In this episode of the Seller Master Class Series, Mike, Matt, and Ryan walk through what sellers should expect after a transaction closes. They cover how to protect customer confidence, reassure employees, establish communication cadence, and prioritize the right operational changes without disrupting service delivery or cash flow.

They also discuss the founder’s transition after closing, common post-merger integration missteps, and what success looks like in the first 100 days.

What you’ll learn in this episode:

• What matters most in the first 30 days after closing
• How to communicate the transaction to employees and customers
• Why messaging and leadership alignment are critical post-close
• What operational changes should happen first and what should wait
• How founders should prepare for the emotional and practical shift after selling
• The KPIs that signal a healthy integration in the first 100 days

OTHER EPISODES IN THIS SERIES:

Part 1. Knowing When It’s Time to Sell: Listen now >>

Part 2. Get Your House in Order: Listen now >>

Part 3. Valuation Drivers: Listen now >>

Part 4. What is my Take Home? Listen now >>

Part 5. It Takes a Village. Listen now >>

Part 6. The First 30 Days of a Process. Listen now >>

Part 7. Finding the Right Buyer. Listen now >>

Part 8. Deal Structures 101. Listen now >>

Part 9. Due Diligence. Listen now >>

Part 10. Definitive Agreements and the Final Stretch. Listen now >>

Key takeaways

• The LOI is not the final deal. It is more like a handshake on price and core terms, while definitive agreements create the legally binding structure of the transaction.
• The focus shifts from headline economics to risk allocation, including representations, warranties, indemnification, escrows, working capital, and earnouts.
• Sellers should expect multiple transaction documents, including the purchase agreement, employment or transition agreements, non-compete and non-solicit provisions, disclosure schedules, and sometimes escrow or lender-related documents.
• An M&A advisor should protect deal momentum and economics, while legal counsel should focus on legal exposure. Letting attorneys drive business negotiations can create delays and unwanted tradeoffs.
• Disclosure schedules require a major lift because they support the reps and warranties in the agreement and must fully disclose contracts, employee matters, vendor agreements, litigation issues, notices of termination, and other material business details.
• Closing day is often surprisingly anticlimactic when the deal has been well managed. Most signatures are already in place, wires are released, and the team confirms final execution and funding.

Listen to Shoot the Moon on Apple Podcasts or Spotify.

Buy, sell, or grow your tech-enabled services firm with Revenue Rocket.

OTHER EPISODES IN THIS SERIES:

Part 1. Knowing When It’s Time to Sell: Listen now >>

Part 2. Get Your House in Order: Listen now >>

Part 3. Valuation Drivers: Listen now >>

Part 4. What is my Take Home? Listen now >>

Part 5. It Takes a Village. Listen now >>

Part 6. The First 30 Days of a Process. Listen now >>

Part 7. Finding the Right Buyer. Listen now >>

Part 8. Deal Structures 101. Listen now >>

Part 9. Due Diligence. Listen now >>

EPISODE TRANSCRIPT

Mike: Hello, and welcome to this week’s Shoot the Moon podcast, broadcasting live and direct from Revenue Rocket world headquarters in Bloomington, Minnesota. For those of you that are new to Revenue Rocket, we are the world’s premier M&A advisor to tech-enabled services companies. Today with me are my partners, Ryan Barnett and Matt Lockhart. Welcome, guys.

Matt: Awesome to be here. Ryan, I know you don’t like it when I do this, but I’m going to give away a little timeframe here because we’ve got to congratulate the United States women’s hockey team on their gold medal. So that’s pretty exciting. I know we’ve got members of the audience who are not from the United States, but we need to root for something these days. We’ll take that. What’s going on, Ryan? We’re continuing on with the master class.

Ryan: Absolutely. And I apologize to our friends in Canada. We also love you too, but we’ll take a win for the USA here today.

We’ve been working through a master class, and Mike and Matt, you’ve been really helpful in this process. The point has been to help educate leaders and owners of IT services firms who are looking at a potential transaction either now or in the future.

What we’ve looked at so far has helped listeners understand what it takes to get ready. That means starting with the discussion and decision of whether they should be selling, walking through valuation, finding buyers, the process of getting into an LOI, and signing that LOI. Last week was really focused on due diligence.

Today, we’re going to go past that phase and picture yourself in the situation where you’ve had an LOI signed, diligence has been going really well, and you’ve been able to show a buyer your business. They get to a point where they say this looks great and they’re going to start crafting definitive agreements.

The focus today is this: if we survive the due diligence process, what does it look like to get from three quarters of the way there to all the way there? Mike, help me understand this. If a seller thinks the deal is done with an LOI, what really changes as you start to move to definitive agreements in this process?

Mike: Yeah, thanks Ryan. Great question.

First of all, you’ve got to understand that the LOI is like a handshake agreement. It is not binding. It’s not legally binding and generally aligns around price and terms, and that’s it. You have to craft all of the legally binding agreements in the definitive agreements. It really should be called definitive agreements because there are a lot of them, and we’ll talk more about that later in the master class.

The focus shifts from just economics around deal terms, price, and terms to risk allocation and how the buyer evaluates the risk of your deal, and how you may share in fortifying that risk for them. It’s frankly where deals get reshaped.

It’s critically important during this phase of moving toward definitive agreements to have a strong cadence around momentum because you can get bogged down. You can definitely get bogged down in the legal language in the definitive agreements, but also in what you’re representing and warranting in the business. We’ll get into that in a minute.

Ryan: Thanks for getting us going, Mike. So if we think of the LOI as the handshake, the binding agreement becomes the definitive agreement. You start to decide things like an asset sale or a stock sale and everything that comes with it.

The parties at the table change as well. Matt, maybe you could dig into that a little bit for me. If you think about that definitive agreement phase, and as Mike mentioned, a ton of documents, what documents are included in that phase and what should owners be aware of?

Matt: Yeah. You started it out right. The purchase agreement is the big one, and you’ll often see an APA or an SPA, so an asset purchase agreement or a share purchase agreement. That’s the big one.

But there are others that matter a whole bunch to sellers. Employment agreement, for example. Regardless of whether you’re selling in or selling out, likely there’s going to be a certain period that you’re involved. If you’re selling in, then certainly an employment agreement is going to be appropriate. If you’re selling out, then oftentimes there’s a transition services agreement. Think about it as a contract for a period of time. Both of those are obviously extremely important.

The employment agreement is especially important because you’re setting the stage for your future employment and what the conditions there are. The purchase agreement, and most likely the employment agreement, will also have non-compete and non-solicitation aspects to those agreements. Those things are obviously super important as well.

Then there are the tie-alongs to the purchase agreement that are critical, including the disclosure schedules. Mike will talk more about those. There’s also the escrow agreement, if that’s going to be included in the purchase agreement. If there’s escrow being set aside, that matters too. Then there can be others. There can be lender agreements and so on.

So there’s a lot of paper and there are going to be multiple signatures. The most critical pieces are the final purchase agreement, the employment agreements, and any associated non-competes and non-solicitations.

Ryan: So there’s a lot to go through, is what it sounds like. All of this, when you think about the weight that goes on, you’ve been running your business this whole time, and then in this last push to close, there’s a big focus on the fact that the business is going to go to someone else. To put everything together and understand what you’re signing up for, there’s a lot that goes on. Sellers can oftentimes underestimate the scope that’s involved.

Mike, when you think about all these documents, who should really be driving at this point? If you think about the people involved such as an M&A advisor, an attorney, and a CEO, who’s driving the bus? What’s the best way to get through this from an advisor capacity?

Mike: As I’ve often said, it takes a village to get an M&A deal done, and you pointed out some of the people that live in that village.

Certainly, clear lanes of responsibility are important. The M&A advisor protects the economics and the deal momentum. Remember, we just talked about how momentum is important, moving forward at a reasonably quick cadence so you don’t get bogged down. Working around roadblocks or stoppers that come into play is the advisor’s role. The advisor keeps everybody moving toward a close date. Otherwise, it’s too easy to reschedule the close date.

We say around here that time kills all deals, and that’s true. Things come up, distractions happen, the economy changes, the Fed changes interest rates. There are a million things that can impact a deal if you spend too much time getting bogged down.

The attorney’s role is more around protecting legal exposure, and they should stay in that lane. The CEO really protects the relationships that have been developed in a positive way with the buyer and keeps the business running.

Without the appropriate village assembled, this can become a real problem. We know many stories of people being approached by buyers, larger companies, private equity firms, and sponsored companies where they underestimated the amount of time diligence would take. It was like death by a thousand cuts. While they were in the diligence process, their business suffered because they weren’t paying attention to it and they weren’t running it.

When that happens, buyers can use that as an excuse to retrade the business. If there’s softness in the deal, they’ll use a reason to change price and terms. They’ll say that over the last several months during diligence, your sales are down or utilization is down or the business is not performing the way it was when we started talking. And they have a point.

So it’s important that you let the advisor ride herd on all of this. A good advisor has a strong diligence defense team so they can answer a lot of the questions, gather information from you in an orderly manner, and manage that defense. There are still going to be a lot of questions in diligence, and there are areas where you’re going to have to weigh in, but you want to minimize those distractions.

The cardinal rule of what not to do is to not allow just your attorney to try to run the deal, defend economics, and manage all of this. The reason is they already have their hands full managing legal exposure. Most lawyers want to do this role if they can because it means additional billable hours, even though they are ill-equipped to do so. Attorneys are a critical component to getting a deal done, but like all things, you need to have the tools and the talent to do your role effectively.

We think it’s best to keep your attorney in the legal defense lane, have your M&A advisor manage the project and keep the wheels on, and have the CEO running relationships and keeping the business running, while bringing in other spot advisors around tax and related issues.

Ryan: Mike, I’ve heard a phrase from you that in this phase it’s often common for lawyers to trade deal points. What I’m hearing here is that it’s important for the M&A advisor to keep this moving so you don’t have the lawyers in the back room going off script, which could potentially endanger the deal or include a point that may not be in the best interests of everyone at the table.

Matt: I would say for sure that’s the case, Ryan.

Ryan: Perfect. If I turn that a little bit into what the teams are working through, and I’m trying to get to what are maybe the three or four things that are always going to be negotiated or most often negotiated, what are three things that matter most to the seller in a definitive agreement?

Matt: Yeah. Let’s bracket that into the purely legal side and then maybe the more business-oriented agreements or understandings.

From a purely legal perspective, there are some real critical aspects in the purchase agreement. Indemnification, warranties, indemnification caps, baskets, and so forth. Oftentimes that’s the number one area with a spotlight around risk mitigation that your M&A attorney is going to be all over, and appropriately so in protecting you as a seller.

When I talk about the business aspects, something that often surprises founder-led businesses and first-time sellers is the working capital agreement. That will be included in the purchase agreement, but there is generally a well-understood market view that there will be a certain amount of working capital to operate the business for a period of time that will be left behind or provided by the seller. Sometimes that’s a surprise.

We educate sellers very early and make sure they understand that when they’re doing their spreadsheet in terms of what’s going to be left behind, there’s got to be a stub in there for working capital.

If there is an escrow requirement as part of the deal, then what does that escrow agreement look like? When is it released? How much is it? What is it for? What are the stipulations around it being released?

Then the last one, and this can be a sticky one, is an earnout. If an earnout is applicable as part of the deal structure, then that’s a negotiation and an agreement that will continue forward, and obviously it is very critical to the seller as well as to the buyer.

We often say an earnout or a gain share means there’s a target that needs to be met, and the buyer and seller should be on the same team trying to go get that target. We always communicate to buyers that if they want to include an earnout and it’s appropriate, then the seller is accepting some risk. Because of that, there should be additional gain for a seller through accepting an earnout.

It’s in the best interest of everybody for the seller to achieve the earnout because that means the business is performing and growing and continuing to hit the agreed goals.

Those are some of the things that are ongoing negotiations. If you keep legal focused on legal risk, they will be after all those legal risk terms like indemnifications and warranties. The business negotiations that also get incorporated into the purchase agreement should really be the responsibility of the M&A advisor or the investment banker because they are alongside you the whole way and are best positioned to drive the best agreement.

Ryan: I think those are the big ones that we see. There’s definitely pushback back and forth in those areas. The next question I have is where do you see some of those logjams?

Matt: Any and all of them can be, if not managed appropriately. This really goes to accentuating Mike’s point around keeping momentum and also keeping the spirit of the LOI in mind. Everybody has the intent. Everybody wants to meet the finish line. So keep that momentum, start those discussions early, and keep the pedal down. Being a Minnesotan and a hockey fan and an old hockey player, it’s okay to be ready to get your elbows up at the right time.

Ryan: Absolutely. If we switch gears a little bit and say the large part of the definitive agreement is done and agreed to, Mike, this often comes down to the last week or two before close and sellers get to what we call disclosure schedules. Can you help define what those disclosure schedules are, why they matter, and why they take more effort than sellers might expect?

Mike: Yep. Think about all of the details associated with every contract you have written that’s active in the business, all your employee agreements, all your non-competes, all your non-solicit agreements, complete sets of your financials, any vendor agreements, and this one’s a big one, whether that be with your internet provider, your landlord, your utility provider, your coffee provider. Every agreement associated with running that business needs to be in the disclosure schedules.

That can be a big lift. Not to mention the fact that you’re going to warrant that the disclosure schedules are everything tied to your warranties. There’s a lot of discussion about representations and warranties. The representations you make and the warranties you make are supported by the paperwork in the disclosure schedules, and you’re going to warrant that they are fulsome in their disclosure.

You may sign disclosure letters that say you don’t have any pending litigation or you don’t have anyone who’s given notice of termination or that you have whatever the case may be. That’s going to be part of the definitive agreement.

Now, if someone has said they’re going to terminate or sue you or do something that you have represented as not being the case, then you have to disclose it in the disclosure schedules. Otherwise, you’re in breach of the agreement.

So it’s super important that it’s done in a very fulsome way and that it’s fully transparent. I would never encourage someone to hold anything back. You need to be fully transparent in the disclosure schedules so that you can make exceptions where needed.

For example, maybe you said no one has given notice of termination, and then a week before close someone says they’re going to terminate. You have to disclose that termination in the disclosure schedules so that the buyer doesn’t come back and say you didn’t disclose that, it impacted the economics of the deal, and now they have liability claims against you.

If it’s in the disclosure schedules, they reviewed it as part of diligence and signed off on it, then it won’t impact the deal post-close. Think of it like an insurance policy. You need to be fully transparent and factual about the state of the business.

