Insights
The Exit Planning Timeline: When to Start and What to Do
Most successful exits begin years before a LOI is signed. Here is a practical timeline for owners who want to control their outcome.
Five or More Years Out: Foundation
If you have five or more years before a potential exit, focus on building enterprise value. Strengthen management, diversify revenue, improve reporting, and document processes. This is also the time to clarify personal goals: How much liquidity do you need? What role, if any, do you want post-close? Are there family or legacy considerations? Early clarity prevents costly reversals later.
Three to Five Years Out: Preparation
This is the sweet spot for formal exit planning. Engage advisors to assess value drivers, identify gaps, and build a preparation roadmap. Address operational weaknesses, normalize financials, and begin thinking about deal structure preferences. Tax planning with your CPA becomes increasingly important. Owners who invest in this phase often find the actual sale process moves faster and with fewer surprises.
One to Two Years Out: Positioning
With a shorter horizon, shift from broad preparation to market positioning. Refine your financial narrative, prepare a confidential information memorandum framework, and identify potential buyer categories. Consider whether any final investments, technology, facilities, key hires, will pay off before sale or simply consume capital without return.
Ready to Sell: Execution
When you are ready, move with discipline. Assemble your deal team, establish confidentiality protocols, and engage representation that will advocate for your interests. The sale process itself typically takes six to twelve months for lower middle market businesses, though complexity varies. Patience and preparation at each earlier stage make this phase significantly smoother.
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