When should I start preparing my business for sale?
This is a question we get a lot.
The answer varies depending on specifics, but at minimum, we recommend starting 2–3 years in advance.
Two to three years may seem like a long window, but in today’s newsletter, we’ll break down why the window makes sense…
As well as share some helpful ideas and frameworks you can start using now, even if you’re still years away from a sale.
You’ll learn:
- 3 insights on how to start planning early
- 2 frameworks to guide your preparation
- 1 action step to shift how you think about your business
3 Insights About Exit Planning
1. Good exit planning is good business planning
There’s a misconception that preparing for an exit requires a different playbook. The same factors that make a business strong day-to-day are exactly what buyers look for in an acquisition.
These might include: clean financials, a diversified customer base, strong leadership, and documented processes.
If you’re considering a sale in a couple of years and aren’t sure where to begin, start here. Simply focusing on building a well-run business makes it more attractive to buyers.
2. Understand benchmarks in your industry
Different industries have unique metrics and benchmarks that buyers compare and contrast. Two to three years in advance is when you should start familiarizing yourself with the benchmarks that matter most in your industry.
For instance, in a software company, buyers might focus on metrics such as recurring revenue, customer churn, and annual contract value. While in manufacturing, they may prioritize gross margins, capacity utilization, and customer concentration.
Without this level of specificity, it’s difficult to know how your business is positioned in the market and what areas you need to improve to show a credible growth story.
3. Assemble the right team early
A few years in advance is precisely the time you want to start assembling a deal team. As a reminder, here are the figures we recommend for a team:
- M&A Advisor / Investment Banker
- Transaction Attorney
- Deal-Savvy CPA
- Internal Lead
Remember, many of these professionals offer some type of complimentary assessment or engagement.
Even if you don’t hire someone immediately, you should start forming relationships with these professionals well in advance.
2 Frameworks That Guide Exit Preparation
Begin With the End in Mind
I’ve used this framework in past newsletters, but it bears repeating here:
Know what you’re working toward and take the logical steps to achieve that outcome.
You might want a full exit. Or you might prefer a partial sale with a “second bite at the apple.”
Knowing these decisions in advance influences how you run the business today.
The Transferability Checklist
One of the key factors that makes a business sellable is whether its processes and operations can be transferred to another party.
You can understand the transferability of your business through four key areas:
- Customers: Is revenue diversified or concentrated in a few relationships?
- Team: Are the right people in place to run the business day-to-day?
- Systems: Are processes documented and repeatable?
- Contracts: Are agreements structured to transfer smoothly in a sale?
The stronger these elements are, the more valuable the business becomes.
List of Our Completed Transactions
1 Action Item This Week
Ask yourself: am I growing or exiting?
You don’t need to sell your business tomorrow to start thinking like an owner who will.
Take a moment to answer this question honestly.