As business owners begin preparing their company for sale, something to consider is how much time it would take to fix a problem if one is found.

"The way we thought about it is, what are the things that are really hard to remedy if you haven't started two years out?" says Lazard Frères & Co. CEO and Head of Industrials, Private Market Advisory, Robert Frost, speaking at the Minneapolis Smart Business Dealmakers Conference. "A lot of times when companies hire investment bankers, those are the things that are really hardest to deal with because you really can't deal with them once you parachute in and you're trying to be in the marketplace."

Part of making the transaction successful is having a succession plan for the management team.

"That's really, really important," he says. "We see that a lot in privately owned companies where that just hasn't been thought through. You're not putting that management team, that next layer, in a place to be successful because that's really, if you're trying to sail off into the sunset, what a buyer is going to be acquiring. And so really thinking about that, putting them in the right seats at the right time and giving them an opportunity to establish a track record in those chairs before you want to sell the business. Then also thinking about that from a retention standpoint and putting the right structures in place so they're incented to make the transaction successful and there's not a conflict of interest with the management team."

Another aspect is growth. Frost says he sees a wide range of preparedness in terms of articulating a growth strategy.

"It seems obvious but, really putting down on paper what the growth strategy is well in advance. That's obviously important to execute a growth strategy, but from a buyer's perspective, it really puts them in a position to have a clearer picture of what they're underwriting," Frost says. "Obviously, you're going to put a growth strategy in place to articulate the future in a sale process. But we find it to be really helpful when you can go back and say, Look, this was the growth strategy two, three, four years ago. You can see the track record of execution. And it just provides credibility to the growth story that you're selling when you're actually in the market."

Frost also suggests making investments early. He says too often when selling the growth strategy while in the market, a lot of those investments are prospective. That's much harder for a buyer to underwrite. A growth strategy that requires investment in CapEx, new locations or R&D that require capital is generally money well spent in terms of getting a buyer in a position to underwrite the future.

Financial reporting is also critically important, particularly with private companies. While owners tend to have an intuitive knowledge and sense for the business that they don't need the depth of financial reporting and analysis to run it, they should understand the distinction between running the business and then asking a buyer to underwrite it.

When it comes to legal and environmental issues, he says it's important that owners have their ducks in a row and have the right lawyers under the tent early in the process to address red flags, but it's also preparedness — having everything well-organized.

"If you do that, you'll find that in a lot of cases you'll be making changes in terms of maybe corporate structure changes or things like that. But just cleaning up the org chart, or it might be addressing specific legal issues, HR issues, whatever it might be," he says. "But if you're doing that on the fly, once you've hired investment bankers, a lot of times it's too late."

The company's ESG profile, he says, is a new but important topic.

"It's really important, now, to think about that — I would say definitely if you think you might be a candidate to be acquired by a public company," Frost says. "But even these private equity firms now, it's really, really important. They're thinking about that. They have to communicate that to their LPs. And so you think about that in terms of the markets and the types of products, the services you provide, what's that profile look like? What are the issues around that to address? But it's also things around environmental, employee diversity, things like that, that have an impact on your ESG profile that a buyer is going to be thinking about."

Sellers should also think about who their potential buyers are, and get to know them.

"That's helpful in terms of planting the seeds for who my buyers might be, particularly if they're strategic buyers," Frost says. "It puts those buyers in a position to know who you are — you're on their radar, they can begin to think about you — so that when your investment banker is approaching them, they're knowledgeable, they're educated, they've thought about it, they've got a view. And that can be tricky to do because it's sensitive for a lot of companies to signal that they may be for sale at some point in the near future. But you can do it the right way, in terms of just getting to know them from an industry perspective and building a relationship."