Common exit planning mistakes include starting too late, overestimating value, retaining excessive owner dependence and neglecting tax, financial records or confidentiality. Prepare evidence of sustainable performance, agree your personal financial objectives and consider alternative exit routes before approaching buyers.
By Tony Vaughan · Published · Last reviewed
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Exit planning involves preparing the business, its owners and its records for a change of ownership. The following ten mistakes can weaken your options or create avoidable uncertainty.
Planning, valuation and business continuity
1. Delaying Exit Planning
Start preparing early enough to address weaknesses in records, management and ownership arrangements. There is no universal lead time: the work required depends on the business and intended exit route, and early planning does not guarantee a higher price.
2. Overestimating Business Value
Overestimation of a business's worth can lead to disappointing outcomes. Therefore, obtain an accurate business valuation from an experienced professional to set realistic expectations. This will not only guide the exit strategy but also allow for better negotiation with potential buyers.
3. Ignoring Business Continuity
Buyers need to know whether the business can operate without the current owner. Heavy can reduce its attractiveness and market value. Building a capable management team supports business continuity.
Advice, tax and sale readiness
4. Lack of Professional Guidance
An experienced business broker or exit adviser can guide you through the process, avoid common pitfalls and help maximise your returns.
5. Neglecting Tax Implications
Failing to understand the tax implications of an exit can lead to unexpected financial burdens. Engage with a tax specialist to understand and plan for any potential tax liabilities upon sale.
6. Poor Financial Record-Keeping
Poorly maintained financial records can diminish the perceived value of the business. Keeping accurate, detailed, and up-to-date financial records not only makes the due diligence process smoother but also builds trust with potential buyers.
Personal objectives, confidentiality and fallback routes
7. Disregarding Personal Financial Planning
Exit planning doesn't just involve the business; it also includes planning for the owner's future. Financial planning can help you understand what you need from the sale to maintain your lifestyle post-exit.
8. Inadequate Confidentiality
Maintaining confidentiality throughout the exit planning process is crucial to prevent unnecessary complications. A leak of information about a possible sale can lead to unrest among employees, suppliers, and customers.
9. Underestimating Timeframes
Selling a business is often a longer process than many anticipate. By understanding realistic timeframes and planning accordingly, you can avoid the frustrations of a drawn-out process.
10. Not Having a Backup Plan
Having a backup plan ensures that if the ideal exit scenario does not materialise, there are other viable options in place. This could include strategic acquisitions, management buyouts, or family succession.
It's imperative to act early, think strategically and avoid these common mistakes for a smooth and successful exit planning. Engaging in confidential discussions with an experienced business broker or exit adviser can offer an invaluable perspective and professional guidance throughout the process.
Review the financial, operational and ownership gaps in your plan, then assign responsibilities and revisit progress as circumstances change.
Common questions
Is there a fixed lead time for exit planning?
No. The work required depends on financial records, owner dependence, shareholder arrangements and the intended route. Start early enough to address gaps rather than relying on a standard number of years.
How can I avoid overestimating my business value?
Use a reasoned valuation based on sustainable earnings, assets and risks, then test assumptions against credible buyer feedback. Distinguish the headline value from cash payable at completion.
What records should I tidy before approaching buyers?
Reconcile accounts, management reporting, tax records and material contracts. Explain unusual income or costs and document liabilities so buyers can assess the figures.
Why does an exit plan need a fallback route?
A buyer may withdraw or funding may fail. An alternative timetable or route, such as a management buyout or succession, reduces reliance on a single transaction, subject to feasibility.
General information from our archive, not personal advice.
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