A lot of people think maybe they don’t need to disclose something because it seems minor. But if the buyer doesn’t think it’s minor or it turns into a major thing, then you’re going to be on the hook for it if you didn’t disclose it.

The issue is that in disclosure schedules there is a lot of paper. Even if you have your records in great order, all the parties want the most recent version of those records. Oftentimes, you have to pull them together right toward the end of the transaction. Almost everyone underestimates the time involved. It can take hundreds of hours to pull together all of the disclosure schedules.

For the disclosure schedules that are not time sensitive, and I would say most of them are not, you can pull them ahead of time. If you need a copy of your lease for example, or certain things that are not time sensitive, get them ready.

One thing a lot of people overlook is consents. This isn’t technically a disclosure schedule, but it’s often related. Your bank may need to have a consent or a release of a filing pursuant to your line of credit. Your landlord may have to agree that the buyer is creditworthy enough to take over your lease if that’s what’s going to happen. They may need to provide consent for the transaction.

Those are often related to the disclosure schedules and come out of them. When a lawyer reviews your lease, it may have very specific terms for how it can be transferred. These are the kinds of things that crawl out of the rocks when you begin putting together your disclosure schedules.

I would always encourage people to start early, start often, and disclose as much as possible as quickly as possible in order to close. We’ve had deals get delayed because people cannot assemble the disclosure schedules in a fulsome way based on the time they allocated to do it. It’s critically important that you assemble a team, focus on it, and get to work so that if there are encumbrances, issues, or things that need to be resolved, you still have time to complete them.

Ryan: That’s a great summary, Mike. So to take that, you’re going to have to disclose quite a bit and start preparing early. Make sure you’ve got all your documents in line. This is something that’s really going to stay with the transaction post-close. If you’re going to come back to something, it’s often going to be in these disclosure statements, and that’s backed by the representations and warranties of the deal, which might have some holdback language. Making sure that you’re nailing that is really important.

Mike: I’d add another point. There’s this legal precedent called, is it in the four corners of the document? I should really say, is it in the four corners of the documents, meaning is it in the definitive agreement as referenced and supported by the reps and warranties and the disclosure schedules?

If it’s not, it’s not considered to be pursuant to the transaction. If someone mentioned it in passing but it’s not documented accurately in the definitive agreements, it doesn’t exist in the eyes and minds of the law.

So it’s critically important that everything has been communicated, clearly defined, and captured in all of the definitive agreements in a fulsome way. That’s how you avoid future liability. You might think, well, I told them that a particular client was rolling off, but if it didn’t make it into a disclosure schedule, too bad. You didn’t disclose it. It wasn’t in the four corners of the document, and you would have liability in that case.

Ryan: Great. That makes sense. Let’s say all of this has been done, all the work has gone through this whole process, and we finally get to closing day. Matt, walk us through what closing day looks like. What are the logistics? What does it look like, who is doing what, and what should a seller expect?

Matt: I’m chuckling because oftentimes we hear from sellers, well, that was kind of anticlimactic. Because pretty much on closing day, if it’s done correctly, and it doesn’t happen all the time, but most often when it’s well managed, closing day is just the period at the end of the paragraph. Everything should already be done.

You should already have put signatures on the documents. Those signatures and documents haven’t necessarily been released to the other parties yet, but they’re in place. So all of the agreements are done on closing day. We like to have a ceremonial call where everybody confirms the deal is done and the money is starting to be released.

All the signature packets are delivered, the final schedules are in place, and the various wires are released. If there are lenders that need to be paid off, those wires are going out. If there’s an escrow agreement, those wires are going out. Often the payment flow is also paying your providers, your lawyer, your advisors, and so on.

Those things are kind of out of your hands. You have a closing call, thank everybody, and move forward. Again, when it is well managed, everything just transpires from there.

That’s where we often hear, wow, okay. And then really, most importantly on closing day, have you figured out how you’re going to celebrate? Whether that’s a big dinner, getting together with your team, or going to a quiet place and having one of your favorite libations, plan something to celebrate because you’ve reached the finish line.

So again, when it’s well managed, all those things are in place. If it’s not well managed, you are still tying out final pieces. And if it’s managed horribly, you’re still negotiating something on the last day. We don’t let that happen, and sellers shouldn’t let that happen either. Ideally, closing feels a little anticlimactic because everything important has already been handled.

Mike: I would add to that, Matt. If everything’s been done well, this can be done in an hour or less typically, routing documents for signature digitally and releasing wires.

Everything else should have been done and considered ahead of time, either signed ahead of time so those signatures are with your lawyer in escrow, or executed in a way that your lawyer can release all those documents. There shouldn’t be a lot of drama on that day.

Sometimes there are documents that get digitally signed that day, but more often than not these days it’s done ahead of time and held by your lawyer because there can be a lot of documents to sign. If people are online with connectivity issues or digital authentication problems, those technical wrinkles can slow things down.

To get around that, we’ve had most of our clients circulate digital signatures ahead of time to be held by their lawyer. That means when they release signatures, it’s really more about wiring logistics.

Depending on where wires come from and originating banks, that can take some time. International wires especially can take a day or two to clear, and that’s not uncommon. The advantage of having your lawyer hold the signatures is that they hold them until the funds are received. Technically, the transaction is not closed until the funds are received.

That can be received by your attorney in their trust account or sent directly to you. There are some logistics that need to be managed that day, but to Matt’s point, it’s mostly anticlimactic and ultimately more about getting people paid and beginning the journey of integration.

I think the best firms begin an integration plan ahead of close, but most of them start celebrating and thinking much more about integration once all these documents are finalized and they’re effectively at the closing table.

Ryan: This has been a really helpful discussion. If you’re at this phase of the process, it is an exhilarating one and at the same time, anticlimactic, which is usually a sign of something done well. You’ve done all the hard work and it’s a day to reflect, celebrate, and look at what’s next.

When we look at this master class, we’ve gone through the process of starting to think about what a transaction can be and we’ve gotten all the way to the end of what it is. The next topic we have is what the next 100 days look like after an acquisition, so we’ll cover that in our next podcast.

Mike, Matt, thank you both so much for sharing a lot of wisdom here. I’m glad that we’ve actually had the opportunity to get to that final stage many times, and you’re speaking straight from experience when it comes to this podcast. Thanks for your great work there.

With that, I’ll turn it over to you, Mike, for any closing thoughts.

Mike: Sounds great, guys. Thanks a lot. With that, we’ll tie a ribbon on it for this week’s Shoot the Moon podcast. I encourage you all to tune in next week when we unpack further new ideas and share our experience with M&A and the IT services space. With that, make it a great week.

Key Takeaways from this episode:

What due diligence is: The buyer’s inspection/audit of the seller’s business to confirm the story, financials, contracts, and assumptions made pre-LOI.

The emotional shift for sellers: Post-LOI can feel like “we’re done,” but diligence is often the most challenging phase and can be exhausting and distracting.

Why buyers do it: Risk mitigation and validation, plus identifying upside (synergies, growth investment opportunities, consolidation savings).

Common seller mistake: Underestimating diligence and showing up unprepared, both emotionally and operationally.

Role of an M&A advisor: First point of contact, ensuring data is clean/defensible, fast response cadence, and pushing back where appropriate.

“Scope creep” reality: Multiple outside parties (QoE, tax, legal, integration) often ask overlapping questions, creating a “Groundhog Day” effect without strong process management.

Top diligence areas buyers focus on: Revenue quality, customer concentration, contracts/renewals, security posture, key person risk, and scalable delivery model.

Retrade risk signals: Business performance softening during diligence, messy financials, messy contracts, or major unexpected changes in the business.

Keep momentum (~90 days as a good diligence window) and don’t let diligence distract leadership so much that performance slips. Revenue Rocket can help prepare you to sell your business from before, start, to finish.

Listen to Shoot the Moon on Apple Podcasts or Spotify.

Buy, sell, or grow your tech-enabled services firm with Revenue Rocket.

EPISODE TRANSCRIPT:

Mike 

Hello! And welcome to this week’s Shoot the moon podcast podcasting live and direct from Revenue Rocket world headquarters in Bloomington, Minnesota. We are the world’s premier, M&A advisor to tech enabled services companies with me today, are my partners, Ryan Barnett and Matt Lockhart as we continue our work through our master class.  

Matt 

Ryan, what? Do you got going there?  

Ryan 

How’s it going? And, hey, Matt, thanks for joining us here today as well of.  

Matt 

Course. Great to be here. I know we got another interesting topic, in our series that, you know, we’re getting a lot of good feedback on this master class on, you know, how to maximize the value of your business when you’re ready for a transaction. So let’s keep it going. Yeah.  

Ryan 

And then thanks for setting that up. Matt and Mike, you know, heretofore what we’ve talked about is getting through that decision of knowing when to sell, getting your house in order, understanding what your firm is worth and what you’re going to take home, we transition that into the process. So working with your team kind of what month one looks like, how you find buyers and… what goes on and indications of interest. Again, it’s an Loi. And then last time we covered deal structures and things like earn outs and selling out. So today, if we follow that logical progression and you think from the start of a process to where we’re at now the deal terms have been struck in an Loi, and what happens after that, in nearly every case, at least that I’ve seen is that we move into a due diligence process. And Mike, I will just get us started with an easy question here. But what is due diligence and what does it mean for buyers and sellers when we get to this point and just help define due diligence to start?  

Mike 

You bet Ryan. So due diligence is really the buyer initiating an inspection of your business. If you’re the seller to confirm what you’re saying about your business is actually correct, and what you’re saying as it relates to your financial data, your legal data as it relates to your contracts, etc, so that they understand that what they’re buying, any assumptions they made in analyzing your business in preparation for the Loi, are in fact proving out to be the case. And so, you know, what happens is the buyer sort of shifts from the excitement to, hey, you know, this one plus one really equals three or four to risk mitigation, right? Diligence is designed to surface risk and in some ways price it in. If there’s things that were unforeseen in there that are discovered in their analysis. So the volume of review and questions about the business and requests about the business and its documentation, particularly financial and legal turns to much like an audit of the business. And there’s a big emotional shift for sellers because, you know, all diligence efforts are challenging because there’s you know, requests from a buyer for things that you may not have looked at in some time and your ability to be prepared and to be able to answer.  

Matt 

Confidently and.  

Mike 

to hopefully have worked with a good advisor helping you come to market and doing pre diligence work has been put in place to minimize your distraction as you continue to run the business moving forward? Yeah.  

Ryan 

Mike, that’s a great setup. You know, we do both buy side work and sell side work here. And we’re first in understanding what that diligence request can look like as well as helping people defend those requests. And I tell you we coach people from day one, that first request is pretty daunting. And so it looks like a lot. And in reality, when you’re going to market and going through a process and you have an advisor by your side, this process can be a little less daunting if you’re tackling it, but it does feel like a lot. Matt, if we think about this in like real world practice and you think about technology tech services firms, and MSPS, csps, and app development firms, you know, what’s the biggest mistake sometimes these firms have when they’re starting that diligence process.  

Matt 

Yeah, I think the, you know, Mike touched on the emotional aspect of it, you know, it’s high emotion to enter any process that you are looking at to transact your firm. And then, you know, you get to that Loi stage and you feel like, hey, somebody is really interested in this business. This is done, right? And they minimize, you know, the due diligence process, they minimize the risk that occurs in the due diligence process. And quite honestly, oftentimes, if they are not working, you know, with a good advisor, they are unprepared for the due diligence process. So, the biggest mistake is both emotional, right? In the context of thinking, you know, once a LOI is signed, you know, this is going to be easy and then practical in that they, you know, simply are not prepared for, you know, the audit and inspection, you know, that is forthcoming. So, you know, and this isn’t the case with, well, any of our clients. But I was reading an article just last night about uncle nearest whiskey. And this is like the hottest whiskey on the market. You know, three years ago, the founder, you know, valued the business at a 1,000,000,000 dollars, well after inspection. You know, it looks like they’re about a break even company if not less. So you got to kind of make sure that you put your, you know, you put your yourself in the eyes of a buyer who needs to ensure that what they have been promised is true. And the more organized and practical that you can make that due diligence process without emotion, you know, really the better.  

Ryan 

And having your, that’s such a great point what a buyer’s trying to do here is validate, and the seller’s trying to kind of prove and sometimes that leads to a mismatch in what’s being acquired. Mike, I guess the question here jumps a little bit off of what we were talking about earlier, but how do buyers end up using the results of due diligence? Then in the case that I heard with matt, I heard perhaps different deal terms, but what else do buyers utilize the results for?  

Mike 

Well, it certainly can, you know, could mean different deal terms, but it also, you know, emphasizes where a buyer may need to invest in the business to further grow it or to further realize their return. For example, there may be an opportunity to invest in further sales and marketing resources to, you know, accelerate growth or there may be an opportunity to get consolidation savings with an existing operation, particularly if the buyer is either a strategic buyer running a similar business albeit larger or, you know, someone who has outside capital in a strategic business where there can be some savings when they combine the businesses and those synergies or those savings usually go to the buyer, right? So validating where there’s opportunities for, not only, you know, maybe chinks in the armor in your own business, but also where there’s synergy opportunities. And discussing those synergies with you ahead of time are all things that impact their return rate, right? And they’re going to want to make sure that they have clarity around all of those things to make sure that they can get the, you know, the highest return for their investment. So when you think about risk, you know, yes, risk is certainly a component of mitigating risk and understanding risk. But also the upside potential of the combination is something that, you know, people certainly focus on in diligence.  

Ryan 

Yes, and even some of the outputs on that might be extreme clarity around an earn out. So, last week, we talked about deal structure and part of the LOI is going to be perhaps high level on an earn out. You have to hit xyz revenue and xyz time to get xyz result. And so due diligence also can have some results to your point. If you have the opportunity to capture upside that can happen, you can also have business improvement during that time. If you’re an extreme growth, businesses can be a great time for a buyer or for a seller to really perform well to the point where you have to take another look at what that deal looks like. If we’re in this process and we’re aiding sellers. Matt… you know, what’s the role of an advisor during that? You know, where do other us or someone else? How does an M&A advisor come into play during this part of the process?  

