Most business owners think about transaction readiness when they’re preparing to sell.
Investors wish they had started years earlier.
Whether a transaction is on the horizon or not, the habits that make a company attractive to buyers are often the same habits that create a stronger, more valuable business today.
As Craig Levy shared during his recent conversation with Kevin Kaye, companies create value not by preparing for an event, but by operating as though someone is evaluating the business every day.
His advice:
Run the company as if a buyer reads your books tomorrow.
Start Thinking Like an Investor
The way investors evaluate businesses is often different from the way operators manage them.
Operators focus on growth, revenue, customers, and execution.
Investors focus on risk, sustainability, and confidence.
One of the most valuable exercises leaders can undertake is to ask:
What would I need to believe if I were investing my own money?
That question changes the conversation.
Instead of focusing solely on reported earnings, investors begin evaluating whether those earnings are sustainable, transferable, and supported by operational discipline.
Craig described how his review process often starts by examining the quality of earnings, the balance sheet, and cash flow before diving deeper into the income statement. The goal is simple: determine whether the investment thesis holds up under scrutiny.
Build Credibility Before You Need It
Many companies wait until a transaction is imminent before organizing information, documenting adjustments, or cleaning up financial reporting.
That approach can create unnecessary challenges during diligence.
Instead, leaders should focus on maintaining a business that is always ready to be evaluated.
Practical steps include:
- Maintaining a documented add-back schedule
- Producing timely accrual-based financial statements
- Keeping organized financial and operational records
- Cleaning up discretionary owner expenses
- Understanding working capital trends
- Creating an always-on data room mindset
Readiness isn’t just about making life easier during a sale process. It creates organizational discipline that benefits the company long before any transaction occurs.
Focus on What Creates Confidence
Many organizations devote significant energy to metrics that ultimately do little to increase value.
Revenue growth at any cost.
Last-minute efforts to improve results before a sale.
Aggressive EBITDA adjustments.
Vanity KPIs that look impressive in presentations but fail to support decision-making.
According to Craig, investors are looking for something much simpler.
They want confidence.
That confidence is built through:
- Provable earnings
- Strong cash conversion
- Diversified revenue streams
- Scalable systems and processes
- Leadership depth
- Consistent execution
When these elements are in place, buyers spend less time questioning the business and more time envisioning its future.
Management Teams Matter More Than You Think
One theme that surfaced repeatedly in the conversation was the importance of people.
Financial analysis may drive initial interest, but management teams often determine whether confidence is earned.
Investors look for leaders who know their numbers, communicate clearly, and take ownership of results.
Strong operators don’t hide problems.
They identify risks early, communicate them directly, and present a plan for addressing them.
As Craig noted:
Bad news ages badly.
Leadership credibility becomes particularly important when businesses encounter inevitable challenges. Buyers want confidence that management can adapt, communicate, and execute when conditions change.
Common Mistakes First-Time Sellers Make
For owners navigating a transaction for the first time, the process is often more intensive than expected.
Common misconceptions include:
- Assuming a letter of intent means the deal is done
- Underestimating the workload required during diligence
- Believing the quality of earnings review is designed to support the seller
- Overlooking working capital mechanics
- Failing to model their own economics before negotiating
Perhaps most importantly, many owners underestimate how much preparation can influence both valuation and deal certainty.
The earlier issues are identified and addressed, the more options leaders typically have.
A Useful Exercise
Craig offered a practical challenge for business leaders.
Spend a day viewing your business through the eyes of a buyer’s diligence team.
Review every add-back.
Question every assumption.
Look for unsupported adjustments.
Ask whether the cash flow aligns with the earnings.
Most importantly, ask yourself:
What would scare me if this were my money?
Then start fixing those issues.
Because the companies that create the most value are rarely the ones preparing for a transaction. They’re the ones operating every day as if the transaction could happen tomorrow.
Watch the Full Discussion
Enterprise value is about more than earnings alone. To hear Craig Levy’s firsthand perspective on risk assessment, transaction readiness, management teams, and what investors really look for when evaluating a business, watch the full conversation with Kevin Kaye.