How do I evaluate my own business objectively?

Apply the questions a buyer would apply, in the order they would apply them, and answer each as though the reader has no reason to be generous. Start with the quality of the revenue, then how much of the business depends on you personally, then margin, then everything else. The order matters because it is the order in which a buyer stops reading.

What does a buyer look at first when assessing a business?

The quality and durability of the revenue. Before margin, before growth and long before the team, a buyer wants to know whether the money arriving next year is contracted, likely, or hopeful. Everything else is a modifier on that answer.

Can I do this without hiring an adviser?

Most of it, yes. Eight of the nine lenses need only data you already hold and a willingness to be blunt about the answers. An adviser is worth paying for when you want the answers challenged, which is the part a founder genuinely cannot do alone.

How to Audit Your Own Business the Way a Buyer Would

The most useful thing about a sale process is not the sale. It is that somebody finally examines the business without any reason to be kind about it.

Founders spend years surrounded by people who are invested in the company being good: employees who work there, advisers who are paid by it, customers who chose it. That is not flattery, it is structure. Nobody in that circle has an incentive to tell you the revenue is lower quality than you think.

A buyer does. And the questions they ask are not secret. They are the same questions every time, applied in the same order, and you can run them on yourself this month rather than waiting until the answers are expensive.

Here are nine lenses, in the order a buyer actually uses them. Score each one honestly, as though the reader has no reason to be generous, because eventually that is who is reading.

01Revenue quality

The buyer's question: of the money arriving next year, how much is contracted, how much is likely, and how much is hoped for?

This comes first because it determines whether the rest of the analysis is worth doing. Everything else in a valuation is a modifier on the durability of the revenue.

Split your last twelve months into three buckets. Contracted means there is a signed agreement with a term still to run. Likely means a customer who has bought repeatedly with no contract, where you would be surprised if they stopped. Hoped for is everything else, including your pipeline.

Most owner-managed businesses discover the contracted bucket is far smaller than they assumed, because they have been counting reliable customers as contracted revenue. Reliable and contracted are not the same thing, and only one of them survives a change of ownership.

02Dependence on you

The buyer's question: what proportion of this business walks out of the door with the current owner?

Go through your top fifteen customers by name. For each one, answer: who do they ring when something goes wrong? If the honest answer is you for more than a third of them, that is the finding.

Then the same exercise for decisions. Pricing on non-standard work, whether to take a difficult job, hiring at senior level, technical judgement calls. Every one of those that routes through you is a job the buyer has to fill.

This lens is second because it is the one that most often converts a cash offer into a deferred one, and because it takes the longest to fix.

03Margin durability

The buyer's question: is this margin a structural feature or a recent state of affairs?

Aggregate gross margin is an average of things moving in different directions. Break it down by product, by service line, and by customer, over three years. You are looking for two things: whether the profitable part of the business is the part that is growing, and whether the margin has been protected by anything other than nobody having pushed back on price recently.

The uncomfortable version of this question is what happens to your margin if your three largest customers each ask for five per cent next year. If the answer is that you would give it to them, your margin is a negotiating position rather than a structural advantage.

04Concentration, in all four forms

The buyer's question: what single event ends a material part of this business?

Founders think about customer concentration and stop there. A buyer counts four kinds.

Customer concentration, which everyone knows about. Supplier concentration, where a single source has no identified alternative. Channel concentration, where most new business arrives through one route, whether that is a referral partner, a marketplace, or one salesperson. And people concentration, where one individual other than the founder holds something irreplaceable.

Write down the top three in each category as a percentage. Four numbers over 25% is a fragile business, however good the revenue looks.

A buyer is not looking for reasons to like your business. They already like it, which is why they are reading. They are looking for the reason the price should be lower.

05Systems of record

The buyer's question: if I ask the same question of two different systems, do I get the same answer?

This sounds administrative and it is not. It is a proxy for whether the business is being managed on evidence.

Pick three questions: how many customers do we have, what did we sell last month, and how many people work here. Ask them of the finance system, the sales system and the payroll, and see whether the answers agree. In most businesses under £20m they do not, and the reconciliation lives in one person's head.

The reason a buyer cares is not tidiness. It is that every disagreement between systems is a place where the numbers they are being shown could be wrong, and they will price that uncertainty.

06Contract hygiene

The buyer's question: does this business own what it thinks it owns, and is it bound only by what it thinks it is bound by?

Four checks you can run yourself in an afternoon. Can you produce a signed contract for your top ten customers, today, without asking anyone. Does any of those contracts allow the customer to terminate if the business changes hands. Is your intellectual property assigned to the company in writing, including work done by contractors. Does anyone have a promise of equity that is not documented.

Founders reliably score worse on this than they expect, and it is the cheapest lens on the list to fix.

07People risk

The buyer's question: who leaves, and what happens when they do?

Name the three people, other than you, whose departure would cause a genuine problem. For each, write down what they hold that nobody else does, whether anyone else could learn it in ninety days, and what would make them stay through a change of ownership.

Then the less comfortable half. Who in the leadership team would a new owner replace? Founders often know the answer and have been avoiding it for years, and a buyer will identify the same person within two meetings.

08The growth story, tested against its own evidence

The buyer's question: what did you say you would do three years ago, and did you do it?

Every business presents a plan. What makes a plan credible is not its ambition but the track record of the people presenting it. Find your budget or board pack from three years ago and compare it with what happened.

If you beat it, that is worth real money, and you should be able to say so with the documents to hand. If you missed it substantially, work out why now, in your own time, with a good explanation. Discovering that gap during diligence, with no prepared answer, does more damage than the miss itself.

09What would I fix first?

The buyer's question: what is the first thing I would change if I owned this?

Ask five people who know your business well and are not employed by it. An accountant, a customer you trust, a supplier, a former employee who left on good terms, somebody who runs a similar business. Ask them the question exactly as written and do not argue with the answers.

You will hear the same two or three things. Those are the things a buyer will see. They are also, usually, the things that would make the business better to run whether or not anybody ever buys it.

How to use the results

Do it over two days, write the answers down, and score each lens out of five.

The pattern that matters is not the total. It is which lens scored worst, because founders are almost always wrong about that in advance. Most expect to score badly on systems or contracts, which are visible and irritating. They tend to score worst on revenue quality and dependence, which are the two that actually set the price.

Then do it again in twelve months and compare. The direction of travel across nine lenses is the single best summary of whether the business is getting stronger or just getting bigger.