The Question a Seller Should Ask Before Signing Any Engagement Letter
When a founder interviews advisors to sell their business, they usually ask three things. What is my business worth. What is your fee. How many deals like mine have you closed. All three are reasonable. None of them predicts the outcome.
The question that predicts the outcome is this: what will you do in the six months before you take my company to market, and what happens if I am not ready?
Ask that question, then watch how the advisor answers. The answer sorts the field faster than any fee comparison.
Some advisors will tell you they can take you to market in thirty days. That is not a strength. It usually means the process is a listing exercise, built to generate a spread of bids on your numbers as they sit today, with the gaps discovered by the buyer during diligence rather than by your team before it. A fast launch feels like momentum. It is often the most expensive decision in the engagement, because it front-loads the price and back-loads the repricing.
Other advisors will tell you the first phase of the work is not selling at all. It is preparation. They will want to build a sell-side quality of earnings view, normalize working capital, document customer relationships, and pressure-test your add-backs before a single buyer sees the book. That answer is the one you want, because it tells you the advisor is planning to close at your headline number rather than at the number that survives diligence.
The evidence is not subtle. Across the transactions we studied, post-LOI price adjustments occurred in roughly two-thirds of deals, and the median adjustment was close to ten percent downward. The deals that held their price were not the ones with the highest opening bid. They were the ones where the preparation gap was closed before the market saw the company.
So the engagement letter question is really a preparation question. When you ask what happens in the six months before market and what happens if you are not ready, you are testing whether the advisor's economics are aligned with your proceeds or merely with getting the deal signed. An advisor paid to close quickly and an advisor paid to close well behave differently, and the engagement letter is where that difference is set.
There are three follow-ups worth asking in the same conversation. First, who does the diligence-readiness work, your team or a referral, and is it inside the fee or on top of it. Second, at what point do you tell me my business is not ready and we should wait. An advisor who cannot describe the conditions under which they would tell you to pause is an advisor who will take you to market regardless. Third, how do you decide which buyers to approach, and how do you prepare me for the fact that a strategic, a sponsor-backed platform, and a family office will each negotiate differently.
I have written elsewhere about why the engagement should begin twelve months before the mandate in why M&A advisory engagements should begin twelve months before the mandate, and about the pre-mandate checklist itself in the advisor's pre-mandate checklist. Both come back to the same point. The engagement letter you sign is a statement about whether your advisor intends to prepare you or list you.
A seller who asks about the six months before market, and listens carefully to the answer, learns more about their advisor than any track record slide will tell them. The right answer is not the fastest one. It is the one that treats your readiness as the product and the sale as the result. That is the standard we hold ourselves to at Cordis Group.