Build to Sell. Designing a Business Buyers Compete For
A 12-month blueprint to turn your company into a transferable, buyer-ready asset—and keep more after tax at the wire.
Most founders think an exit is about finding a buyer and getting a number. In reality, the buyer and the number are the last steps. What commands a premium in 2025 is transferability (someone can run it without you), durability (cash flow won’t fall apart), and readability (a stranger can verify the numbers fast). If you design these three traits into the business—before bankers draft a teaser—you change the conversation from “convince me” to “compete for me.”
This guide is your build-to-sell field manual, written for U.S. entrepreneurs who care about after-tax outcomes, not vanity prices. You’ll learn how deal structure affects taxes, how to make your revenue “multiple-worthy,” and how to run a 12-month exit sprint that creates real options. The tone is practical: what to do, when to do it, and why buyers will pay more if you do. We’ll use plain language, short sections, and a single scorecard you can copy into your planning doc.
Read this if you’re selling in the next 6–24 months, or if you simply want the freedom to sell on your terms. A company that’s easy to sell is also easier to operate, easier to finance, and less stressful to own. Even if you never transact, these steps raise your margins and lower your risk—now.
1. What buyers actually pay for and quietly penalize
Buyers pay a higher multiple when they believe two things: cash flow is durable and they don’t need you to keep it durable. They penalize anything that suggests fragility: one customer controlling the P&L, contracts they can’t assume, or a founder who is the only adult in the room.
Think like a buyer reviewing your business for the first time:
Can I transfer the machine on Monday? That means assignable contracts, clear IP ownership, and SOPs that are used—not just written.
Will the cash keep showing up? Healthy retention, pricing power, and a competent number-two who already runs the weekly cadence.
Can I verify the story fast? GAAP-clean financials, consistent revenue definitions, and a third-party Quality of Earnings (QoE) that matches what you say.
If it isn’t transferable, it isn’t worth full price. That’s the whole game.
2. Choose the sale you want—and reverse-engineer it
The biggest fork in the road is asset sale vs. stock (equity) sale. It affects diligence, legal friction, and your tax mix.
Asset sale: Buyers love it because they pick assets and get a basis step-up. Sellers face possible ordinary income on items like depreciation recapture and more friction when assigning contracts.
Stock sale: Sellers love it because it’s usually capital-gains heavy and simpler to transfer; some buyers resist unless they can mimic an asset treatment via elections or price.
Your job is to make either path painless. Tighten assignability language to prevent an asset deal from becoming a consent circus. Keep equity clean and liabilities contained so that a stock deal feels safe enough to the buyer. Optionality is leverage.
3. Architecture that sells: simple, clean, and documented
You don’t need complexity; you need clarity.
HoldCo/OpCo split: Park IP and trademarks in HoldCo, license to OpCo. It calms diligence and can make allocations cleaner.
Cap table hygiene: No orphaned SAFEs or handshake promises. Everything signed, dated, and reconciled.
Replace founder dependence with filmable systems: SOPs, weekly metrics, and an escalation map that works when you’re offline.
Incentives that travel well: Options/RSUs/profit interests that are easy to settle at exit and don’t trigger ugly tax surprises for the team.
Think early about small-business stock rules: If you want potential capital-gains exclusions, eligibility and timing are everything. Late conversions rarely help.
4. Revenue quality: the multiple mover
Two businesses with the same top line can price miles apart because buyers believe one stream more than the other.
SaaS example.
Company A: 3% monthly logo churn, 110% NRR, two whales at 40%+ of ARR, month-to-month terms.
Company B: 1.2% monthly logo churn, 118% NRR, no customer >15%, 2-year assignable contracts.
B will command the premium because retention + diversification + assignability reduce future-cash-flow risk. The difference can be multiple turns, not basis points.
Services example.
Standardized scopes, named backups on every account, and documented delivery playbooks lift EBITDA and lower perceived risk. That often compresses escrow and reduces reliance on earnout—more cash on day one.
5. The number that matters: net after tax
Headline price is theater; wired to you is reality.
Net Proceeds = Purchase Price – Debt – Escrows/Holdbacks – Transaction Costs – Taxes
Reps & warranties insurance (RWI) can shrink escrow and speed cash.
Working capital peg mistakes can drain six figures. Seasonal businesses, deferred revenue, and prepaids must be normalized long before LOI.
Tax mix drives your take-home: capital gains vs. ordinary income, state rates, and the 3.8% NIIT. Model early; structure accordingly.
6. Deal levers you control
Earnouts: Keep to one metric you operate (e.g., gross profit). Define exclusions (e.g., sponsor overhead). Cap offsets.
