Business Exit Planning: A US Owner's Guide
A practical exit planning guide for US business owners: readiness, value drivers, the twelve to twenty-four month preparation window, advisor roles and the questions to put to your CPA.
Most of the money in a sale is made in the two years before it, not at the negotiating table. What to work on, in what order, and how to tell whether the business is ready.
What is business exit planning?
the work of making a company transferable at the highest defensible price before it is ever taken to market
. It covers earnings quality, owner dependence, revenue durability, the management team, the records a buyer will test, and the personal and tax questions the owner needs answered before a letter of intent exists.
It is not the sale process. The sale process takes six to nine months and determines who buys and on what terms. Exit planning runs for twelve to twenty-four months before that, and it determines what there is to sell. Owners who start the two together consistently discover the issues that reduce their price at the point when it is too late and too expensive to fix them.
Where price is usually lost
Cost to start", value: "A written valuation, which we provide free
Each stage makes the next one possible. Owners who start in the middle usually end up repeating the first step anyway.
Establish a baseline valuation you can defend
Not a rule of thumb and not a broker's opening figure. A written valuation that rebuilds your earnings the way a buyer will, prices recurring and project revenue separately, and names the specific factors holding the multiple down. Everything below is prioritized against this.
Decide what you actually want from the outcome
A full exit, a partial sale with a second bite, a sale to management, or a transfer within the family. Each implies a different buyer population, a different structure and a different preparation plan. Owners who leave this undecided until an offer arrives tend to accept the structure the buyer prefers.
This is the longest job and the one with the largest effect on price. Move customer relationships onto the company, document the processes that live in your head, put someone else in front of the key accounts, and give a second person genuine authority. A buyer is pricing what remains after you leave.
Strengthen the durability of revenue
Convert repeat customers onto written agreements. Extend terms where you can. Reduce concentration by growing the rest of the book rather than by losing the large account. Contracted revenue is priced at a materially higher multiple than the same dollars won job by job.
Get the financial records into diligence condition
Clean monthly accounts reconciling to the filed returns, revenue split by type with margin on each, a documented add-back schedule, a monthly working capital history and an accurate asset register. This is what stops a quality of earnings review turning into a renegotiation.
Licenses held personally rather than by the company, a lease with no remaining term or no assignment right, customer contracts with change-of-control clauses, undocumented employment arrangements, unregistered intellectual property. Each of these is cheap to fix now and expensive in week twenty of a deal.
Have the personal and tax conversation early
With your CPA and your wealth advisor, not with your buyer. What proceeds you need, how the deal structure affects the tax outcome, what an earn-out means for your risk, and what you intend to do afterwards. This is your own advisors' work, and it should be settled before a letter of intent, not during one.
Then run a competitive process
Preparation raises the ceiling. Competition is what gets you to it. A single unsolicited buyer negotiating alone sets the price, the pace and the framing, and no amount of preparation fully compensates for having only one party at the table.
Agreements with defined terms, renewal history and measurable retention. The most reliably rewarded characteristic in every sector we advise in, and the one that most changes the multiple applied.
A business that runs without the owner
A second layer of management with real authority, relationships held at company level, and documented processes. Buyers are underwriting the earnings that survive your departure.
Long tenure and no single customer dominating the revenue. Concentration rarely removes earnings but it changes the multiple and it pushes structure toward earn-outs and escrows.
Records that stand up on first inspection
Accounts that reconcile, add-backs already documented, contracts filed and current. Credibility established early affects every later negotiation, and its absence puts every number in doubt.
License and certification coverage, low turnover, a functioning recruitment pipeline. In field service and compliance sectors the workforce is frequently the constraint on the buyer's own growth plan.
A trend the buyer can believe
Two or three years of steady, explicable performance is worth more than a single exceptional year. A spike immediately before a sale invites the question of whether it repeats.
Unresolved legal or compliance exposure
Open disputes, uninsured exposure, license or permit irregularities. These are discounted heavily or dealt with through escrow and indemnities, and they are usually cheap to resolve in advance.
Deferred investment: An aged fleet, worn plant, an obsolete operating system. Buyers quantify the catch-up spending and deduct it, so the saving made by not spending is not a saving at all.
An aged fleet, worn plant, an obsolete operating system. Buyers quantify the catch-up spending and deduct it, so the saving made by not spending is not a saving at all.
