Most Owners Wait Too Long
I have had this conversation more times than I can count. A business owner in their late 50s, or sometimes earlier, starts thinking seriously about what an exit looks like. The business is solid. They have built something real. But when we start pulling back the curtain on how the business would look to a buyer, the picture is not as clean as they expected.
Documentation is thin. Revenue is too dependent on the owner’s relationships. There is no management layer that could run things without them. And the financials, while profitable, have some personal expenses mixed in that cloud the actual picture.
None of these are unfixable. But fixing them takes time. Usually two to three years of intentional work. And if you wait until you are ready to sell to start that work, you either leave significant money on the table or you cannot exit at all on your terms.
Business exit planning for small business owners is not a retirement-adjacent topic. It is a now topic, regardless of your timeline.
What Exit Planning Actually Means
Exit planning is not just about finding a buyer. That is the last step, not the first.
Real exit planning starts with understanding your number. What do you need from the sale of this business to fund whatever comes next? Retirement, another venture, travel, legacy, all of it? Once you know that number, you can work backward and figure out whether the business can actually get there and what needs to change if it cannot.
From there, exit planning involves building the business as if a buyer were looking over your shoulder every day. That means documented processes, a team that does not depend on you for everything, clean and accurate financials, and a clear picture of what makes the business defensible in its market.
According to the Exit Planning Institute, fewer than 20 percent of businesses that go to market actually sell. The primary reason is that owners have not done the preparation work to make the business transferable. That number should get everyone’s attention.
The Valuation Conversation
Here is where a lot of business owners are surprised.
Most assume their business is worth a certain multiple of revenue or profit. And multiples do matter. But what drives the multiple up or down is the quality and predictability of the business behind the numbers.
A business with recurring revenue, a strong management team, documented systems, and diversified customers will command a meaningfully higher multiple than a business with the same EBITDA but none of those structural features. We are talking about the difference of sometimes hundreds of thousands of dollars, or more, on the same profit level.
The work we do with clients at Crestone Business Group in the pre-exit phase is largely focused on this: building the characteristics that push valuation multiples higher. It is some of the highest-ROI work a business owner can do.
And it overlaps directly with running a better business in the meantime. The things that make a business more valuable to a buyer, recurring revenue, operational independence from the founder, strong cash flow, are also the things that make it more enjoyable and less stressful to run today. You can read more about the cash flow side of this in our post on how to improve business cash flow.
Who Buys Small Businesses
Understanding your buyer universe matters more than most owners realize.
The most common buyers of small businesses are individual owner-operators looking to buy themselves a job and a future. These buyers are typically financing with SBA loans, which means your business needs to meet certain criteria: profitable, documented, not owner-dependent.
Beyond individual buyers, there are strategic buyers, often larger companies or competitors looking to acquire customers, capabilities, or market share. Strategic buyers can sometimes pay more, but they are harder to find and the process is different.
Private equity is another option for businesses at a certain scale, typically $1 million or more in annual EBITDA. PE buyers move quickly, know what they want, and the deals can be complex.
Knowing which type of buyer you are likely to attract shapes how you prepare the business. Your advisor should help you think through this early.
The International Business Brokers Association is a solid resource for understanding the market for small business transactions and finding credentialed professionals to help with the process.
The Tax and Structure Side of Things
I want to flag this clearly: the structure of how you sell matters enormously to what you actually walk away with.
An asset sale versus a stock sale, earn-out structures, installment arrangements, the tax treatment of different deal structures, these decisions can shift your net proceeds by a significant percentage. This is not the place to figure things out as you go. You need a qualified CPA and likely a transaction attorney involved well before any deal is on the table.
One thing we consistently tell clients: do not let urgency compress the time you take on deal structure. A buyer who is eager will still be there in two weeks while your advisors review the terms. The deals that go badly for sellers almost always involve sellers moving too fast through the structure conversation.
Start the Planning Now
If you are a small business owner and you have not thought seriously about your exit, start now. Even if your timeline is ten years out. Especially if it is ten years out, because you have time to build real value.
At Crestone Business Group, we work with owners at every stage of exit planning, from early preparation to being ready to go to market. The first conversation is about understanding where you are and what you want. From there, we help you build a plan to get there.
Your business is probably your largest asset. Treat the plan for it with that level of seriousness.