Rollover equity: Great for a “second bite” if you trust the sponsor. Understand what’s taxed now vs. deferred, and how governance works post-close.
Price vs. terms: The top price with booby-trapped terms is often inferior to a slightly lower price with clean cash, tight reps, and minimal earnout.
7. Exit-readiness scorecard
8. Two short case studies
A. “Steady SaaS” ($3.2M ARR, 85% gross margin)
Problem: Two whales at 28% of ARR; month-to-month; churn mixed with downgrades.
Fix: Convert top 10 to 1–3-year assignable terms, ship two retention features, publish a revenue definition memo, and run a pre-QoE.
Result: Risk profile improves; buyer competition increases. Multiple expands from ~5.5x to ~7.5x—roughly +$6.4M in headline value before tax.
B. “Ops-Heavy Services” ($6M revenue, 22% EBITDA)
Problem: Founder in every client group chat; contractor IP unclear.
Fix: Install a delivery lead, centralize IP assignments, and productize the top three retainers with renewal/assignment baked in.
Result: EBITDA to 25%, escrow reduced, lower earnout share—more cash at close, and a cleaner tax mix.
9. The 12-month exit sprint
Quarter 1 — Clean and clarify.
Legal: add assignment & change-of-control language on contract renewals; finalize IP assignments; reconcile the cap table.
Finance: close monthly on an accrual basis; document revenue recognition; start a pre-QoE so you fix issues now, not under the bank’s clock.
Ops: draft your SOPs and actually run the business with them for 30 days.
Quarter 2 — De-risk cash flow.
Targeted customer diversification; convert top accounts to term agreements; ship features/processes that reduce churn or rework.
Name a valid #2. They lead at least one full ops cycle without you.
Quarter 3 — Make diligence boring.
Build the data room (financials, contracts, HR, IP, security). Pre-model the working capital peg using a 12-month lookback. If SaaS, progress SOC 2; if services, harden your delivery playbook.
Quarter 4 — Package and choose.
Refresh your projections; decide whether you’ll accept asset-style mechanics or push for stock; interview bankers and a short list of buyers. Pre-wire references. Enter the process ready, not hopeful.
10. Taxes without the headache
You don’t need to be a tax pro; you do need to control where each dollar lands.
Push as much as legitimately possible into long-term capital gains.
Minimize ordinary income (e.g., depreciation recapture) with early planning on allocations and structure.
Model state taxes and NIIT before selecting a close date or new domicile. If you might move, that is a 12-month project, not a sprint.
If exploring potential small-business stock benefits, verify eligibility early and keep records tight. The goal isn’t cleverness—it’s eligibility plus documentation.
11. Diligence playbook (how to be the fast, trustworthy seller)
The quickest way to lose value is to surprise the buyer. The fastest way to gain it is to answer complex questions with organized evidence.
Financials: 36 months of monthly P&Ls and balance sheets, AR/AP aging, revenue by cohort or service line, and a revenue recognition memo.
Legal & IP: Cap table, board consents, contractor IP assignments, and a license map if HoldCo/OpCo.
Commercial: Top 25 customer files with renewal and assignment language, churn reasons, and pipeline health.
People & Security: Org chart with documented backups, key employment agreements, SOC 2 status (or security policies), and DPAs.
Short, labeled folders. Version control. No mysteries.
12. Frequent questions founders ask
“Will buyers pay more if I stay a year?”
Sometimes—but you’re selling risk reduction, not your time. If a buyer needs you to run the machine, they’ll discount. Build a team that makes your stay a nice-to-have.
“Should I accept an earnout?”
If it’s one metric you control and the base cash works, maybe. If the definition is fuzzy or the buyer can load costs onto your P&L, expect pain.
“Is rollover equity smart?”
It can be. Treat it like a new investment: governance, future dilution, exit path, and how your tax is handled now vs. later.
“Banker or no banker?”
A good banker expands the buyer set and manages the clock. If you already have multiple credible buyers and a clean story, you may run a focused process with counsel. Most founders net more with a pro.
13. Your three moves this week
Start a pre-QoE conversation. A short discovery call will surface what to fix in 30–60 days.
Update contract templates to add assignment and change-of-control language; queue renewals.
Name and empower a #2 to run one full ops cycle. Debrief, patch gaps, repeat.
You’re not selling revenue—you’re selling a reliable engine. Make it transferable, make it durable, and make it easy to verify. Do that, and in 2025 you won’t negotiate from hope. You’ll invite a competition, set cleaner terms, and walk away with more—after tax.