Matt 

Yeah, I mean, if you know, it’s probably a good debate class on… what is more important in the role of an advisor to get to a LOI with the right party or to successfully move through the diligence process to close, you know, with the right party. So a good advisor is really, you know, side by side and taking on the role of first point of contact for all diligence related items. And you know, as you know, it’s sort of the old Mary poppins saying, well begun is half done. A good advisor is going to ensure the cleanliness of all the data that it is in line with… the story that’s been told towards the LOI. There’s cleanliness in terms of the chart of accounts, obviously, the PL and the balance sheet and, et cetera. So the advisor is going to make sure that going into the due diligence process, everything is well understood. It is absolutely defensible against the expectations of a buyer. And then, you know, obviously, there’s need for clarification throughout the due diligence process. And the advisor, is ensuring that there’s a very quick response. Now, in addition to that, you know, as we’ve talked about in the past, there’s always nefarious actors in the marketplace who are attempting to, you know, have a history, of bait and switching or re trading, and they, you know, they work towards getting somebody under LOI, you know, with the knowledge that they’re gonna try to reduce the purchase price, you know, come hell or high water. And part of the advisor’s job is to ensure and understand where there’s indicators that could impact the eventual transaction price. So the advisor is absolutely critical, should be very forward in the process. Should be very well organized and, you know, ready to get your elbows up if need be during the due diligence process.  

Ryan 

It’s really well said, I think that what we lead from due diligence, and part of what’s in our next podcast we’ll be covering too is, the crafting of those definitive agreements to your point that they, these coincide together and can flow from one kind of process to the next. It’s a, having a con, continuity throughout starts to become critical for the success of a deal. Mike, I’m gonna go back to a little topic here and, you covered this a bit, and I just wanted to make sure that we’re addressing this or the sellers really understand kind of what firms are looking for. So, you know, it seems like the list always explodes like we start out small, then it’s if we dig up, we find a little bit more and we find a little bit more. And then there’s just a lot of different areas of focus that are going into this. And I was hoping you can a cover, you know, what are top diligence areas that many buyers are focusing on? And then B, you know, how does an advisor help triage those requests, and perhaps even pushing back on requests that, are not really meaningful… for the deal to get closed?  

Mike 

Now, it’s really interesting. It’s a great question. Ryan and I would tell you that, you know, usually most of the broad categories are around sort of revenue quality, customer concentration, contracts and renewals, you know, security posture, key person risk, you know, scalable delivery model among a variety of other things. But, but what, what’s important to note is that there can be great scope creep and diligence just by the number of actors that are involved. So, for example, usually, and we do this on for our buy side clients, we manage collate and analyze diligence information alongside them and on their behalf. So we, you know, kind of know how to run these processes whether you’re selling or buying. But oftentimes when a buyer particularly a funded buyer or a private equity buyer needs a quality of earnings analysis and they bring in an outside audit firm to help them, they’ll ask all the same questions of, you know, without sort of fully understanding the, you know, what’s already been covered by the buyer and that’s not atypical, right? Where we’ll you know, populate a data room. We’ll put everything that the buyers requested in there and it’s not atypical for other parties to come in, whether it’s a tax advisor, or legal advisor, maybe someone doing a quality of earnings analysis to ask the same questions over and over so oftentimes, it can feel a lot like groundhog day. You know, it can feel like, well, yeah, we answered that question five times already and the data’s in the data room. And if you’d go look at the data, you’d have it. But, the new folks that are coming to the process as it continues to grow and mature, don’t have the legacy context for what’s in or what’s out and may not have been shown the data room in a meaningful way. So, there’s a lot of, you know, asking the same question over and over by different parties. And sometimes the questions get answered, you know, slightly differently or even the same questions by the same parties because they either forgot or they didn’t know they analyzed it previously or there was time that went on where they need to refresh the data throughout the diligence process. You know, they need to look at a, you know, fresher set of financial data, or customer data or whatever. And that can be super frustrating, right? And an advisor that knows our way around, does what we call diligence defense and they can guide the buyers in a fairly unemotional way as to where is the data? And it minimizes. The distraction.  

Matt 

For you, right?  

Mike 

That’s a huge benefit that advisors bring to the part. And so, when you think about who all has to sign off on a diligence effort, you’ve got a variety of actors from the business that’s doing the acquisition, maybe their financial sponsor, someone looking to do a full quality of earnings analysis, a tax advisor, a legal advisor, and there may be even other strategy advisors that are trying to get their arms around integration teams. And they’re all looking at similar sets of data and probably have similar sets of questions. And so being able to be well organized on your game and working with an advisor that can help remove the redundancy. So you’re not just distracted by it or feeling like it’s a 1,000 cuts is super helpful.  

Ryan 

Yeah, absolutely. You nailed that well. And if I think about this as well, matt, when we think about some of the areas that people are digging into. And as Mike was mentioning that, where you need defense, what are a few things that CEOS or owners should understand, kind of red flags that you should be aware of that could lead to a retrade or a restructuring of an Loi, that might come up during due diligence?  

Matt 

Yeah. I mean, a couple of different things I think… you know, first off, and we can’t say this enough that and any good advisor is going to ensure that this is the case, is that the business needs to be humming along, right? It needs to be on an upward trajectory, needs to be sort of meeting general forecast, et cetera. So, you know, that’s critical. But as it pertains to, you know, sort of specific items beyond, you know, the ongoing going concern of the business. You know, things like the cleanliness of contracts, right? That, that is in place. Obviously, we talked on before the, you know, the cleanliness of financials that there are not outliers that are in place that can bring question to the overall data set. And, you know, then, you know, sort of major changes in the business. You know, you aren’t going to all of a sudden shuttle a service line or, you know, something along those lines, you know, the most important part in a diligence effort is, you know, again, I go back to this aspect of practicality, it’s just the facts, ma’am, and, the more that you can have preparation of the data and, you know, the things that I just talked about, contract cleanliness, financial cleanliness, all of those things should be very well prepared, and easily understood. So that there is not a quote unquote perceived risk in the business that is underlying, you know, the data. So, you know, again, it does also go back to understanding the buyer personas and ensuring that you know, what appears to be a good and willing buyer that lines up strategically is indeed the case. Yeah.  

Ryan 

Great. This has been really great content. Mike and matt for understanding this process again, it feels it can feel really daunting. But once you walk through it, the reward is great. And if you’re running a well run business and you have a lot of your documents in order, it’s a process that can be relatively smooth and you surround yourself with the right people. Mike and matt just kind of last closing thoughts. But if you could give one piece of advice to a CEO heading into due diligence. What would it be? Matt? Why don’t you get us going and pass it over to Mike to end? Yeah.  

Matt 

I think that this context of momentum, you know, we believe, you know, we work in, you know, the middle, the upper market space, any, you know, well executed due diligence process, you know, should be done in 90 days, and, you know, keeping that momentum throughout the process is absolutely critical. If there’s bubbles in the momentum that are not understood well, then, you know, that’s a red flag and you need to address those red flags, you know, right away, and get those resolved. But keep that momentum, keep the promise of the future of the combined firm and get to that finish line Mike.  

Mike 

Yeah, I would add that this is a very, this is a, it can be an exhausting phase of the M&A process. And, you know, the M&A journey. It’s been said many times you’ve heard us say it many times, you know, it’s the most unnatural act in business that will feel like that in spades at this phase as you’re going through a due diligence effort. And I think it’s important to not let it become such a distraction that it negatively impacts the business. It’s a, it’s a big risk. And how you mitigate that risk is that you make sure you have a competent advisor that can help you navigate and defend your diligence so that you’re not spending every waking moment trying… to continue to manage and run the business as well as respond in a timely manner to the diligence request, it’s, very challenging for an owner and a small leadership team to respond to all of the diligence requests and the time that a buyer would expect them while running the business and have it not negatively impact the business. And the problem is when it negatively impacts the business during due diligence, you’re setting yourself up for a retrade because the buyer will see softness in your business and they will start to say, well, what’s going on and why is there softness? And we’ve seen two months of revenue going down and, you know, and they’re going to retrade that deal. So it’s a solid investment for you to have a great advisor that can, you know, act on your behalf and diligence defense. And you can keep your eye mostly on the ball. There will be some distractions, right? Because there may be data that wasn’t collected that was asked for or a slice and dice of the data that comes later in the process. And so, there’s enough distractions as it relates to weighing in not only to diligence but also into legal requests from your own team on definitive agreement fortification. So if you can offload some of that or outsource it to your advisor, I would encourage you to do so. And with that, we’ll tie a ribbon on it for this week’s Shoot the Moon podcast certainly appreciate you tuning in and we’ll keep moving through our masterclass on, you know, how to manage and prepare your business for sale in next week’s podcast. And with that, make it a great week.  

• Finding buyers = defining the buyer universe (fit + ability to close).
• Strategic buyers buy for synergies (capabilities, customers, geography, talent, growth).
• Financial buyers buy for return + a future exit plan (often with rollover equity and a “second bite”).
• The “best” buyer isn’t just highest price, it’s alignment + certainty to close.
• Certainty signals: deal track record, internal M&A function, knows services underwriting, disciplined pace.
• Run a structured outreach process (teaser → NDA → CIM/financials → calls/meetings → IOIs/LOIs).
• Avoid the extremes: too narrow (no options) or too broad (wasted time + info risk).
• Competitive tension helps improve terms, structure, and closing confidence.
• Culture matters and should be evaluated like the numbers.

Other Episodes in this Series

Part 1. Knowing When It’s Time to Sell: Listen now >>

Part 2. Get Your House in Order: Listen now >>

Part 3. Valuation Drivers: Listen now >>

Part 4. What is my Take Home? Listen now >>

Part 5. It Takes a Village. Listen now >>

Part 6. The First 30 Days of a Process. Listen now >>

EPISODE TRANSCRIPT:

Mike: Hello and welcome to this week’s Shoot The Moon podcast broadcasting live and direct from Revenue Rocket, world headquarters in Bloomington, Minnesota. For those of you that tune in regularly. And even for those of you that don’t Revenue Rocket is the world’s premier, M&A advisor to IT services companies worldwide. With me today, are my partners, Matt Lockhart and Ryan Barnett, welcome guys.

Matt: Thank you, Mike. We’re continuing our awesome master class today, which has been a huge success. And I think it’s great. Now, we got to start thinking about what the next master class is going to be, Ryan, but I guess let’s not get a hold of our—or get ahead of ourselves. What’s going on Ryan!

Ryan: Well, yeah. To your point, we’re continuing the master class and this is really targeted towards IT services owners and founders and CEOs of firms and tech enabled services businesses and what it means to sell your firm in 2026. And so far we talked about the decision to sell, getting your house in order, figuring out what your company is worth, what you actually take home, what team you have around you, and what that first month looks like.

The next stage is: once you’re committed, you understand the value of your company and you start executing on the process. When you think about those tasks here at Revenue Rocket, it starts to become a parallel effort. Your marketing materials are being prepared to help put your company into market. So things like a teaser, a Confidential Information Memorandum (CIM), and a financial packet are all put together.

But just as important in that process is understanding who should buy the company that we’re representing. And so this episode’s really for sellers and understanding: how do you start to think about buyers when you’re in the process?

And Mike, man, we’ve got a number of questions. We do this well and it’s an area that we’ve spent a lot of time in. I want to start out with the most basic question I’ll throw to you, Mike: at a high level, what does finding buyers mean in a professional sell-side process?

Mike: Good question, Ryan. Finding buyers is really about defining the buyer universe, right? There’s more to it than that, but as you think about suitor targeting…

Matt: And origination?

Mike: And structured outreach. When you think about it, you want to identify those prospective buyers that are most likely to be interested in your business—those that are the best strategic fit, those that have the capital, those that have the appetite, and those that have a track record of doing deals.

Ryan: So when you say “define the buyer universe,” what does that actually look like? How do you go about building that?

Mike: It’s a combination of understanding the seller’s business and how it fits into the marketplace, looking at comparable companies and who’s acquired them, looking at who’s active in the space, and then building a list across different buyer categories. Typically you’re going to have strategic buyers, financial buyers, and sometimes individuals or family offices depending on the size and nature of the business.

Matt: And when we say strategic vs. financial—can you define that a little bit?

Mike: Sure. Strategic buyers are operating companies. They’re buying because there’s some strategic reason: they want capabilities, customers, geographic expansion, talent, intellectual property, or they want to accelerate growth. Financial buyers are buying primarily as an investment. They’re looking at return on capital and typically they’ll use leverage and/or plan for a future exit.

Ryan: So if you’re a seller, how should you think about which bucket is “better”?

Mike: It depends on your goals. Strategics can sometimes pay more because of synergies, but financial buyers can be a great fit if you want to stay involved, roll equity, or if you like the platform story and the chance to take a second bite at the apple. The “best” buyer is the one that aligns with what you want and is most likely to get to close.

Matt: That last part is big: “most likely to get to close.” Because there are buyers that look good on paper and then they don’t perform.

Mike: Exactly. And this is why you don’t want to just take the first offer and run at it. You want optionality. You want multiple buyers engaged so you can compare not just price, but structure, terms, cultural fit, and certainty.

Ryan: Let’s talk about certainty. What are the characteristics of buyers that are “more certain”?

Mike: Track record matters. Buyers that have done deals in your space before, that have an internal M&A function, that know how to underwrite services businesses, that move with discipline. A buyer that needs to “figure it out” in diligence is a buyer that may struggle. Certainty also comes from alignment—if you’re in their thesis, if you fit their strategy, and if they know what they’re buying.

Matt: And there’s also the issue of “buyer intent” versus “buyer capability,” right?

Mike: Right. Some buyers are very interested but they can’t get it done—capital isn’t committed, they don’t have leadership support, they don’t have the bandwidth, or they’re trying to learn while they execute, which is risky. Other buyers can absolutely get it done, but they’re not the right fit. The best outcomes come from identifying the intersection of fit and ability to close.

Ryan: Walk me through how we actually do this in a process. Because sellers might think it’s “we just call buyers,” but it’s more than that.

Mike: It is. We start with a story—how do we position the business in a way that resonates with different buyer types. Then we build a target list. That list is informed by experience, data, relationships, and research. Then we do outreach in a structured way. The outreach typically starts with a teaser, then NDAs, then sharing the CIM and financial packet, then management calls, then meetings, then indications of interest, then LOIs.

Matt: And the buyer list is not static. It evolves.

Mike: Exactly. As you go through outreach, you learn. Some buyers aren’t actually active. Some are active but in a different way than they say. Some are active and great. You also get inbound interest. So we refine.

Ryan: What are common mistakes sellers make when they think about buyers?

