Separate the transaction from the relationship
The existing management team may know the business well, but familiarity does not replace a written brief and a clear process. Set out what is being bought, the proposed timing and who advises each party. Confirm the financial information to be shared and the assumptions used in the proposed structure.
Follow the repayment cash
If part of the price is deferred, ask how the business is expected to fund it alongside ordinary operating commitments and any borrowing. A cash model can examine receipts, investment needs and downside scenarios. The model should make funding assumptions explicit rather than treating expected profits as cash automatically available for the seller.
Compare structures transparently
Illustration only: an offer of £900,000 all at completion differs from £1 million with £400,000 payable later. The larger headline is not enough to decide between them. Compare the timing, conditions, funding evidence and risks, with legal and tax advice on the proposed terms. This example deliberately does not assign a discount rate or recommend an outcome.
Make the handover assumptions visible
A forecast may depend on the seller remaining involved for a period, a manager taking over customer relationships or new investment after completion. Record who is expected to do what and what costs the model includes. The valuation, financing analysis and handover plan should be consistent but remain distinct pieces of work.
Prepare for the conversation
- Write down the payment timetable and conditions.
- Stress-test cash after normal business commitments.
- Identify the handover assumptions behind the forecast.
Further reading: British Business Bank: management buyouts within private equity.
General preparation guidance, not a valuation opinion or legal or tax advice. Any assignment is subject to an agreed scope, suitability and intended-use review. Examples are illustrative, not client cases.