Exit Strategy Planning 101: How to Prepare for a Successful Business Sale

One day, it’ll be time to part ways with your business. Unless you close it down altogether, you’ll likely transfer ownership to an ambitious investor. Or maybe pass it down to a family member.

Either way, you’ll need a solid plan in place for a painless transition.

Preparing for this moment now can help you maximize the value of your business and prepare for success in the future.

Let’s take a closer look at some business planning essentials to keep in mind when creating your exit strategy. But first, let’s define a business exit strategy so we’re on the same page.

What is a business exit strategy?

An exit strategy is a plan for stepping away from your business.

For most owners, this means getting the business ready for transfer. 

A smart exit strategy increases your business’ value. (Coinbase, for instance, achieved an exit value of 86 billion dollars less than 10 years after it was founded.)

An exit strategy also keeps the business running once you’re out of the picture. This is often called “succession planning.” The idea is straightforward. You want to leave the business in the best possible shape for its next owner.

That means making sure:

  • You’ve documented every process so someone else can take over the reins
  • The business can thrive without you (no matter how involved you’ve been)
  • The business is highly profitable
  • Your books are in order

This doesn’t happen overnight. That’s why it’s never too early to start planning your exit strategy!

And here’s the bonus: Preparing for a smooth handover can make your everyday operations run better, too. Streamlining processes, increasing profits, and creating a more efficient setup means you’ll be ready for success — and attract the right buyers when the time comes.

Exit planning essentials: 8 steps to planning a successful business exit strategy

Here’s how to begin crafting an exit strategy as a critical component of your business plan.

Step 1: Keep your financial records neat and accurate

One of the first things a buyer will look at is your financials.

Ensure your income, expenses, and tax filings are clear and current. The more organized your financial records are, the smoother the due diligence process will be when it’s time to sell.

For example, if you’re looking to sell your restaurant, make sure you have clear records of your sales, payroll, taxes, and operating costs. Buyers will want to know how much they’ll be taking on.

Step 2: Write down all business processes so anyone can easily follow them

Document your sales process and business operations for a successful transition. Without Standard Operating Procedures (SOPs), a new owner would be lost entirely.

Think about everything that keeps your business running, from employee roles to tax planning to customer service procedures. Write it all down from scratch. Or fill in a SOP template.

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Take a clothing boutique as an example. If you have processes for managing inventory, handling customer returns, and running promotions, make sure to clearly document them. The new owner will need these processes to keep things running.

Step 3: Set up your business to run without relying on you

The key to a successful business exit is creating a company that doesn’t depend on your presence. The more you can remove yourself from day-to-day operations, the more attractive your business becomes to potential buyers.

Start by automating routine tasks and putting systems in place for core functions like:

  • Project management
  • Customer service
  • Communication

For instance, a small digital marketing agency could automate client onboarding, reporting, and campaign tracking.

Step 4: Bring in strong leadership and train them well

Your management team plays a key role in the success of the business post-sale. Bringing in solid leadership before you sell can ease the transition.

Invest in training employees to take on more responsibility. Show them how to handle critical business operations so they can step into leadership roles when you’re ready to leave.

For example, in a cybersecurity firm, the owner might train a senior security analyst to lead the team in monitoring systems, responding to security incidents, and managing client relationships.  This shows potential buyers that there’s already a strong team in place, which increases the company’s value.

Step 5: Refine and set up better systems

Running a productive business means it’ll be easier to sell.

Look for areas where you can streamline operations, improve efficiency, and cut costs.

For example, if you own a small consulting firm, automating scheduling, streamlining client communication, and improving billing processes can reduce your workload and boost your business’ buying appeal.

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Step 6: Focus on making the business as profitable as possible

A profitable business is a valuable one. To increase your selling price, focus on improving your bottom line.

Take a close look at your revenue streams and identify which ones are the most profitable.

Double down on the tactics that work and cut out the ones that don’t. For instance, if you run a marketing agency, you could focus on high-margin services like SEO and digital strategy while scaling back on lower-margin services.

Additionally, look at automation options that can scale your sales.

If you have an online store, using automated ads, optimized landing pages, and tested calls to action on your website can increase recurring revenue with less effort.

Step 7: Get a thorough business valuation

Before you sell, get a professional business valuation. You need it to determine your business’ worth and set realistic expectations for the sale.

A business valuation will typically review all your assets and financial statements, as well as your liabilities, revenue, and profits. It should also consider market conditions, industry trends, and how much your customer base and brand are worth.

For example, if you’re running a family-owned law firm, a business valuation will take into account your client base, reputation, and future growth potential in addition to your financials.

Step 8: Determine your goals for the sale

Think about what you want from your business exit. Are you looking for a clean break? Or do you want to stay involved in some capacity? Would you like the company to stay the same? Or are you open to changes after the sale?

Also, consider what you’ll do after the sale.

Will you retire? Start a new business? Remain available as a consultant?

Having a clear plan for the future can help you make more aligned decisions during the sale process.

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For instance, if you’re running a gym, you may want the buyer to keep your team and services in place. However, you may be open to changes in how the new owner runs the business. Be clear about these in your exit paperwork (and during any last-minute meetings) so the new owner understands your expectations.

Step 9: Look for a target buyer

Identifying the right buyer is a top priority. (After years of nurturing and scaling your business, you want to make sure you’re leaving it in good hands.)

When looking for a target buyer, consider the following:

  • Financial stability. Guarantees the buyer can afford the purchase and sustain operations.
  • Industry experience. This means the buyer can understand and navigate your business.
  • Business goals. Aligned goals mean your business can thrive under new owners.
  • Cultural fit: Helps maintain your company’s values and keeps employees engaged.
  • Track record. A successful history increases confidence in the buyer’s ability.
  • Motivation: A motivated buyer will put in the effort to help the business grow

For example, if you’re selling a tech company, you might want to look for someone from the tech industry who understands the market and has the resources to grow the business.

Step 10: Craft a tailored pitch

When you find potential buyers, craft a tailored pitch that highlights what makes your business unique. Be clear about your business’ value, potential for growth, and the opportunity it presents for the buyer.

A personalized pitch will help you stand out and show the buyer why your business is worth investing in.

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Here’s a pitch script you can tailor to your ideal buyer:

Exit sale pitch script

“Hi [Buyer’s Name], I’m [Your Name], owner of [Business Name]. We’ve built a strong presence in [industry] by [unique selling point]. Our business stands out because of [key strengths], and there’s great potential for growth in [specific areas].

I believe your experience in [buyer’s interest] makes this a great fit, and with your vision, we could expand even further.

Let’s discuss how this opportunity aligns with your goals. Are you available for a meeting next week?”

Wrap up

Creating a well-crafted exit plan can feel overwhelming. However, taking the right steps can help streamline the process.

Focus on cleaning up your finances, streamlining operations, and improving profitability. Then, find the right buyer.

Start planning today, and you’ll be one step closer to a successful sale.

For a more in-depth approach, consider working with a financial advisor or business broker to help guide you through the process. The proper support can make all the difference.

PS: Looking for more business and investing insights? Join Snowball, an entrepreneurial investing community focused on building wealth. Get started now.

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Nick

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