, clean up normalised EBITDA support, and install a weekly cash rhythm. Months 4 to 6 convert profit into cash faster by fixing billing, collections, working capital drag, and weak-margin work. Months 7 to 9 reduce the triggers for earn-outs and retentions by cutting founder dependence, widening the customer base, and making delivery repeatable. Months 10 to 12 turn that progress into a deal-ready proof pack, a clear valuation story, and firmer positions on working capital, debt-like items, warranties, and holdbacks.

If you want an exit that pays properly, start now. Get a baseline Business Valuation, write a short value blocker list, then run the 12-month plan with Consult EFC.

Contact us today for a FREE consultation.