Mike: One is assuming the “obvious” buyer is the right buyer. Another is assuming a big name equals a better outcome. Another is letting a buyer control the pace of the process. Another is being too narrow. And probably the biggest mistake is running a process without competitive tension—only talking to one or two buyers.

Matt: Or the opposite: being too broad and attracting the wrong kinds of buyers.

Mike: Yes—if you don’t curate, you can waste time. You can expose yourself to parties that shouldn’t see your information. You can distract your leadership team. You can create confusion. This is where a good advisor helps—curation and control.

Ryan: Let’s talk about strategic buyers specifically. What do they typically care about in services?

Mike: They care about customers, revenue quality, recurring revenue, client concentration, delivery capabilities, key employees, and how the acquired company can integrate. They may care about vertical expertise, geographic footprint, security certifications, partnerships, and in many cases the ability to cross-sell.

Matt: And they care about risk. So if the business is too dependent on the owner, too concentrated, or the delivery model is fragile, it’s harder.

Mike: Exactly. And that ties back to earlier episodes. Seller readiness directly impacts buyer interest and buyer confidence.

Ryan: And financial buyers—what’s different?

Mike: Financial buyers care about cash flow, growth, predictability, and scalability. They’ll look at margins, working capital dynamics, customer retention, pipeline, and the strength of the management team. They’ll also look at how the business fits into their investment thesis. Financial buyers are often more comfortable with a platform + add-on strategy, which can work well for certain sellers.

Ryan: So how should sellers think about “platform” versus “add-on”?

Mike: A platform is typically the first acquisition in a new thesis or a key acquisition that stands on its own with scale, management, and infrastructure. An add-on is something that plugs into an existing platform—often smaller, sometimes more niche. The outcome for the seller can be great in either case, but the buyer’s expectations and integration approach can differ.

Matt: I also think it’s important to talk about cultural fit. Sellers don’t always prioritize that early enough.

Mike: That’s right. Culture shows up in diligence and post-close. How they treat people, how they make decisions, how they communicate, what their reporting expectations are. You should evaluate culture just like they evaluate your numbers.

Ryan: What about international buyers? We’ve seen more of that.

Mike: Yes, depending on the sector and the business, you can see overseas strategics and sometimes international funds. That can expand the buyer universe, but it also introduces complexity—regulatory, currency, timing, and integration considerations. It’s not always better, but it can be a good lever.

Ryan: So if you’re a seller listening—what’s the takeaway? How do you think about buyers in the process?

Mike: Think of it as part strategy, part research, part execution. You want the right mix of buyers, you want optionality, and you want a structured process. You also want someone who can run outreach and manage buyers, because buyers will test you. They’ll test your process, your narrative, your numbers, and your resolve.

Matt: And the right buyer list, built by someone who knows the market, changes everything.

Mike: It does. It increases the odds you find the right buyer, increases the odds you get competitive tension, and increases the odds you get to close with a buyer that aligns with your goals.

Ryan: That’s a great spot to wrap. Any closing thoughts, Matt?

Matt: Great topic. As we continue to say: specialization matters. The more specialized the firm that you work with, the better chances that you’re going to have the right buyer list. And it’s important—it will make the process go easier, more smoothly, and certainly more rewarding overall.

Ryan: Where do we take it from here?

Mike: Time to tie a ribbon on it for this week’s Shoot The Moon podcast. I encourage you to tune in next week for the next installment of this masterclass. And with that, make it a great week. Thanks for tuning.

What does it really feel like when you decide to sell and the process officially begins?

In this Sell-Side Master Class episode, we walk through month zero and the first 30 days of a sell-side process: the pre-market foundation, the time commitment, and the “transfer” that has to happen so an advisor can speak like they’re part of your team. We cover the core information you’ll be asked to assemble (financials, customer data, employee data, forecasting, go-to-market materials), plus the practical reality that founders often need to keep the circle tight to avoid data leakage internally.

We also explain the role of the three key documents that drive early-stage buyer movement:

• Teaser (anonymous, broad interest)
• Confidential Information Memorandum (CIM) (post-NDA, full story)
• Financial packet / data room (deeper dive, typically after qualification)

Finally, we talk through a critical leadership question that often evolves during the process: are you selling in or selling out? And we close with a simple reminder: preparation equals leverage because speed and clarity protect value.

Other Episodes in this Series

Part 1. Knowing When It’s Time to Sell: Listen now >>

Part 2. Get Your House in Order: Listen now >>

Part 3. Valuation Drivers: Listen now >>

Part 4. What is my Take Home? Listen now >>

Part 5. It Takes a Village. Listen now >>

Listen to Shoot the Moon on Apple Podcasts or Spotify.

Buy, sell, or grow your tech-enabled services firm with Revenue Rocket.

EPISODE TRANSCRIPT

Mike: Hello, and welcome to this week’s Shoot the Moon Podcast broadcasting live and direct from Revenue Rocket world headquarters in Bloomington, Minnesota. If you tune into this Master Class or our podcast in general, you know that Revenue Rocket is the world’s premier M&A advisor to tech-enabled services companies. With my partners today, I’m happy to bring Ryan and Matt into the podcast. Welcome, guys.

Matt: Excited to continue with our Master Class series. I’ll tell you, I’ve actually started to get a couple of positive feedbacks from people who’ve been tuning into the Master Class. So I’m excited to keep it going. Way to go, Ryan.

Ryan: Well, thanks. In the past year, we’ve covered the decision to sell, preparing your house and getting it in order, understanding what valuation means, what to take home for fees. And then last—our last one—we were talking about building an advisory team. And once you have an idea of what “ready” looks like and what your firm is worth, and you’ve picked an advisor—and hopefully one of those is an M&A advisor—it starts to be like, what’s it like when rubber hits the road? We’re actually going to get out and take a firm to market.

So today, I want to talk about what we looked at as the first 30 days of a sell-side process. You’re looking to sell, and you’ve engaged a firm to do so.

So Mike, I’d love to know—if you can get us going—to level set: when we say “month zero” or just day one in a sell-side process, what does that actually mean? And why does it matter so much?

Mike: Month zero is sort of the pre-market phase, right? The foundation for everything that follows. And so when you think about level setting, there’s quite a bit of thinking that has to go on—rumination on behalf of the seller, right, the owner or owners in a business—to be processing and being ready.

To think about things like: what is your story? What is your historical story—why is it promising, and why is there a future? What sort of vision do you have for the business? And how does finding a particular partner—capital partner or strategic partner or both—really fit with that? And then also, how does that relate to your deal goals, life goals, that kind of thing.

I think being ready—thinking about that—having prepared the business (which we’ve talked about in previous podcasts in this Master Class) for that inevitable process is really what month zero is all about.

Ryan: Building phase. And I think a lot of this goes back to “what do I want to do next?” It’s really formulating where you’re at and where you’re going, and finally getting prepped—even going through that advisor process.

And then, Matt, once a CEO says go, and we’re into that—from month zero into day one and month one—what should they expect? What should it actually feel like? Tell me a little bit about time commitments or attitude going into day one.

Matt: The reality is, it is a time commitment. Whether you’re engaging a sell-side advisor, an investment banker, however you want to call it—there’s a “transfer” that needs to happen. In order for that advisor to take your business to market, they need to understand your business like you do.

So the first 30 days is really about packaging and knowledge transfer. And this is where you’re going to spend a lot of time: meeting, answering questions, providing documentation, helping shape the story. It’s not just “here are my financials.” It’s, “how does this business actually work?” and “why does it win?”

At the same time, you still have to run your business. And taking your eye off the ball is about the worst thing you can do during a sale process, because performance matters. So you’re balancing: help the advisor build the materials, and keep the business strong.

Ryan: That makes total sense. You used the word “transfer,” and I think that’s important. How do I enable an advisor to speak as though they were one of us? And that takes real work.

Mike, I’m curious: when we talk about that first 30 days, who needs to be involved? Like—how broad is the circle?

Mike: It depends on the business and the sophistication of the management team, but generally, the owner/CEO is heavily involved. Finance leadership is heavily involved. Depending on the nature of the business, you may have an operations leader involved, and potentially a sales leader involved.

But one thing that’s really important: confidentiality. The circle often needs to be tighter than people expect. Because the reality is, if the wrong people find out too early, you can get nervousness. And nervousness can cause behavior that impacts customers, employees, and performance.

So there’s a balance between: you need help assembling information, but you also need to control information flow internally.

Ryan: That confidentiality point is real. It can feel lonely in the process if you can’t talk openly about it in your own company.

Matt, what kinds of things should sellers expect to be asked for early on? Like, what does the data gathering actually look like?

Matt: You should expect a pretty comprehensive information request. Financials are the starting point: historical financials—often five years—plus trailing twelve months, plus whatever interim periods are relevant.

Then you get into customer data: customer concentration, top customers, contract terms, retention, revenue mix, recurring versus project, pipeline, backlog depending on the business.

Then operational and employee data: org chart, key roles, compensation structure, any key person dependencies.

And then forecasting: how do you see the future? What’s driving growth? What assumptions do you operate with? How do you track sales and delivery? What are the leading indicators?

The point is: buyers aren’t buying last year. They’re buying the future. And the early work is organizing the proof points and the story in a way that makes that future feel credible.

Ryan: So financials, customers, employees, and forecasting. That’s the big buckets.

Mike, are there other items you see come up that sellers don’t always expect?

Mike: Governance and structure documentation can come up—entity structure, ownership, cap table or shareholder composition, things like that. Tax considerations. Depending on the business, maybe licensing, compliance, key contracts, insurance.

But the bigger idea is: you want to get organized. When you’re prepared, you can respond quickly and confidently. If you’re scrambling, the process slows down, and uncertainty goes up.

Ryan: And uncertainty is the enemy in a deal.

Let’s talk about the deliverables, because I think this is what people picture when they think “sell-side.” The teaser, the CIM, and the financial packet—can we break down what those are and how they work together?

Matt: Sure. The teaser is generally anonymous. It’s meant to spark interest without revealing the company. It’s high-level: market, offering, size range, and reasons a buyer might care. It’s the first step in gauging interest and identifying potential buyers.

Then, after a buyer signs an NDA, they get the CIM—the Confidential Information Memorandum. That’s the deeper narrative: who the company is, what it does, how it goes to market, why it wins, the market dynamics, competitive differentiation, leadership, and the financial picture.

And then the financial packet—sometimes you’ll see that as a more detailed financial file and then eventually data room materials. That’s where buyers start to get more granular, test assumptions, validate numbers, and prepare for diligence.

It’s a gating process: teaser creates interest, NDA unlocks CIM, qualification unlocks deeper financials.

Mike: And that gating is important. You don’t just hand out everything to everyone. You want to protect confidentiality and control the flow of information, while also creating momentum.

Ryan: That makes sense. Teaser → NDA → CIM → financial packet/data room. Controlled steps.

Now, there’s also this question that comes up for a lot of sellers once they get into a real process: am I selling in or selling out? Mike, can you talk about that?

Mike: Sure. “Selling out” is what people often imagine—exiting completely. “Selling in” can be a partial sale where you keep equity, stay involved, and partner with someone to grow.

And sometimes, sellers start with one idea and change over time. Because once you see the buyer landscape and the options—strategics, private equity, different deal structures—you may realize there are paths that align better with your goals.

The key is being clear about what you want, but also being open enough to evaluate options thoughtfully.

Ryan: And being open to different buyer types, including private equity, depending on goals and fit.

Matt: Exactly. Sellers often come in with assumptions. But once you get into a process and see what buyers value, what structures they propose, and what the partnership could look like, the “right” answer can evolve.

Ryan: So as we wrap this one, we’re talking about month zero and the first 30 days—foundation and packaging—without losing focus on running the business.

Mike, what’s the key takeaway you want people to leave with?

Mike: Preparation equals leverage. The more prepared you are, the clearer you are, and the faster you can move, the more confidence buyers will have—and the better the process tends to be.

And I’d also say: slow down to speed up. Invest in doing it right upfront, and it will pay dividends throughout the process.

Ryan: Love it. Preparation equals leverage. Slow down to speed up.

And then next episode, we’ll talk about building the buyer list—who should be on it, how to think about it, and how to approach outreach.

Matt: Looking forward to it.

Mike: Thanks, guys.

Key takeaways

• Start building your advisor relationships 6–12 months pre-exit—waiting until LOI puts the close at risk (“time kills all deals”).
• Your M&A advisor is the quarterback: runs the process, manages buyer psychology, protects your time, and helps prevent value leakage and retrades.
• Advisor red flags: guaranteed above-market multiples, vague deliverables, weak references, and “exclusive” lockups that pay them no matter what.
• Use an experienced M&A attorney (not a generalist) who understands negotiation tradeoffs—over-lawyering can derail otherwise good deals.
• Tax + financial hygiene matter: get clean, diligence-ready financials and understand structure implications; a QoE may not be required if you’re already well-prepared.

Listen to Shoot the Moon on Apple Podcasts or Spotify.

Buy, sell, or grow your tech-enabled services firm with Revenue Rocket.

Other Episodes in this Series

Part 1. Knowing When It’s Time to Sell: Listen now >>

Part 2. Get Your House in Order: Listen now >>

Part 3. Valuation Drivers: Listen now >>

Part 4. What is my Take Home? Listen now >>

EPISODE TRANSCRIPT:

Mike 

Hello and welcome to this week’s. Shoot the moon podcast broadcasting live and direct from revenue, rocket world headquarters in Bloomington, Minnesota. If you guys tune in to this podcast on a regular basis, you know, that we are a firm that’s focused on M&A for tech enabled services companies. With me today, are my partners, Ryan Barnett and Matt Lockhart, welcome guys. 

Matt 

Great to be here. Mike, excited to continue our master class series. Ryan. I love your topic of the day. You know, I like to sometimes give a weather report and, you know, by goodness guys, there was this bright orange orb in the sky today that we haven’t seen in something like 30 days here in Minnesota. So we’re fired up and ready to go. Ryan, what’s up that? 

Ryan 

Helped explain some of the productivity gains I had today. You’re absolutely right sun is shining and if you’re thinking about selling your business, the sun might be shining on you as well. And today, as part of our continuation in our master class, this is episode five in which we’re really talking about who you need to surround yourself in a transaction. The first few episodes were on getting ready, and what you need last episode is what your take home pay would be after a transaction and the next moves into really what does it take, to start to go to market? And so today, I really want to talk to you matt and Mike about what kind of advisors aid IT services for needs to have by their side. I’ll preface this. We are an emanating advisor ourselves so well, this is not totally self serving. It, it is really a guide to helping you decide what kind of partners do I need to do if I want to have an exit this year or next year? So, I love Mike, matt, both of you. I think there’s a just a general question but we’ve seen some deals just go wrong and there’s a, an advisory team that maybe isn’t the right fit or even they run solo. You know, Mike, why does that happen? Why, what happens, when you don’t have the right team in place? Well? 

