Exit Planning Is a Multi-Year Commitment
The decision to sell a business rarely arrives as a discrete moment. It emerges gradually through conversations with partners, encounters with potential acquirers, observations of industry consolidation, and personal reflections on what comes next. Yet many founders treat the actual exit process as something that begins when they decide to sell, as if preparation is optional and execution is everything.
This approach consistently produces suboptimal outcomes. Founders who spend twelve to twenty-four months preparing for an exit, before ever engaging an advisor or speaking with buyers, achieve meaningfully better results than those who rush to market. The difference shows up in valuation multiples, deal certainty, and the terms that determine what they actually receive.
The data on deal timelines reinforces why preparation matters. According to BCG research on M&A timelines, approximately 40 per cent of transactions take longer to close than the timeline estimated in the deal announcement. Among delayed deals, nearly two-thirds require an additional three months or more beyond the original timeline. Founders who begin the process without adequate preparation find themselves managing their business through an unexpectedly long period of uncertainty and distraction.
The multi-year commitment to exit planning is not about working with advisors or talking to buyers. It is about building the business in ways that maximise value when the time comes. Metrics need to trend in the right direction over multiple quarters. Systems need to demonstrate scalability. Management teams need to show they can operate without the founder's daily involvement. None of this happens quickly, and attempting to compress it into a few months before going to market simply does not work.
The Pre-Exit Phase: Building Value Before Going to Market
Exit preparation begins long before any formal process starts. The twelve to twenty-four months before engaging an advisor should focus on building the characteristics that sophisticated buyers reward with premium valuations.
Financial metrics require sustained attention. Buyers evaluate trends, not snapshots. A company that shows improving gross margins, accelerating net revenue retention, and declining customer acquisition costs over six to eight quarters tells a growth story that a single quarter of strong performance cannot match. Founders who know they may sell should begin tracking and improving these metrics years before going to market.
The quality of financial systems matters as much as the numbers themselves. Buyers will conduct detailed due diligence on revenue recognition, cost allocation, and working capital patterns. Companies with clean, auditable financials move through diligence faster and with fewer price adjustments than those whose books require forensic accounting to understand. Investing in proper financial infrastructure during the pre-exit phase prevents painful surprises later.
Operational readiness encompasses everything from documented processes to management depth. Buyers need confidence that the business will continue performing after the founder reduces involvement. Building a capable leadership team, documenting institutional knowledge, and demonstrating that the business operates through systems rather than heroics all contribute to buyer confidence and, ultimately, valuation.
Customer concentration deserves particular attention. A company where one client represents 30 per cent of revenue will trade at a discount to one where no client exceeds 10 per cent. Diversifying the customer base takes time, often years, and should begin well before any exit process. Similarly, contract terms matter: multi-year agreements with automatic renewals demonstrate stickier revenue than month-to-month arrangements.
From Market to LOI: Managing the Sell-Side Process
Once preparation is complete, the active sell-side process typically spans six to nine months from engaging an advisor to signing a letter of intent. This phase demands significant founder time and attention while maintaining business performance.
The process begins with preparation of marketing materials and identification of potential buyers. Advisors develop a confidential information memorandum that positions the company for its target buyer universe, identifying strategic acquirers with relevant synergies and financial sponsors with appropriate investment theses. This targeting determines who sees the opportunity and shapes the competitive dynamics that follow.
Initial outreach and management presentations occupy the next phase. Founders present their business to multiple interested parties, answering questions, providing additional information, and building relationships that will continue through due diligence. The goal is to generate multiple indications of interest that create competitive tension.
Evaluating indications of interest requires more than comparing headline prices. Deal structure, financing contingencies, required approvals, and integration plans all affect what the founder actually receives and experiences. A higher price with significant earnout components, extensive escrows, and aggressive working capital targets may produce worse economics than a lower price with cleaner terms.
Negotiating the letter of intent represents a critical inflection point. The LOI establishes the framework for everything that follows, from exclusivity periods to price adjustment mechanisms to indemnification structures. Mistakes at this stage compound through closing and beyond. Founders benefit from advisors who have seen hundreds of LOIs and know which terms are standard, which are overreach, and which are worth trading against price.
Why Deals Take Longer Than Expected
Understanding why transactions consistently exceed estimated timelines helps founders plan appropriately and manage the inherent stress of a prolonged process.
