Preparing Your Business for Exit

Having exited four companies, I've learned that successful exits don't happen by accident. They're the result of careful preparation, often starting 12-18 months before you go to market.

The 12-Month Exit Preparation Timeline

Months 12-10: Foundation

Financial House in Order

• Clean up your books
• Implement proper accounting systems
• Separate personal and business expenses
• Document all revenue streams
• Reconcile all accounts

Legal Structure

• Review all contracts
• Ensure proper IP ownership
• Update shareholder agreements
• Resolve any legal issues
• Document corporate structure

Metrics Dashboard

• Define key metrics
• Implement tracking systems
• Create monthly reporting
• Establish trends and benchmarks

Months 9-7: Value Creation

Revenue Optimization

• Focus on recurring revenue
• Improve customer retention
• Increase average contract value
• Reduce customer concentration risk
• Document sales process

Cost Structure

• Optimize gross margins
• Reduce unnecessary expenses
• Document all cost drivers
• Improve operational efficiency
• Build scalable systems

Team Development

• Reduce founder dependency
• Hire key management roles
• Document all processes
• Cross-train team members
• Build strong culture

Months 6-4: Documentation

Data Room Preparation

• Financial statements (3+ years)
• Customer contracts
• Employee agreements
• IP documentation
• Growth metrics
• Competitive analysis
• Market research

Business Model Documentation

• Revenue model
• Customer acquisition process
• Product roadmap
• Technology stack
• Operational processes
• Growth strategy

Risk Mitigation

• Identify potential concerns
• Address weaknesses
• Document mitigation strategies
• Prepare explanations
• Build contingency plans

Months 3-1: Go-to-Market

Valuation Preparation

• Hire valuation expert
• Understand your worth
• Prepare multiple scenarios
• Know your walk-away number
• Understand deal structures

Buyer Identification

• Create target buyer list
• Understand buyer motivations
• Research recent acquisitions
• Identify strategic fits
• Prepare for different buyer types

Marketing Materials

• Executive summary
• Confidential information memorandum
• Financial model
• Management presentation
• Demo environment

What Buyers Look For

Financial Performance

• Consistent revenue growth
• Strong margins
• Predictable cash flow
• Low customer churn
• Efficient CAC/LTV ratio

Market Position

• Defensible market position
• Clear competitive advantages
• Growing market
• Strong brand
• Customer loyalty

Operational Excellence

• Documented processes
• Strong team
• Scalable systems
• Low founder dependency
• Clean technology

Growth Potential

• Clear growth opportunities
• Product roadmap
• Market expansion possibilities
• Upsell/cross-sell potential
• Strategic value to buyer

Common Deal Killers

Financial Issues

• Inconsistent revenue
• Declining margins
• Customer concentration
• Accounting irregularities
• Unclear unit economics

Operational Problems

• Key person dependency
• Undocumented processes
• Technical debt
• Legal issues
• Cultural problems

Market Concerns

• Shrinking market
• Intense competition
• Regulatory risks
• Technology obsolescence
• Customer churn

Valuation Multiples by Business Type

SaaS Companies

• 5-10x ARR (depending on growth rate)
• Higher multiples for >50% YoY growth
• Lower multiples for <20% growth

E-commerce

• 2-4x EBITDA
• Higher for strong brands
• Lower for commodity products

Service Businesses

• 3-5x EBITDA
• Higher for recurring revenue
• Lower for project-based work

My Exit Checklist

✅ Financial statements clean and accurate ✅ Legal documents organized ✅ Customer contracts documented ✅ IP properly assigned to company ✅ Key employees under contract ✅ Processes documented ✅ Data room prepared ✅ Management team in place ✅ Growth story clear ✅ Risks identified and mitigated

The Reality

Most founders wait too long to prepare for exit. Start preparing the day you start building. Every decision you make should consider: "How will this look to a future buyer?"

The best exits happen when you're prepared but not desperate. Build a business buyers want, and they'll come to you.