Exit Planning: Preparing Your Business for Sale

Most business owners assume exit planning begins when they're ready to sell. It doesn't. A solid business exit strategy covers the tax structure, buyer positioning, and retirement income plan that determine how much you keep, and it is built years before a buyer appears. Most owners start too late, and that gap is expensive.

Step 1: Do You Know What Your Business Is Actually Worth?

Most valuations use a multiple of Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) or Seller's Discretionary Earnings (SDE) for smaller businesses. A multiple is a purchase price expressed as a number of times annual earnings: a business with $1M EBITDA at 5x is worth $5 million. Your multiple depends on revenue concentration, management depth, recurring vs. one-time revenue, and clean financials with at least three years of tax returns.

The table below shows typical EBITDA multiples by business size as of 2025.

Source: Pepperdine Private Capital Markets Report

Step 2: Can Your Business Run Without You?

According to the International Business Brokers Association (IBBA), owner-dependency is one of the top value-reducers in small and mid-market sales. Buyers aren't purchasing a job; they're purchasing a business. If yours can't operate without you, plan for two to three years of restructuring before it commands full value. The key questions to ask before hiring can help you vet advisors for this work.

• Document your Standard Operating Procedures (SOPs) so the business runs without you
• Build a management team that could operate for several months if you stepped away
• Transition key customer relationships to your team now, so buyers see a business, not a person

Step 3: Are Your Financials and Tax Structure Ready?

Financials first. Clean books give buyers less room to renegotiate price mid-deal. Two priorities:

• Normalize add-backs. Add back personal expenses run through the business, such as an above-market owner salary or executive perks. Work with your Certified Public Accountant (CPA) to build an EBITDA or SDE bridge: a summary showing buyers what the business earns after personal expenses are removed.
• Clean up the balance sheet. Aged receivables (invoices past due you are unlikely to collect) and personal assets on the books give buyers room to lower their offer.

Tax structure next. Buyers almost always prefer an asset sale; sellers almost always prefer a stock sale. In an asset sale, the buyer gets a stepped-up basis, meaning their cost basis resets to current market value so they pay less tax on future appreciation. In a stock sale, the seller typically receives more favorable capital gains treatment. The gap between these structures can be worth hundreds of thousands of dollars. The table below shows the full comparison.

Two additional opportunities worth structuring well in advance:

• Qualified Small Business Stock (QSBS) under Section 1202: C-corporation shareholders may exclude up to $10 million in capital gains on stock issued before July 4, 2025, or up to $15 million on post-Act stock under the One Big Beautiful Bill Act. Holding periods: five years pre-Act, three years post-Act
• Charitable planning: Donating appreciated business interests before a sale can reduce capital gains, but the IRS requires the gift to occur before material terms are agreed upon White Coat Investor's guide to minimizing taxes on a business sale covers goodwill allocation and related strategies.

Step 4: Who Should Be on Your Exit Team?

Fee structure determines whose interests each advisor is actually serving. The table below maps the key roles.

On a $3 million liquidity event, a 1% Assets Under Management (AUM) fee pulls $30,000 from your proceeds every year (2024 Kitces Research) Over 20 years, that can exceed $660,000. A Wealth of Common Sense lists a business sale as one of the clearest triggers for hiring a financial advisor.

When Should You Start Your Business Exit Strategy?

The table below maps what needs to happen and when, working backward from your target sale date.

After the sale, the financial transition matters as much as the deal. At a 4% withdrawal rate, $3 million generates $120,000 per year before taxes. Know whether that works for your lifestyle before you agree to terms, and work with a planner who has no stake in where the proceeds end up.

The owners who built a successful business exit strategy started early, structured things deliberately, and had the right advisors in place before they needed them. Start now.

Ready to Work with a Flat Fee Advisor?

The financial decisions made years before a sale are the ones that move the number. A flat fee advisor who specializes in business owners can help you model your exit, stress-test your retirement income, and structure the deal before you're in the room with a buyer.

Our directory features vetted flat fee advisors who specialize in working with business owners and high earners.

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