Due diligence complexity drives much of the delay. Buyers examine financial records, customer contracts, employment arrangements, intellectual property, technology infrastructure, and regulatory compliance in detail. Each area can surface issues requiring resolution before proceeding. A single unexpected finding in a key customer contract or an unanticipated tax exposure can add weeks to the timeline while parties negotiate resolution.
BCG's analysis shows that for transactions over $2 billion, the average time from signing to closing increased 11 per cent between 2018 and 2022, now sitting at 191 days. While smaller transactions typically close faster, the trend toward longer timelines affects deals of all sizes. Increased regulatory scrutiny, more sophisticated buyer diligence processes, and the complexity of modern businesses all contribute.
Financing conditions create additional timeline risk for transactions involving acquisition debt or investor capital. Changes in credit markets, lender due diligence requirements, and syndication processes can extend timelines in ways that neither buyer nor seller controls. Founders should understand their buyer's financing structure and assess the associated timeline risk.
External events add unpredictable delays. A change in the buyer's strategic priorities, a shift in their stock price that affects deal currency, or a broader market disruption can pause or extend transactions unexpectedly. Founders who budget generous timelines and maintain business performance throughout can weather these delays better than those running on optimistic schedules.
Post-Signing: The Journey to Closing
Signing the purchase agreement does not complete the transaction. The period between signing and closing involves significant work and risk that founders should understand and plan for.
Working capital adjustments represent the most predictable post-signing mechanics. According to SRS Acquiom's Deal Terms Study, working capital purchase price adjustments are now present on more than 90 per cent of private-target M&A deals. The average adjustment flows to buyers at roughly 0.9 per cent of transaction value. These adjustments reconcile actual working capital at closing against the target established in the purchase agreement, and founders who do not understand the mechanics often find their net proceeds differ from expectations.
Escrow and holdback arrangements protect buyers against potential claims under the seller's representations and warranties. The median survival period for general representations has held steady at 12 months, meaning founders may have a portion of their proceeds subject to claims for a year after closing. Understanding the escrow percentage, survival periods, and claim thresholds helps founders plan their personal liquidity around realistic receipt timelines.
Earnout provisions, when present, create ongoing obligations and uncertainty that extend well beyond closing. Founders should evaluate earnout terms sceptically, understanding the metrics, measurement periods, and the degree of control they retain over business operations that affect earnout achievement. Historical data shows that earnouts pay significantly less than their face value on average, suggesting founders should discount earnout components heavily when evaluating total consideration.
The transition period following closing requires founder involvement in knowledge transfer, relationship introductions, and operational handoff. The intensity and duration of this period should be clearly defined in the purchase agreement, with compensation structures that align with the actual time commitment required.
Building Your Exit Timeline
A practical framework for exit planning acknowledges both the extended preparation period and the execution timeline, while building in contingency for the delays that regularly occur.
Eighteen to thirty-six months before an anticipated exit, founders should begin the value-building activities described above. This period focuses on financial systems, metric improvement, management development, and customer diversification. No advisors are engaged, and no buyers are approached. The goal is simply to build a better business that will command a premium when the time comes.
Six to twelve months before wanting to close, founders should engage advisors and begin the formal process. This timeline assumes six to nine months of active marketing and negotiation, plus three to six months for due diligence and closing after signing an LOI. The total duration often extends beyond initial estimates, so founders should not commit to post-exit plans that depend on specific closing dates.
Throughout the process, maintaining business performance is essential. Buyers evaluate companies based on trailing performance, and any deterioration during the sale process will affect valuation, deal terms, or buyer commitment. Founders must balance the demands of running a process with the demands of running a business, typically by delegating more operational responsibility to their management teams.
Advisor selection deserves careful consideration. Fee structures for mid-market transactions typically include monthly retainers of $5,000 to $10,000 plus success fees in the 3 to 5 per cent range for companies with $10 to $30 million in EBITDA. Beyond fees, founders should evaluate advisors based on relevant transaction experience, buyer relationships, and the team that will actually work on their deal.
Personal planning should parallel professional preparation. Founders should understand the tax implications of different deal structures, plan for the personal transition away from a business that has consumed years of their life, and consider what comes next. These personal considerations often matter as much as the financial terms of any transaction.
The exit journey is longer and more complex than most founders initially expect. Those who approach it with realistic timelines, thorough preparation, and patience consistently achieve better outcomes than those who rush.
If you are beginning to think about an exit and want to understand how the timeline might apply to your specific situation, we welcome a confidential conversation about your planning.