Mike 

You know, I think it’s important to note that it takes a village to get a deal done. It takes a village of advisors who are, who have deep expertise in legal tax and M a matters in order for you to be successful. And I think for those that have tried to do this on their own, sometimes they’re looking for cost optimization. Hey, I don’t want to hire advisors to tell me something I should be able to do myself or I should know myself. They get sideways when around some of the details or things that should be known that are not known. And so I’ll just tell you that understanding the specifics of our market, understanding the nuance… of these specific disciplines and then also being able to be objective with a buyer throughout a very lengthy. What I would say is negotiation of terms pursuant to agreements, and economics around a deal are all there’s all a benefit of having the right advisors on your team to do that. Any one of those advisors, if they’re a wrong advisor or there’s not someone in that seat and you’re trying to roll your own, can have a turn, it turn into a deal breaker frankly. And if you’ve gotten far enough to say, hey, I want to do a deal or maybe you’re to the point where you’re negotiated the Loi, or it’s already underway, you certainly need a team of advisors to help you get that deal finished. And you need the right ones. 

Ryan 

Matt, anything you want to add on to that? 

Mike 

Well, yeah. 

Matt 

I mean, I think first and foremost, there’s in all areas and all industries, there’s well, quite honestly, there’s bad actors, right? There are people who, you know, see an opportunity to quote unquote make a buck and they… maybe are not forthright, not completely honest. They, you know, may inflate, you know, opportunities and shoot. One thing that we see all the time is we have somebody who approaches us and they say, well, they talked to, you know, some other Guy and that Guy says my firm is worth X, right? And that’s what we’re going to be able to go get… when it doesn’t bear out in the market, there’s very little reality to it. You know, they’re so inflating a price that it’s you know, ridiculous, right? But, you know, people can buy into it and that’s just one example. And so, you know, the credibility of an advisor is based upon their experience, how long they’ve been around their focus. And, you know, what other people are saying about them. So, you know, I think that’s the only that’s a place to start is let’s you know, just recognize that there are bad actors out there. There are bad actors in the M a environment, investment bankers, M&A advisors. So we can sort of just set that aside but know that it is the case. 

Ryan 

Absolutely that the experience and your specialty and your just being in this market and understanding what is truth from fiction is something that is critical here and having the right team that works with you through that is important. Matt, I know we hear that all the time my friend sold his company for 14 times. Well, your friend was probably in a different situation than what you’re at today, but it leads to challenges when trying to go to market with realistic expectations. And that’s what those advisors can help with. Mike. If I think about these teams and someone’s looking to sell, when should you start engaging experts? How far ahead do you need to be planning to be working with the teams that you suggest? 

Mike 

Well, I think, you know, it’s reasonable to be thinking six to 12 months ahead of time. You know, you need to know who’s going to be on your team when the time comes and you need to develop those relationships. If you wait until you get an Loi, the clock is already ticking right? There’ll, be a, you know, the Loi will only be good for a limited time. If you accept the LOI, or negotiate an LOI, you know, you typically have 90 days to close and, you know, early preparation will help you particularly in defending your diligence. So you don’t get what’s called a retrade or a move down in enterprise value because you either didn’t have your records in order or your house in order in general or you hadn’t assembled a team of experts to help you time. We have a saying around here that says time kills all deals. 

Mike 

The time that takes for you to assemble your advisory team, find the right fit, have them be prepared and up to speed and to get your house in order. It’s too late. If you’re trying to do all that, after the Loi is signed, it’s very unlikely that your transaction will get done. If you wait. So, you know, being prepared ahead of time, at least six to 12 months ahead of time. Some people are, you know, laying the seeds of this prep work years in advance, we think it’s not a bad idea and certainly will benefit you when the time comes to go to market or to accept an offer. 

Ryan 

Yes, that’s great. So, at least six to 12 months out. And if you’re not quite ready for a transaction, it may make a lot of sense to incorporate some of those advisors well beforehand or even if the phone is ringing off the hook and you need to just tell people to be at bay having the right advisors there well before that transaction. It can be pretty critical to success in maximizing your value of your business and the structure of the deal. Makes sense. So if you think if you’re in that shoes and you’re out, let’s say a year out, can you just walk me through at the highest level? What kind of advisors that someone should be looking for? What are those core advisors? And which, what does each one do? 

Matt 

Yeah, sort of three key categories, right? First and foremost is us, right? Your, M, a advisor or an investment bank that has a focus on mergers. And acquisitions. And these guys are going to be your quarterback. They’re going to be your counselor. They’re going to be your guide. They’re going to be the ultimate deal maker in the process in finding the very best strategic deal for your firm and ensuring that there’s applicable competition in place that is going to ultimately drive the highest price for your firm. Second to that is a credible, M&A attorney, and they are there to protect your risk to… complete the definitive terms in a purchase agreement. And really that negotiating point around the legalese, if you will, in the definitive agreements, the purchase agreement, if an employment agreement is appropriate, etc, these legal documents and that’s critical. And then, you know, third is, you know, your personal sort of tax specialist, you know, because when you’re selling your firm, obviously, it’s a significant liquidity event and want to ensure that the agreements and the terms of the deal are as favorable as can be as it pertains to your tax burden. So, those are, you know, really the three key buckets, you know, one item and it really enhances, you know, as you look at a credible M a advisor is, do they have the capability to ensure that your financials are set up in a way that is clean, that is understandable and doesn’t create any confusion in the process? And, you know, we at revenue rocket do have that team and many do. Sometimes there are M a advisors that, you know, don’t have that capability and you may, you know, want to work with that individual but you will need to know that you’re going to need to have the appropriate accounting and finance support in place as you go into the process. And then one thing sort of on the timing of it, you know, many people, obviously, all of you firms have a lawyer in place, but does that lawyer and, or that firm have, you know, merger and acquisition experience, right? You know, and that’s something to understand. And if they don’t you know, tag that now, do you need a lawyer 12 months before you sell your company? No, you don’t so you have some time there. Do you need to think about the tax aspect as you go into the process? Yeah, very much. So, you know, depending upon how your firm is organized, the corporate structure of your firm, that’s critical to understand. And just so you have an idea in mind and we talked about this last week in terms of the take home number that you have in place. Now, your M a advisor. And you guys touched on, this is something that you’ll want to have in place early especially if there is an opportunity to optimize the firm in a call it a readiness period of six to 18 months and that M&A advisor can certainly help in that process. To ensure that again you’re going to get the greatest return at the end of the day. So that M a advisor in our opinion is one that, you know, comes early and can have a distinct benefit on the return that you’re going to get. 

Ryan 

Absolutely. And that’s really kind of where I want to go next is exactly to the point if we start to look and break down these roles, I really understand when someone’s trying to evaluate what to look for, what should they look for? Mike, why don’t you get us started here on just, you know, what’s the value of an M a advisor and flow right into kind of, you know, what are a few things to look for and also a few things to watch for as potential risks in an advisor red flags there? 

Mike 

Yeah. I mean the value of an M&A advisor certainly is, you know, I’m a little biased here but it’s immeasurable we’ve heard that from our clients over the years that with a quote unquote, you know, without your involvement, this deal wouldn’t have gotten done. I think any M, a advisor who has deep domain expertise and experience with firms like yours… if they’re credible and they’ve been around awhile, should be able to provide that value or you shouldn’t be using them, right? And I think that’s evidenced by the references it’s probably evidenced by their deals, completed deals that’s evidenced by their… experience and the value that those folks bring. And I’d like to say ourselves included is to position your story in the best light with a buyer list that is most likely to transact, has a high likelihood of transacting for a premium value. They have to be able to sort of manage the multiple work streams, to control a timeline with an interested and qualified buying community. They have to be able to negotiate and manage the buyer psychology. They’ve got to keep you as a founder focused on running your business and manage all of the other things that are needed to be in play. Otherwise, a distraction of either you managing it or a thinly staffed advisor asking you to manage some of these components will mean that distraction puts downward pressure on the growth and health and wellness of your business while you’re running this process. And it gives the opportunity for a buyer to retrade your deal. So in short, you want to outsource as much of this as you can. So you can continue to run your business. So you don’t have value leakage and retrades creeping in because either you’re trying to do it on your own or you’re trying to do parts of it that, you know, frankly, your advisor, if they’re well put together should be doing for you or staffing for you. When you add up all of those things into pure value. If your advisor is charging kind of normal what we would call market rates which the marketplace has a good way of shaking that out frankly by comparing proposals and thinking about how you would work with an advisor. You’re going to, they’re going to more than pay for themselves just in the value of maintaining your enterprise value, being able to keep you focused on running your business and being able to negotiate around the situation, inevitably will come up throughout the process. 

Matt 

You know, one thing I’d add there, Mike is, you… know, that process can be sort of full of peaks and valleys emotionally. And, you know, one of the things that we get on a consistent basis is, you know, sort of a thank, you know, for keeping us sane right throughout the process because it can be emotional, and I think that a good advisor is obviously focused on getting that deal done and getting the right deal done and maximizing the price, but also ensuring that it’s not something that, you know, that you’re not able to sleep throughout the process. And so, I just think that that’s a really important piece that we hear consistently and, you know, worth noting. 

Ryan 

For sure. Yeah, yeah. And also just playing that role of, the person that the M&A advisor is not going to be there the whole time and there’s going to be conversation and you maybe you might be working with this company for or with a buyer, for quite some time. And so having that person in the middle that’s actually had those really hard conversations so you can continue to have a great relationship with the buyer is critical as well. Yeah. All great points. There’s a lot of Roi that comes with an M&A advisor. And a lot of it is more than just the enterprise value that’s going to go up with using an advisor. And it’s critical to have one to help you that sure process. Mike, if you go back to that other question, just part of it, it’s when you think about that, M&A advisor, what’s really important for leaders of it services firms to consider? How would you have them evaluate a firm that can be an advisor in this? 

Mike 

Well, I think, you know, as I mentioned before, you… know, look for specialization in it services, right? Look for someone that has a process, a repeatable internal operating process, right? That has good communications, a great track record. They have the ability to lead the leadership of that advisor with a buyer and a seller is critical. I think anytime you hear an advisor… or an investment banker start to guarantee a particular valuation, they can certainly give you guidance based on their experience in doing valuations. But to guarantee a number, particularly if it sounds above market, that should be a huge red flag. There are certainly unscrupulous actors in our market who tell you they can get a particular number, usually a multiple of EBITDA, that sounds too good to be true. I would caution you that those guys are doing that on purpose in order to get your mandate. When they do get your mandate, they lock you up typically in what’s called an exclusive contract where no matter who you sell to in the coming years, they get paid whether it happens now or later, and they can’t deliver that number. And so we think that’s unethical and bad actors. That’s why frankly we don’t have in our business exclusive if you want to go sell to someone else. And while you’re running a process with us and we say go for it because we think that we add enough value along the way, that you’re going to stay the course with the work that we do together. I think anybody who gives you vague deliverables promises billions of deals that don’t seem to make sense that they have been involved with. A lot of these guys actually count all the deals as individuals they’ve ever been involved with. We know of one relatively prominent advisory firm that hasn’t done the number of deals that they tout on their website. They did them with another firm and brings that to their existing firm. And alluding to the fact that they’ve done those deals with their existing firm, which just isn’t factual. They oftentimes have no relevant references. They do a lot of spray and pray, you know, it’s just a lot of unethical buyer targeting. I can go down a long list, right? So hiring an M a advisor who has been there for the long term who is credible has credible references, has what we’ll call integrity in how they market. I think will all be indications that you’re probably signing up with the right guys. 

Ryan 

Yeah, thanks, Mike. It’s good to spend a little bit of time there just to understand the value in those red flags. And your point, we’ve got previous podcasts on selecting an M&A advisor and I think they’re definitely worth listening to as well. Matt, you’ve worked with a lot of attorneys in this process and I just would love to. And you mentioned earlier, the industry specialization matters now. I’d love to hear understand what is important in selecting an attorney and why does that specialization matter? 

Matt 

Yeah. And you know, the industry aspect particularly in it services because there’s a, you know, a fair amount of nuance, right? In the it services industry where specialization can, you know, can certainly be helpful in that space, right? Liability around contracts, right? For example, liability around it services, contracts, and understanding what that means and how that is going to have any impact on, you know, reps and warranties, and then overall liability, right? Just an example, you know, I think that even more important than that is having an experienced M&A attorney and not just a generalist attorney. And, you know, we’ve seen this, right? Our, you know, clients have sort of mandated that they use their old pal attorney that they’ve been using for, you know, just corporate contract matters and, you know, employee matters and the like. And, you know, what sometimes can happen in that space is they don’t understand the give and take around, you know, negotiating a final agreement that there is always a sense of give and take and they want to, you know, sort of take the hill on every particular matter and win, you know, on every item. And then, you know, they pretend to their clients, well, I’m reducing your risk and reducing your liability. I’m protecting, you know, when the, you know, some of the matters that they’re you know, wanting to fight on really are of very little risk to the client. They just, you know, when you put it on the risk continuum, it’s really quite low and that can basically shuttle a deal. The terms are understood, they’re agreed upon, you know, the strategic value is in place. There’s really good alignment. Both parties are willing and wanting to get the deal done yet simply because the lawyer does not have experience, they get in the way and they shuttle the deal and you know, that it’s not only costly. There’s reputational cost in the marketplace. When that happens. It’s costly because you’ve spent a fair amount of money and the deal didn’t get done and the like, and so in other cases, it, you know, the deals can get done however they’re awfully painful and it kind of goes back to that emotionality aspect. And, you know, the lawyer is presenting just conflict upon conflict and it can, you know, taint the seller’s view of the buyer and that’s never a good thing, right? And so, you know, for a lot of reasons, find that credible experienced, M&A attorney. And plus is finding that M&A attorney that has relevant experience in the market that you’re in. 

