Exit Planning Tips and Tricks

It's a seller's market

The typical business sale goes something like this:

1. Seller is burned out and wants a quick exit
2. Broker hired to market business
3. Business isn't ready for sale (messy financials, weak processes, etc.)
4. Offers come in lower than expected
5. Seller feels stuck, unsure of next move

Not all deals go that way, but the "quick exit" ones typically do. The average sale process can take 6-12 months, but the exit planning process in front of that can take 2-3 years.

Earlier this week, my partner and I attended a conference on the topic of "exit planning and the M&A process" hosted by a well-known investment bank. I couldn't take notes fast enough...

Most people consider these topics a surefire sleep aid, but for me, they’re more energizing than a fresh cup of coffee.

Over the course of my career, I’ve been on the buying side of around two dozen acquisitions (both personally and professionally) and I’ve sold 2.5 companies (the “half” being a near-bankruptcy wind-down I’d rather not brag about).

With my notes still fresh and my own hard-earned lessons etched in memory, let’s look at some key exit planning takeaways...

1) Don't wait

The best time to start the exit process is the day you start (or buy) your business. It takes years of preparation to close a sale: a good set of financials, clearly defined business processes, limited owner-reliance, solid revenue streams, a well-articulated narrative, etc.

Even if you have no intention of selling your business in the next 1-10 years, you could benefit from designing and running your company with an exit in mind.

2) Timing matters

There are multiple overlapping timing cycles at play — your personal timing, the market timing, and business timing — don't get caught being ready to sell without a saleable business. Alternatively, the market could be ripe even if you're not personally ready (looking at you HVAC owners).

3) Think like a buyer

Every buyer (myself included) wants a good or great price on their purchase. This would be bad for you as the seller.

Before going to market know your business's weaknesses (customer concentration, owner dependence, limited revenue visibility, etc.) and help buyers see the upside picture (potential cost savings, growth opportunities, a market or product you haven't been able to get after, leveraging their resources, etc.).

4) Price is what you pay, value is what you get

Business value is a not a fixed number, rather it's a range with heavily subjective input assumptions.

Get a sense for your business value (with the help of a professional) and pay more attention to the value drivers than the value itself. What actions can you take to create more value? If your business has an estimated value of $1-2m and you want $4-5m in the next 4 years; what strategic plan should you be executing to get there? That is value!

5) Deals die a thousand times before they close

From the time you decide to sell to the day you get paid, there are millions of little details to decide and execute. Some generic tips here:

• Don't get excited too early in the process (even with an offer in hand)
• Don't lose sight of running your business throughout the process
• Be decisive and know your non-negotiables
• Stay organized and communicative during due diligence
• Make sure an offer doesn't leave key details to be decided later
• Get help with negotiating, drafting documents, and communicating with buyers

Homework — Whether you're thinking about selling your business or not, grab one thing from this list that you're not currently doing and make it a goal for 2025. Messy financials? Make that your goal for the year. Want a large eventual sale price? Build a strategic plan to get there.

P.S. There is a lot more to cover on the exit planning and sale process. A more comprehensive series is already in the works!