Three years of accounts reconciling to the filed returns without explanation
Recurring revenue identified, contracted and measurable
A manager who could run the business for ninety days without you
No customer representing an outsized share of revenue
Licenses, leases and contracts assignable to a buyer
A documented add-back schedule with evidence attached
A clear personal plan and a settled tax position
Earnings presented only from management accounts
Every significant customer relationship held personally by the owner
Revenue won job by job with nothing contracted
A license or permit held in the owner's own name
A lease expiring within the likely deal timetable, with no assignment right
One customer representing a large share of revenue and no plan for it
No answer to what the owner will do the day after closing
An indicative sequence for an owner with a two-year horizon. Shorter horizons still work; they just force choices about which items get attention.
Months 1 to 3: Baseline valuation, gap list, decide the intended outcome
Months 3 to 9: Owner dependence: delegate accounts, document processes, build the second layer
Months 6 to 12: Revenue durability: convert repeat work to agreements, address concentration
Months 9 to 15: Financial hygiene: monthly reporting, add-back schedule, working capital history
Months 12 to 18: Transferability: licenses, leases, contracts, insurance, employment terms
Months 15 to 21: Personal and tax planning with your own CPA and wealth advisor
Months 18 to 24: Re-run the valuation, confirm readiness, then start the process
The sequence matters more than the calendar. Owner dependence takes the longest and gates several of the later items, which is why it starts first. Financial hygiene can be compressed if it has to be. Tax planning cannot usefully be done after a letter of intent is signed, which is the mistake we see most often.
How far ahead should I start exit planning?
Twelve to twenty-four months before you intend to go to market, for the straightforward reason that the changes worth the most money take that long to show up in the numbers. Reducing owner dependence or converting repeat work onto contracts has to be visible in a full trading year before a buyer will credit it. Starting three months out limits you to presentation rather than substance.
What is the single biggest thing that increases a sale price?
Across the sectors we advise in, contracted recurring revenue. A business whose earnings are underpinned by agreements with renewal history is underwritten differently from one that wins the same dollars job by job, and the difference shows up in the multiple rather than in the earnings figure. Reducing owner dependence runs a close second, and the two reinforce each other.
Do I need an exit planning advisor as well as an M&A advisor?
Not necessarily a separate one. What you do need is a defensible valuation, an honest list of what is holding it down, and someone who will tell you when the answer is to wait rather than to sell. You will also need your own CPA and, if the proceeds are material to you, a wealth advisor. Those two roles are not ones your sale advisor should be filling.
What tax questions should I raise with my CPA before selling?
How the structure affects the outcome, since an asset sale and a stock sale are taxed differently and buyers usually prefer the former. How an earn-out or a seller note is treated and when. What your basis is. Whether entity structure or timing changes are worth making, and how long before a sale they need to be in place. We do not give tax advice, and no advisor should be giving it to you as part of a sale pitch.
Should I sell now or wait two years?
It depends on what a written valuation says the gap is between today's value and the value after the preparation work, and on whether you have the appetite to do that work. Some owners are close to ready and waiting achieves little. Others are leaving a great deal on the table for the sake of eighteen months. Anyone who answers that question before rebuilding your earnings is guessing.
What if a buyer approaches me before I am ready?
Do not negotiate on their timetable with no alternative at the table. An unsolicited approach is useful information about demand, but a single buyer with no competition sets the price and the framing. Establish what the business is worth first, then decide whether to engage with that buyer, run a process, or wait. Owners who sell to the party who called them, unprepared, are the group most often surprised by the final number.
Where should I start?", answer:
With a valuation you can rely on. The free written report rebuilds your earnings the way a buyer will, prices recurring and project revenue separately, and lists the specific factors suppressing your multiple with what each is worth. It is confidential, it is free, and it commits you to nothing.
Selling a Business in the US
Exit planning for US lower middle market business owners: valuation baseline, value drivers, transferability and the preparation window before a sale process.
); export const UsProcessGuideTemplate: React.FC
Questions owners ask before they start
A free written valuation report rebuilds your earnings, prices your recurring revenue separately, and shows the specific factors holding your multiple down. It is the sensible first step before any of the work on this page.
Please enter your company website URL, for example yourcompany.com
Your data is strictly confidential.
Learn more about the valuation and value drivers report