Ryan 

Yeah, absolutely. Well said. And it’s critical for the speed of the transaction and the completeness of the transaction to get that done. You absolutely nailed that. And then if you do think about the tax planning, matt, you had mentioned just the tax planning earlier, there’s some advice to just to start earlier here. So if there’s some big decisions that need to be made whether that’s a family plan, tax planning or wealth strategies that are big impacts to what your take home payment is. Your standard CPA can help allocate some deal structures. And, but you’ve got to take some time to understand what stock and asset deals look like or the allocation of the assets that you have and roll over equity when it comes to getting the deal done. And tax planning and financial accounting here is critical to make sure that you get nailed down. I think sometimes we skip over this section a little bit. But really making sure that you have your long term planning is going to really help put a little bit more money in your back pocket here. I think… Mike, I think of this. Just a quick question for you is that, can you help me understand the role of a CPA in an accountant? And also kind of understanding what role they’re going to play within this process? As well as just addressing, you know, do you really need a quality of earnings report to go to market? 

Mike 

Yeah, it’s a great, it’s a great question. Ryan. I think, you know, there’s a lot of debate in the world of, you know, finance and M&A, as to whether you come to a transaction with a qv done independently or if you kind of wait to see if a buyer needs a qv to be done and have them do it. I think, you know, certainly… being able to be deal ready is critical, right? And financial readiness is critical. So your accountant plays a role in doing that. You want to be cleaned up and ready to go. Now if you choose to invest in a quality of earnings. And some M&A advisors require you to get a quality of earnings done before they’ll even undertake taking you to market. And I want to make sure that your financials are clean and that you’re marketable… frankly and that you can get to a number that you expect. So they require you to take on that effort. I don’t personally believe that’s necessary if you have good financial hygiene and that hygiene has been reviewed by an outside third party such as an M&A advisor with a competent financial function. I’ll put a little plug in with revenue. Rocket. We have that, or your cpa who has some experience in making sure that your records are in order and will stand the test, due diligence test. And if not, if your cpa you’ve worked with for many years, you feel doesn’t have that level of skill. Maybe they’re just working with you on tax. They don’t really provide strategic advisory. You need to find someone who can provide that strategic advisor, whether it be a rent to CFO or someone that can take a more deal oriented view of your finance. But financial readiness is critical. Tax advisory is critical. How you’re going to manage a transaction. From a tax perspective. Your personal tax situation is likely not the same as the next Guy. And you’re going to want to make sure that you have, very good advice. So, you know, I would leave it with great and easy to understand financials and good financial hygiene as well as you know, strong and understanding of the tax ramifications of a transaction. And your preferred transaction from that perspective will be important. And if those things are in order, then it would be my bet that you don’t need an outside qv done independently before going to market. You should be able to be able to get to market without that. 

Ryan 

Yeah, this has been a very helpful discussion. Matt and Mike, I really thank you for it. I would love matt. Feel free to answer this and pass this over to Mike. But if a founder remembers one thing from this episode, what would you want them to walk away with? 

Matt 

Yeah, I think that it’s you know, build your team and you know, even more than building your team is building those relationships. You know, this is such a critical life… event and, you know, obviously critical financial event and you want to have some time and, you know, build the bridges and, you know, build trust, you know, with your advisor team. And so, you know, build a relationship, build a relationship with a few different advisors. And, you know, over time, you know, one is going to really rise to the top as the people that, you know, both have the credibility and the experience and the expertise as well as, you know, that sort of that gut feel of the people that, you know, that you’re going to enjoy working with. And so, you know, start early, certainly start early with, you know, at your, M&A advisor, I think we’ve talked, you know, if you don’t already have, you know, a tax specialist in your wings, you know, important for you to do, so, not very costly, right? But can certainly help in terms of your take home. And then, you know, understanding who are credible, M&A attorneys in your purview as well. So start early and build those relationships. Mike. Well, with that, I’d say. 

Mike 

It’s time to tie a ribbon on it. Thanks guys for this episode as part of our masterclass and moving towards step by step, how to get to market, how to think about getting to market and how to get to a successful transaction. Feel free to tune in next week for our next installment of this masterclass and make it a great week. 

What we cover

• Enterprise value vs. net proceeds: why the headline number isn’t the check you cash
• The biggest “below-the-line” items that reduce proceeds:
• Taxes (often the largest bite)
• Debt payoff in cash-free, debt-free deals
• Working capital targets and true-ups
• Professional fees (M&A, legal, tax, accounting/QoE)
• Timing vs. reduction: how escrow/holdbacks and seller notes can delay (not always reduce) proceeds
• Reps & warranties: why buyers want protection, and the two common ways to structure it (escrow vs. RWI)
• QoE + diligence: how add-backs get challenged, how deals get “retraded,” and how to defend your EBITDA
• The recurring theme: start early—prep with M&A, tax, and legal advisors before you’re in a live deal

Listener takeaway

If you want confidence in your outcome, don’t just ask “What’s my valuation?” Ask “What’s my take-home, when do I receive it, and what could reduce it?”

Other Episodes in this Series

• Episode 1: Knowing When It Is Time to Sell. Listen now >>
• Episode 2: Get Your House in Order. Listen now >>
• Episode 3: Valuation Drivers. Listen now >>

Listen to Shoot the Moon on Apple Podcasts or Spotify.

Buy, sell, or grow your tech-enabled services firm with Revenue Rocket.

EPISODE TRANSCRIPT

MIKE:Hello, and welcome to this week’s Shoot the Moon Podcast, broadcasting live and direct from Revenue Rocket corporate headquarters in Bloomington, Minnesota. Let me try it again. Hello, and welcome to this week’s Shoot the Moon Podcast, broadcasting live and direct from Revenue Rocket world headquarters in Bloomington, Minnesota. With me today are my partners, Ryan Barnett and Matt Lockhart. Welcome, guys.

MATT:Great to be here, as always. We’re starting to get toward that time of year where we’re shutting things down—although it’s exciting that we’ve got a couple of deals closing before the end of the year. And for those of you who may be new to the podcast, we are your M&A advisors for tech-enabled services companies worldwide. Ryan leads the parade here and has come up with a heck of a series. Ryan, I think it’s going great. How are you?

RYAN:Hey—thanks, Matt. And Mike, thanks for being on here today. Today we’re on our fourth episode of a Master Class series focused on IT services executives and the potential of selling your firm. As you look toward 2026 and what that could mean for you—maybe monetizing your life’s work, the biggest asset you have, and taking that next step—we want to help you think about it in a way that gets you the most value and gives you reassurance about the future.

So far we’ve covered how to get ready, how to organize your business, and valuations—what to expect and how valuation works. Today is a continuation of that: once you have a valuation in mind and you understand your enterprise value, the next question many CEOs ask is, “What’s my take-home?” Today we want to look at the biggest factors that impact what actually goes into your pocket after a transaction.

Mike, let’s start with you. When you think about these deals, enterprise value is that headline number—why do sellers fixate on it, and why is it risky to use enterprise value as the goalpost versus net proceeds?

MIKE:Great question. Enterprise value does not translate equally into what you put in your bank account. It’s critically important to consider price and terms—what portion of the proceeds is cash, what portion might be an earnout or seller note, what portion goes to tax, and what portion goes to fees (tax, legal, and M&A). Those fees shouldn’t be underestimated.

You also have to reconcile debt. Most transactions are structured as cash-free, debt-free transactions. What that means is you may be able to harvest excess working capital (not all working capital, but excess working capital), but you also have to pay off debt. All of those items effectively come out of enterprise value—especially on the liability side—offset somewhat by assets you can harvest from the balance sheet at the time you sell. The key point is: enterprise value is not the number you ultimately put in your bank account.

RYAN:Thanks, Mike—that’s a great setup. The rest of the conversation really focuses on those areas. Just because the top line looks great doesn’t mean the bottom line is the same.

Matt—when you think about gross proceeds versus net proceeds, can you simplify what that means so a CEO can understand it?

MATT:Sure. Gross proceeds is essentially that enterprise value number Mike is referring to—the headline number on an LOI. Let’s use a simple example: an enterprise value of $20 million (it could be $50 million or $100 million, but we’ll use $20 million). That’s what you see in big bold letters.

Then you need to understand there will be reductions. Often, the largest reduction is taxes—what will be paid to Uncle Sam. Another big category is debt: because most deals are cash-free, debt-free, if you’re carrying debt above and beyond the assets in the business, that debt typically needs to be paid off—often as a reduction from enterprise value at close (or it can be cleared beforehand).

You also have potential working capital adjustments. Market practice is that a certain amount of working capital will be left in the business so the buyer can operate the going concern. Then you have transaction fees—M&A advisor fees, legal fees, accounting and tax support, and so on. Those reductions take you from enterprise value to net proceeds—your take-home amount.

MIKE:That helped, Matt.

RYAN:If I heard you right, there are a few major categories: debt payoff, advisor fees, working capital adjustments, and taxes. Mike—are there other things someone should account for when they look at the deal overall and the types of fees they might expect?

MIKE:Yes. There may be advisor fees you haven’t thought about that are important. Competent tax counsel is critical—especially if you’re rolling over equity, have earnouts, or are deferring tax on portions of the proceeds. A good tax advisor can help structure the deal in the most tax-efficient way, including timing—there can be nuance at year-end that affects tax treatment.

You also may want a financial advisor. For many owners, this is the biggest single asset on their personal financial statement. When you receive proceeds, you need to decide what you’ll do with them—how to invest them and how to build the greatest return. There are also tax considerations tied to working capital harvests if those amounts are material. Thinking ahead about how to optimize take-home—taxes, debt, and working capital—matters, and it’s important to engage these advisors early so you’re prepared.

RYAN:Sticking with deal structure for a moment—you mentioned terms earlier. Are there other things that might defer payment? Specifically, I’m thinking about holdbacks for reps and warranties. Sometimes the take-home isn’t necessarily less—it just happens later. Can you expand on that?

MIKE:It’s super important to understand this from the buyer’s perspective. In the purchase agreement, you’ll make representations and warranties about the fitness of the business—your books, contracts, vendors, and so on. The buyer wants protection in case something shows up after close that contradicts what was represented.

Because of that, buyers often want a holdback, setoff, or escrow—money that’s held back to fortify against a breach in the contract. As long as you’re truthful, honest, and transparent, this generally never comes into play and you get the holdback.

There are typically two ways to fortify reps and warranties. One is reps and warranties insurance, which is often used on deals over roughly $10 million in enterprise value and can scale much higher. If there’s a claim, the insurer pays. Both parties usually share in the premium.

A more cost-effective approach is an escrow holdback. That usually means waiting six months to a year for some of your money—but in most cases, you get it, assuming everything was represented accurately and honestly.

RYAN:That really helps. The big message is: buyers may include things that defer payment. You may see reps and warranties holdbacks, or terms like a seller note that pays interest on the money you’re effectively lending.

So, the major categories we’ve covered are: debt payoff, M&A advisor, legal advisor, accounting and tax advisory, possibly a quality of earnings report, a working capital true-up, taxes, and reps and warranties holdbacks. And taxes can vary significantly depending on where you live—so having the right tax strategy is critical.

Matt—switching gears: these fees are important. Can you explain why advisor fees can actually increase net proceeds, not just reduce them?

MATT:Absolutely. Advisors—what we do, plus legal and tax advisors—help ensure you achieve the best deal possible. From our role, we aim to find the best strategic fit: cultural, strategic, and financial alignment with your goals. Strategic fit drives value and drives price.

Competition matters too. A strong and credible M&A advisor runs a process where multiple buyers see that fit and put their best foot forward. In most cases, we’re able to achieve an enterprise value that exceeds the fees paid to us—and often exceeds the total fees paid to all advisors.

Likewise, a credible M&A attorney reduces ongoing risk and helps structure the purchase agreement to maximize your return. And working early with an experienced tax advisor—aligned with legal counsel and the M&A process—is absolutely critical to structuring the deal appropriately. Done correctly, the use of advisors pays for itself by increasing price and improving structure.

RYAN:Well said. Next topic: once an LOI sets enterprise value, what should owners be cautious about that might reduce enterprise value during the process? For example, a quality of earnings report might question EBITDA add-backs. How does enterprise value start to decrease? And post-transaction—are there things like true-ups, or items that could be dealt with months or even years after the transaction?

MIKE:Good question. It’s not uncommon—particularly for financial buyers—to do a quality of earnings analysis. Think of it like a financial audit. They’ll review your books with scrutiny, including EBITDA add-backs like owner add-backs and other adjustments. There’s generally negotiation about what is or isn’t an appropriate add-back.

Sometimes there are simply errors in the financials—timing problems or issues in how transactions were posted—that put profit in question. As the buyer’s auditor works through the quality of earnings and potentially moves EBITDA down, that can impact value because many buyers price the deal off a multiple of EBITDA. They may try to retrade the deal or negotiate a lower price.

That’s why having a competent advisor matters—someone who can do diligence defense and defend your EBITDA against that audit scrutiny. In our firm, that means another auditor has already reviewed the numbers so we know what’s defensible. If you haven’t done that work before engaging a buyer, and you have “chinks in the armor,” you can create momentum toward reducing profit and weakening your position.

This is one reason so many unrepresented deals don’t get done. Statistically, if you’re approached by a buyer, only about 1% of those deals actually close. A common failure point is that the pre-work hasn’t been done, the financials haven’t been stress-tested, and the buyer starts picking things apart—while you still have a business to run and aren’t prepared to fully defend your EBITDA.

RYAN:Mike, Matt—this is extremely helpful for sellers. Matt, I’ll turn it back to you for any closing thoughts or anything we may have missed.

MATT:Another great topic. For people who’ve been through this before, it might feel like the basics—but we work with a lot of founder-led businesses who haven’t been through the process. And it’s easy to get sidetracked if you’re not properly prepared.

That shiny headline number isn’t necessarily the take-home number. Many people understand taxes in concept, but not the intricacies. Often they don’t understand working capital, working capital adjustments, or how buyers will use diligence to try to reduce purchase price.

The last thing I’d add is: preparation matters—mentally and emotionally—because it ties directly to what your actual take-home can be. Start early with your M&A advisor, start early enough with your tax advisor, and then at the appropriate time, start early enough with your legal advisor. We’re looking forward to having many more of these conversations in the year to come.

MIKE:With that, we’ll tie a ribbon on it for this week’s Shoot the Moon Podcast. I encourage you all to tune in next week for the next class in the Master Class on preparing your business for sale. We look forward to you tuning in—make it a great week.

