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Exit Strategy Checklist

For small business owners planning to sell, transfer, or scale down their business, a clear exit strategy ensures a smooth transition and maximizes value.

Define Your Exit Goals

  • Determine your reason for exiting: Retirement, new ventures, financial gain, burnout, etc.
  • Set a timeline: Immediate sale, 3–5 years, or long-term succession.
  • Financial targets: Desired sale price, passive income needs, or legacy goals.

Business Valuation

  • Get a professional valuation: Hire an appraiser or use EBITDA multiples (3–6x earnings common for small businesses).
  • Assess tangible/intangible assets: Inventory, real estate, intellectual property, customer lists.
  • Review financial health: Clean up debts, taxes, and financial records to boost valuation.

Prepare Your Business for Sale/Succession

  • Improve profitability: Reduce unnecessary costs, streamline operations.
  • Document processes: Create SOPs (Standard Operating Procedures) to make the business less owner-dependent.
  • Strengthen customer base: Diversify clients to avoid reliance on a few key accounts.
  • Resolve legal issues: Settle lawsuits, renew leases/licenses, and clear liens.

Choose Your Exit Path

Selling the Business

  • Identify potential buyers:
  • Competitors
  • Employees (management buyout)
  • Family members
  • Private equity or investors
  • Engage a broker: For wider reach and negotiation help (typical fee: 5–10% of sale price).
  • Prepare marketing materials: Confidential Business Review (CBR), financial summaries.

Succession Planning (Family/Employee Transfer)

  • Select a successor: Train them in leadership and operations.
  • Legal/financial structuring:
  • Gradual transfer: Use gifting or installment sales.
  • Buy-sell agreements: Binding terms for family/employee purchases.
  • Tax efficiency: Explore trusts, ESOPs (Employee Stock Ownership Plans), or installment sales.

Liquidation/Closing

  • Sell assets individually: Equipment, inventory, IP.
  • Settle obligations: Pay off debts, cancel leases, notify customers.

Legal & Financial Steps

  • Consult professionals:
  • Business attorney (for contracts)
  • CPA (for tax optimization, e.g., capital gains vs. ordinary income)
  • Financial advisor (for wealth management post-sale)
  • Draft transition documents:
  • Sales/purchase agreement
  • Non-compete clauses (if applicable)
  • Employment contracts for key staff

Post-Exit Planning

  • Plan for personal finances: Reinvest proceeds, retirement accounts, or new ventures.
  • Communicate the transition: Notify employees, customers, and suppliers professionally.
  • Stay available: Offer consulting during the handover period (if negotiated).

Bonus Tips

  • Start early: Exit planning can take 1–3+ years—begin before you’re ready to leave.
  • Tax-smart strategies: Structure deals to minimize taxes (e.g., seller financing spreads gains over time).
  • Emotional readiness: Selling a business can be stressful—prepare mentally.
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