What Your Business Is Worth: Valuation Drivers for Tech-Services Firms

• Valuation vs. EBITDA multiple: why they’re not the same thing
• Buyers price future performance and confidence in future cash flows
• Revenue quality premiums/discounts: recurring/contracted revenue, churn, concentration
• Adjusted EBITDA + add-backs: what’s “clean” vs. what gets rejected
• Specialization + growth consistency: vertical expertise can drive premiums
• Valuation killers: messy books, contracts, founder dependency
• How to increase value in 1–2 years: positioning (incl. AI), revenue quality, leadership/operating model

The Sell Side Masterclass for Tech Services Founders Series:

Part 1. Knowing When It’s Time to Sell: Listen now >>

Part 2. Get Your House in Order: Listen now >>

Our Podcast playlist for Sellers: https://www.revenuerocket.com/podcast-episodes-for-sellers/

Listen to Shoot the Moon on Apple Podcasts or Spotify.

Buy, sell, or grow your tech-enabled services firm with Revenue Rocket.

Last time, they explored knowing when it is time to sell. This week is all about getting your house in order so buyers can move quickly and confidently through diligence.

We cover why “time kills all deals” and how the vibrancy or cadence of a deal is driven by how fast you can deliver clean, accurate information.

Financial readiness basics:

• Clean P&L with defensible add-backs and clear, normalized EBITDA
• Moving from cash to accrual accounting and resolving open issues
• Understanding your revenue mix (recurring vs. one-time vs. resale, deferred revenue)
• Showing consistency over years, not just months

People & leadership readiness:

• Reducing over-dependence on the founder across sales, operations, and delivery
• Demonstrating a leadership team that can scale and execute
• Succession planning — including “who’s in the tent” during a transaction
• Using data (e.g., sales leadership forecasting growth from customer intimacy) to prove leadership impact

Operational readiness:

• Tool stack hygiene, systems that actually work, and useful dashboards
• PSA/ticketing discipline and clarity on what makes up your gross margin
• Transferable contracts with clean renewal and termination language
• Customer satisfaction metrics buyers will want to see

Customer & contract hygiene:

• Clear target market and GTM strategy (vertical, size, geography, problem-based, etc.)
• Demonstrating long-term, renewing, high-intimacy customer relationships
• Making sure contracts and your chart of accounts tell the same story buyers see in the data

Legal and compliance housekeeping:

• Corporate and regulatory filings (e.g., secretary of state docs, LLC details)
• Clean cap table
• Fixing misclassified contractors, missing signatures, and expired MSAs before diligence

If you only have 90 days to get ready:

• Prioritize financial readiness and third-party-vetted numbers
• Tighten up contracts and leadership accountability (“who’s who in the zoo”)
• Start building a data room with financial, contract, and operational data buyers will expect to see

Tying it together with strategy:

How “selling in” vs. “selling out” ties to your readiness story

Showing that your differentiation, GTM, and organization are well thought out — and executable with or without the founder in the seat

This episode is perfect for: Founders and leaders of IT services and MSP firms who see an exit on the horizon and want to avoid value-eroding surprises in diligence.

Listen to Shoot the Moon on Apple Podcasts or Spotify.

Buy, sell, or grow your tech-enabled services firm with Revenue Rocket.

Episode Transcript

Mike: Hello, and welcome to this week’s Shoot the Moon podcast brought to you by Revenue Rocket. We are the world’s premier growth and M&A advisor to IT services companies. With me today are my partners, Ryan Barnett and Matt Lockhart, welcome guys.

Matt: Great to be here. Mike the M&A guys, right? You’re probably hearing some of this branding change going on. A lot of fun. Talking with folks about the podcast and excited to continue our series here, Ryan, what’s going on?

Ryan: Absolutely. So at Revenue Rocket, we’re 100 percent focused on buying and selling IT services firms. I’m Ryan Barnett, I lead go-to-market and we are on a lovely journey of masterclass. I think it’s really a mini series on how to think about buying, growing and exiting your IT services firm. In this series, we’ve reviewed why you would want to do a transaction. We’ve talked through what a buyer may be thinking about in terms of that transaction. We did our masterclass part one, which was all about getting your head right. So I think it’s the introspective part and probably the hardest one. Today, I thought we’d talk through a masterclass on the practicalities of getting ready for your sale. So Mike, I thought I’d throw it to you. When we think through the concept of time kills all deals. How much does the readiness impact what it means for you in both the valuation of the company and the speed of a deal?

Mike: Yeah, great question, Ryan. So the vibrancy of a deal and what I mean by vibrancy is what’s the cadence of the deal, the pace of the deal, which is driven by the seller typically and this is driven by the readiness of the seller. How ready are they to actually engage with a buyer and provide all the information required for that buyer in the form that they need it, whether that be financial information, collaborative information, customer information, or just the general sort of readiness of their own leadership teams, their own back office, their own operations, their own growth trajectory, their own positioning. All those things factor into the readiness of the seller and it affects and impacts the vibrancy of the deal. If the buyer views you as a ready seller, there’s vibrancy in that deal. There’s really people rallying to the work and the diligence and all the things that need to get done in order to get to close. However, if they’re you know, you haven’t put this time in upfront.

Ryan: Absolutely. So, Mike, you know, clean deals, clean data really leads to confidence in there. Matt, when you think through readiness, what’s the first thing that comes to your mind as you’re thinking through just practical steps for what it means for a company to be ready to sell from a business standpoint. So not like mentally, we reviewed that in our last episode. Practicality from a business sense, what needs to be ready? How do you think about readiness of a firm? And these can be small firms, mid-sized firms, but they can also be much larger enterprise firms. How do you think of that clarity on when you’re starting out a process to sell your firm?

Mike: Well, certainly, you know, it starts with clean financials, right? A clean financial picture that shows three years performances is critical as a start. Right. I mean, if you don’t have three years of income statement, balance sheet, cash flow, the clarity around your revenue, your gross profit, your operating expenses, as well as a clean normalization so that we can get the consolidated. And of course, a lot of people use the word normalized interchangeably with consolidated or vice versa. But show a normalized and consolidated EBITDA so that you can truly show what earnings you’re delivering to a buyer, to a shareholder is really step one. Right. If you don’t have that, we’re never going to be able to get done with the transaction. And it breaks down into multiple things. Right. That might be, you know, certainly your chart of accounts that shows, you know, the right categorization. You know, sometimes we run into, there’s quite a bit of expense that should be COGS and maybe it impacts your gross margin, incorrectly. So you want to get that cleaned up. If there are add backs, we certainly want your add backs to be normal, right? Things that add back your add backs to be normal, meaning that your add backs should be one time expenses, things that are not going to repeat themselves after close or that they need to be expressed that way. Many deals are done on a cash basis. We see that we have to migrate those deals to accrual basis in order to get a clean cash flow, as well as an earn-out schedule. There’s deferred revenue. There’s things that need to be addressed as well. And, you know, all this stuff is critically important to get right, because it builds a lot of confidence in a buyer and looking at your numbers.

Ryan: Yeah, Mike, you did a great job of that overall part. Matt, I want to push to you. So let’s think through things overall. We’ve talked through getting your head right. We’ve now talked through some of the technical things that make sense on the financial side. I would love if you could maybe give us a broad perspective of high-level buckets on getting ready. Maybe what’s included in a readiness, knowing that the buyer side you probably have a more intimate understanding of this just because you see more deals, give a sense on what it means for readiness. And broadly, I’ll hit on some financial stuff, maybe a legal side. There’s an assumption of some marketing and sales, maybe there’s a leadership organization in place so that maybe kind of give a broad sense on what it means and some categories by which you see people getting ready and if we get through some of them, but we’re kind of do a ten thousand foot view first and then we can dive into some of these, that might be helpful for everyone to understand what people have to go through for a transaction.

Matt: Yeah. And this is one of those readiness items that is, you know, it’s probably not easy to say, okay, we can, we can get this all done, you know, quickly, but, you know, again, going back to our, you know, those leaders of what we’ve seen in the space who have been ready and have great outcomes, they have spent time in preparation for a sale. So I like to think about it as Matt’s belief in the three legs of a stool, people, operations and financials. And they’re not necessarily a leg of equal lengths in terms of how much time and effort that goes into getting ready. But, you know, having those three legs in place is really critical that the three legs of the stool are the supporting element to the top of the stool, which is a good strategy. A good go to market, a good definition of where your best prospects and best customers are and what are those products and services that you have that serve their needs. So that’s that top of the stool. But again, who are the people that are going to go enact and execute upon that? How are your operations built to be able to support that? You know, how much maturity is in those operations relative to what the seat that it is that you would want to sit in as a scaled, vibrant, ready for scale organization? And then, how are the financials, you know, telling the story, baked into the story and how are the financials that support that story? And so, you know, I think that that’s a thoughtful way to think about your own organization, it’s the people, operations and the financials that are ready to go in support of the strategy and how that’s going to create a vision and a story for a buyer of a vibrant scaled or ready for scaled organization in place.

Ryan: Matt, excellent job covering a really dense subject on that front. Let’s, maybe, throw these into buckets and walk through them. Not surprisingly, I think all of us tend to go to the financial first, so let’s maybe dig into some of that. Some of this can be practical, but we don’t want to get into accounting rules necessarily, but give a broad sense. So one of the things that I do a lot when I’m working with a client, I’m looking at, their chart of accounts, you mentioned M&A, when you looked through, what are some of the things that you like to see and that you pull out to understand the true drivers or financial health of the business or, Matt for you, as you’re looking through a buyer, what are the kind of things that you want to see from a financial readiness part or more like higher level things that kind of give you more comfort in understanding this is a financial company that one is ready for a set and two, kind of explain kind of the value in the market. Think of that a weird way, but again, maybe think of the chart of accounts and financials. What kind of things need to be tightened up before a sale?

Mike: Yeah, great question, Ryan, I mean, I think, you know, operating financials as an asset for you, particularly if you’re in preparation for a transaction is critically important. And I think, you know, beyond the things that I already talked about, I think what’s critically important is that you’re accurately representing the revenue you have, the costs that go against that revenue and the margin that you make on that revenue, that you’re able to answer a simple question for the buyers. And we see a lot of sellers not being able to do this, is that “what do you sell to whom and what margin?” If you think about that, that’s pretty simple, right? Like what do you sell to whom and what margin? And that sort of triangle that you’re able to sort of describe in the financials to a buyer is critically important. And if you’re not ready to be able to answer that question in the way that you’d like, which is, “we have an ideal customer profile and we’re selling an ideal service to those guys and we’re making a great margin on it.” The more you can deliver that outcome and be able to represent that outcome simply in the financials, the more you’re going to be able to show financial readiness. And I think those components are very important, you know, financials can be very complex. They can either be overly complex or too simple. We kind of like to see that they’re in the sweet spot where there is some complexity that sort of describes, maybe the uniquenesses of your business while at the same time provide clarity from a revenue perspective about what you’re doing.

Ryan: And those operational things. And keep in mind, these are like, there’s probably 50 things that we could talk to in each of these pillars that really matter. And part of this is understanding that these, these parts of this puzzle will always be changing and evolving. And what you’ve been doing today might be different in what you’re going to be doing tomorrow, but understanding that these things exist and then looking at it, it can help a ton. So Matt, let’s bring it into maybe this concept of customer and contract hygiene and there’s lots of things that are probably in there, whether it’s customer satisfaction, or, you know, your contracts have the right language, or clearly deliver the value that you’re doing as a business. How does that impact companies that are that are ready? And I would say even more so, how do you think about bringing together your financial operations and customer with the legal sides? Just recognize that these are like all the things that need to be moving forward and they need to be tightly tied together. How do you think about customer and contract hygiene? Maybe give a sense of what it is that you see that impacts the value of a deal, or some of the things that must change in the next few years for customer and contract hygiene?

Matt: Yeah. Well, and, you know, really Ryan, you raised up, okay, these are the, this is the, this is the full picture. And so when we think about financials and readiness, you know, within those financials, we want to see what are the financials and sort of the operations and the operational metrics around specific customer segments, right? How you’ve defined that that target customer or that target market. From a strategic perspective, it’s, it’s defining where you want to be relevant and be meaningful. And so that means the types of customers that you want to be relevant for. So what’s the target market so that we can have financial and operational pictures and data, you know, around that. Is it is it a particular industry and in some sort of category within that industry? Is it a particular size of company? Is it a particular geography that you’re working with? Is it the problem-based scenarios that you’re solving for that customer? And you want to be able to give a buyer, you know, a picture across the strategy, across the operations. How does the target market lead, you know, to and relate into and be, you know, and references into your financials so that your, you know, your chart of accounts and your contracts, and everything is aligned so that the financial metrics that you’re reporting, support the strategy that that you’re taking into market. Contractually, that the contracts are, you know, similar, they’re easy to understand, they’re transferable, that the risk language is, it’s manageable. That things like termination clauses are clear, that that deal size or contract size, maybe terms are clear and in place that renewal language is also sound so that when they’re looking at the financial picture and the strategy picture, then they can also look at contracts and say, okay. I see this that, that there’s a number of customers who renew year after year because the buyers are going to want to say, okay, what’s the probability of that continuation of that contract. And, you know, another big element within that picture is, how would the buyer view the depth of the relationship? And can you support that in your, in your data, right? So you can support that relationship, depth of the relationship with history of the customer, the services contracts maybe, you know, if there’s been some movement, movement in pricing, you know, upwards over the years. But then also, you know, the operational metrics and the customer satisfaction, metrics that work against that particular customer and services and so on and so forth so that the buyer can look at it and say, okay, we trust that, you know, number one, we trust that these financials and this history of financials are likely to persist, meaning if there’s a nice growth trajectory there. That this is going to persist over the years and in year after year, but also retain those customers and retain them at the gross margin levels that are currently being delivered in which we feel good about. And more importantly, when you have those scenarios where you’ve got long-term customers who are renewing and, you know, renewing in higher gross margin levels and hopefully at some higher EBITDA levels, that the buyer is going to feel really good around that persistence of financial, persistent of relationships that you’re going to have your customers stick with you. And the deeper that you can show that, the better it is that they’re going to be able to come closer to you.

Ryan: Right? And a lot of those, as you mentioned, some of those KPIs, you’re touching on some things that I think we could probably do, some episodes in the future on, just in terms of how to measure those things and how to understand those things and look forward to it. So excellent job covering that. I would say one thing that also kind of stands in parallel to that is not only is it who you’re working with today, but what is the picture of tomorrow? So what is it that you’re doing? That is you know, what is the future potential of these accounts? How often are you talking to them? How often, what are the services, things that they’d like? What are you trying to do as a business to look forward to and think through, how you’re going to set what the services look like and the economic model that supports those services? I think economic model is where we spend probably most of our time. And it’s amazing that as we look through these things on the economic model, many times we get into clients that are dealing with which geography should they cover, which industries are they covering, which areas are ancillary, how are they thinking through and how can they be a part of a future buyer. So there’s a lot to do. And that kind of leans into, even other services that we have that are, that help get your go to market right. And we’ve got some, go to market strategies that will help improve that, that you don’t necessarily need a transaction for, but it will help solidify the value of your company both. From a standpoint of, if you’re selling it, and if you want to keep it and grow. That there’s just some sheer optimization things that help both you as an owner and you, as a, a buyer. There’s lots to do there. While we, we talked again a little bit through financials, we’re talking through customer contracts, your operation side, Matt can you touch on people and organizational readiness for just a minute? And I think that’s one that tends to be a little bit, I don’t know if it’s missed or I don’t know if it’s just not thought through in both a buyer and a seller side, but maybe give us some examples about how you see people connecting in the readiness and then likewise with organizational strategy. Give us a little sense on the people side.

Matt: Yeah. I think on the people side, it starts with a bit of self-reflection on behalf of the founders slash ownership group, that’s in place. I think that self reflection starts with, what else are you doing? What else are you responsible for in terms of roles? And there’s, I think, a direct correlation between the maturity level of the organization and the number of functions within an organization that a founder leader is, you know, responsible for. The least mature organizations, they’ve got their fingers in a lot of different parts of the organization. They’re seen as crucial to multiple parts and not necessarily there’s a clean line between which, leadership team members and leaders are responsible for certain functions. That’s that self-reflection that should be in place. And then sort of a, you know, the, you know, this foundation of that readiness picture, again, going back to my three legs of the stool, people operations and financials. Are you ready where the leaders are responsible for clear chunks of the organization? Maybe those chunks aren’t this functional level. Sometimes they are, but, you know, you want that leadership accountability spread out throughout the organization so that when you sell that that buyer can see that all the way down the organization, there’s clear lines of accountability. That there aren’t too many of those lines rolling up to, you know, individual leaders that aren’t structured. And that there’s enough there that independent leaders have integrity within their parts of the organization and that, that buyer can trust that, yes, this is something that we are going to be able to plug in and integrate into our organization and that it’s going to persist post close and that we’re going to have all the functions covered so that the strategy can be executed against. And, of course, the founder slash leadership team, when they go into transaction, they’ve got to be ready themselves for what is their desired outcome. Are they ready to be able to have an open, honest discussion, for both a buyer and us from an advisor perspective as to what they want their future to look like. And that means, how active do they want to be? And whether that’s if their kind of that second bite of that apple is their, you know, is going to be their big, and maybe the biggest piece of the financial benefit that they’re going to see out of a transaction. You know, so defining what they want their role to be, do they want to stick around in a leadership role across the broader platform and take advantage of the synergies that the platform is going to be able to afford their previous organization. Or do they want a staged transactional outcome, meaning they’re going to, you know, they’re going to see some element of cash and then maybe an earn-out. And then, you know, they’re going, they’re going to split. That needs clear, thoughtful planning on behalf of that leadership group to be able to define that so that going into a transaction, they can be open and honest along the way. And so that they’re not sitting and waiting to say, all right, let’s see what it is that the buyer offers us and, you know, then we’ll sort of define what our roles are going to be. That tends to lead to less than optimal outcomes, you know, for everyone quite frankly. If there’s not a broader leadership team in place and, you know, there’s too much reliance upon the existing ownership slash founder group. Well, then that tends to be, you know, kind of limiting and opportunities and, and certainly from a value perspective.

Ryan: Absolutely. I love your take there around, one kind of being realistic around thinking through, how much of the hands-on part of the business do you want to be, want to be in or not. And we see those leadership shifts. And part of it is there’s a key concept that we’ve talked through. I think, of selling out versus selling in, and I think these concepts really align well when we think through, really understanding what’s the strategy. What is it that you’re trying to do? And if you are truly trying to sell out and have minimal commitment after, you’ve got to set up and have the organization to go do that. You’ve got to have the strategy to work towards that. If you are going to selling in, you’re going to look at your future life, your future relating ways that you’re working with people differently. And that also influences your role in the organization, not only from a time and, ownership perspective, but in what you’re actually doing and what you’re getting to do. And so there’s lots to kind of unpack there, but really understanding thinking through how that relates to people. And I think another key point that you brought up is this organizational readiness is accumulative of work, right? You have to make sure that there are reductions of risks that are happening within your organization. There’s a reduction in risks that are happening inside of your, across the organizations. Across those pillars that we talked about. There’s a reduction of risks that are happening, across your customer base. And so all of this stuff takes time and time to build and opportunities to work out. So imagine that this readiness and, and this organizational side really takes time, that you need to build up and you can’t do this on just a short term, even though you may think of things from higher level strategic organizational things to somewhat a lower level tactical things like what your, your tool stack is, and what it will be in the future, what your data looks like. There’s gonna be lots of different parts there. So let me ask you both this question. So if you’re thinking through from a seller’s perspective and someone says, I want out, I’m ready to go. I want a Revolution Rocket to help me out. I’d love to start a process as soon as possible. I know it’s going to be a few months, your little lean, but I’d love to be after that I’d be open to a transaction. And they say, they’re doing it today. However, they’re thinking, hey, in future states is I want this, I want this to be done sometime in the next year. I’d like, I don’t want to go necessarily two years, but I’d like to go to one. But I really want to get out in, in, in short term, they’re relatively defined. You know, they maybe have some inconsistencies in their past, they haven’t done a full quality earnings report. You know, they’re, they’re relatively okay with their chart of accounts, but not perfect. They maybe don’t have some deep planning and some true strategy in place. Maybe there’s a few things off. For that firm, Mike, if you look at it and say that firm, that short term, in the short term, to look for a transaction as soon as Q1 of 2026? What are the things that you would say that they must do today to be ready for that short term, that short term life?

Mike: Well, Ryan, it’s all about financial readiness. I think, day one, now complex financials that don’t match your story is somewhat the act killer to getting a transaction done in the short term. And, you know, for every time you say, as a seller, “well, we’ve had a great year this year and the last couple of years have been average,” a buyer doesn’t hear that, like they don’t hear that at all. You hear that, but that’s not what they hear. They hear I’m buying the historical performance of the business. And so therefore, you know, we should be looking at, the historical performance and the last year is probably the anomaly, right? As owners of companies, we often think the last year is really what our business will be. But the average of your business where it’s been average, that’s the derisk version of where it’s likely to be. And I think what we try to do is one, get financials that are normal, that are recurring. If you look at the recurring revenue mix of your revenue and you’re able to say that its recurring services, your project’s revenue or resale, or it’s something that’s, you know, one time. We want those recurring services to be as high as they can be. And in absence of that, we want to be able to mitigate that and convey and position why it’s maybe a lower margin component of your business or as a smaller percentage, but there’s this major upside story of growing recurring services. I think that’s probably item one, sub one, that, needs to get done. Beyond that, there’s a variety of things that need to happen on the financial front. You know, our view, we’ve rolled out a preparedness report at Revenue Rocket, which we’ve talked about in other podcasts. The preparedness report essentially is a quality of earnings without running a quality of earnings. It allows us to get to your normalized EBITDA and your revenue mix, sufficient for planning around a transaction. And I would go as far as to say that if a buyer is saying that they absolutely need a quality of earnings report in order to move forward, that there’s something wrong in the financials. They don’t trust the financials, they see an issue. They see an add back, they see something. And certainly when doing some of these Q of E type reviews as a buyer, you know, we’ll see things in there that are anomalies or unusual or something that’s not clearly expressed through performance and calling that out is critically important. And once it is called out, then hopefully you can crystallize around why it’s a one time event or it won’t reoccur. Or you can, you know, discount it to where it’s likely to be as a buyer. So I think getting financial readiness is absolutely the reason number one thing that you have to do as a prospective seller. I think secondly, is you have to get legal and compliance readiness, and that means that your corporate filings are up to date. You’re registered with the secretary of state. You have an LLC or whatever entity you have is up to date and doesn’t have some weird ownership on it. The cap table needs to be clean and simple and that you have, you know, good operations in place and that the people that work for you are actually employees. They’re not contractors where they should be employees. And you don’t have any liability hanging out there on the legal front for claims that are kind of hanging over your head. And that that’s, can be anything. It’s can be a variety of things. Anything from IP issues to issues around employee conduct, to issues around employee status, in the case of contractor or vendor agreements. It could be anything, but making sure that that’s clean and that your contracts are collectable and that all signers are, signed and notarized and you’re, in good shape with all the stuff that we believe would need to be delivered in the data room is done. You essentially need to build a data room before you create a data room. And that means that at Revenue Rocket, we have a hundred data points that are part of our diligence checklist that, prospective sellers need to have in place and ready to go. And we use part of our preparedness report and program to review that with sellers. And in your example, that’s what we would do. We have the benefit of having a proprietary understanding of what needs to be, ordered, particularly for IT services companies, so you can be prepared. And, you know, some of these things only take hours to do. Some of them require, involving other third parties. So as I talked about how, you know, if you do financial readiness, you may need an analyst or someone to help you build a financial model and get through some of this stuff that looks a little wonky. Diving in a little deeper than maybe your bookkeeper, accountant, or back office people have done historically, or that you even drive as CEO. Some of this requires someone that has the experience and professionalism in building a financial model in preparation for the sale of a business. And a lot of it’s around correctly categorizing stuff and helping through extraordinary expenses that you might have had. So, I think that would be how I would think about it. If we had a short time horizon and we had to deliver, what would I do? Well, you need a team and that team will include a quality regional advisor like Revenue Rocket. It will include a legal team, hopefully that you’ve got some experience with, or we can refer to a variety of merger and acquisitions, legal and law firm specialists that focus in this area. And you know, you’ll certainly want to have a back office team, which may be the same back office team you had historically supporting you as an owner. And beyond that, there are other people that can get involved in this process that are specialists that can help.

Ryan: the great wisdom, a great knowledge, nuggets of wisdom here on this front for you both. And maybe we can get some final feedback from you both on what that takes. But one of the things that I’ll add that both of you touched on that really needs some amplification is the idea that selling your firm and doing this is a team sport. It is not something that you’re doing alone and it will go through, what I like to call, just a village. If you think through drafting these things from a short term perspective, recognize your own skill sets, that that’s extra help. And I think investors that we’ve seen that do this the best know you’re going to have to have your legal advisors, you’re going to have to have your operational team, you’re going to have to have leaders throughout the organization mindfully engaged in this process. Your leadership team is going to need to be engaged with this process. HR is going to be engaged with this process. You’re going to have input from board members. So you’re going to have people that are outside of your team, but you’re also going to have some payroll. And all of these people really do come together to give that, ultimately the goal is to get this into a win-win scenario between you and a buyer. The one thing I might, I might reference is that we do find that there is a concept of who is in the tent and who is not in the tent. So when we work with clients, that is one of the things that we march through and, and strongly encourage as part of our readiness is like, who do we want to be including in there as part of the project team for buy and sell side or exit, but do going through that process is definitely a team for and getting ready is on, on everyone’s shoulders that they’re working towards, working towards that advantage. So, Matt, let me bring it back to you for, a quick comment here, and then take it from you, Mike. For those who are listening and saying, boy, this might be overwhelming, there really might be a bunch of, stuff that I have to go do here in this process, and I’m not sure where to start. What’s the advice that you would give to someone out there that is either thinking through, they want to get ready for a buy or maybe even some of the motions that we’re talking about that’s helping them tighten their company up, regardless of when they’re thinking through a transaction or not. But maybe give us some final thoughts from you on what that would be from your perspective and then pass it over to you, Mike.

Matt: Yeah, I think it’s like anything that. That you want to enact. You have to think about it on a continuum, right? You know, we talked a lot about, you know, three years of historical financials. Well, that means financials from three years ago, right? And so you gotta, you gotta start in the present and, and just think about it as a continuum and hopefully this series. And I, I say that hopefully, because that’s the genesis of what we set out to achieve with these is to help leaders define where it is that they want to be from a transaction perspective or a financing perspective, right? We’ve, we’ve talked about the, outcomes and what you’re looking for from a financial perspective. And so you want to, you want to think about and envision where it is that you want to be from a financial perspective. Is that your first time sale where you’re wanting to move on and be doing something different? Is that your second bite at the apple where you’re looking for a big payout where you’re selling into and then, and going from there. So you want to envision that future state. Think about what your role is in that. And then think about your organization today and set that as a mountaintop that you’re climbing. It’s just like anything, right? You’re not going to rise to that top all at once, but you, but you want to think about that and begin to take steps by understanding what’s it going to. What are the future states look like? What does it look like within each one of those pillars of financial readiness, operational readiness, people readiness, and how that supports the strategy. So you got to take it up in manageable chunks, but you do have to think about the future, the desired future, and so that you can begin taking those steps in a deliberate manner. Right. And from a time perspective, it’s often talked about what you can, what you can do in a year. Or, you know, we think about it from a, you know, a short term perspective, oh, we only can, can, you know, do a certain number of things. And we, we think about, okay, the things that we can control, or maybe we overestimate what we can do in a single year. But when we think about in a five year horizon and a more deliberate path, we underestimate those things. The, sort of asked backwards way that I just got there is that having a longer horizon with manageable chunks that you’re managing in a stepwise manner is the way to get there. And that, then of course you want to have people along with you to help you guide, but you’ve got to think about what will those future outcomes look like for you, for your family, for your company and for your employees.

Mike: Great thoughts, Matt, I appreciate that. You know, to kind of put a bow on this, I think my perspective is, just get started. Right. And wherever you’re at today is fine, like we’re not judging. I think what we’d say to you is, think about the better future that you want to build and to map out, a roadmap to get there. And sometimes that requires outside help. Certainly people like Revenue Rocket, your legal and accounting advisors can help build that better future. And yeah, I encourage you all to think about that. And as part of this, I would tell you that working with people that have experience and know how, can dramatically reduce the amount of time to move from where you’re at today to where you want to be. And it can help you up your game as a seller, whether it be your business as a seller or be you to achieve your own sort of personal goals as the class. And with that, make it a, great week and a great month.