Business Exit Planning: How to Build a Business Someone Will Buy, Without You In It

Business exit planning is the work of making your business worth buying, and able to run, without you in it. It starts two to five years before you want to leave, not the year you decide to sell. Most owners leave it too late, then find that the thing they built is worth far less than they thought, because the buyer is really buying them.

I own and invest in businesses, and I mentor owners whose end game is to scale and exit. This is the honest version of what exit planning involves, written from the owner’s seat. Tax, legal structure and valuation methods belong with your accountant and lawyer; I’ll say where to hand over.

What is business exit planning?

Exit planning is the set of decisions that turn a business that depends on its owner into an asset someone else would pay for. It covers who will run the business after you, how the profit is proven, how the risk is spread, and how you will leave: a sale to a trade buyer, a sale to your management team, an employee ownership trust, handing it to family, or bringing in an investor and staying on with a smaller role.

It is not a document. It’s a programme of changes to the business, with the exit as the deadline.

When should I start exit planning?

Two to five years before you want to leave. Here’s why:

• A buyer wants to see two or three years of clean, consistent accounts, with the owner’s personal spending taken out and the profit proven.
• Replacing yourself takes time. Recruiting or promoting a managing director or general manager, then stepping back far enough for a buyer to believe it, is at least a year’s work, usually two.
• Customers, contracts and suppliers need to be tied to the business, not to you. That happens one renewal at a time.
• Most sales take six to twelve months from going to market to completion, and many fall through at least once.

If you’re ambitious and growing, the good news is that exit planning and scaling are the same work. A business that can be sold is a business that runs without you, and that’s also the business that can grow past you.

What do buyers actually pay for?

Buyers don’t pay for turnover. They pay for profit they believe will carry on after you’ve gone, and they mark the price down for every reason it might not. In rough order of importance:

What a buyer looks at	What they’re really asking
Profit and cash, over three years	Is it real, is it consistent, and what’s left once the owner is paid a market salary?
Owner dependency	If you leave on Friday, what breaks on Monday?
The management team	Who runs it day to day, and will they stay?
Customer concentration	What happens if the biggest customer leaves?
Recurring or repeat revenue	How much of next year is already sold?
Systems and documentation	Can someone else run it from what’s written down?
Growth that’s still available	Is there an obvious next move the buyer can make?

Every one of those is something you can change before you sell. That’s the whole point of starting early.

How do I prepare my business for sale? Five things to fix first

1. Get yourself out of the day-to-day. This is the big one. Build the management structure: who runs what, across every team and site, with their own numbers and the authority to decide. Then delegate properly and hold people to account. A business where every decision still comes to you has one buyer, and that buyer knows it.

2. Prove the profit. Clean the accounts: a market salary for yourself, personal costs out, one-offs explained, and management accounts every month that match the year end. If you can’t show a buyer the numbers in a week, you’re not ready.

3. Spread the risk. No customer over around a fifth of turnover if you can help it. Contracts in the company’s name with sensible notice periods. More than one supplier for anything critical. Key people on proper contracts, with the knowledge written down.

4. Build the recurring revenue. Service contracts, retainers, subscriptions, repeat orders: anything that means next year is partly sold before it starts. Buyers pay more for revenue they can forecast.

5. Decide what “done” looks like for you. How much do you need from the sale? Do you want to leave completely, stay on part-time, or keep a stake? What will you do next? Owners who haven’t answered this stall at the last step, and buyers can tell.

What are the business exit strategies, and which suits which owner?

Route	Suits	Watch out for
Trade sale (to a competitor or a larger company in your sector)	A business with a strong position, customers or capability a bigger firm wants	Usually the highest price; often an earn-out that ties you in for one to three years
Management buyout	A capable team who want it, and an owner happy to be paid over time	The team rarely has the cash; the price often comes from the business’s own future profit
Employee ownership trust	An owner who wants the business to stay independent and the staff looked after	Paid out of future profits over years; take tax advice early, because the rules are specific
Family succession	A family member who genuinely wants to run it and can	Fairness between family members; the handover takes longer than anyone expects
Investor or private equity, with you staying on	A growing business that needs capital and a partner for the next stage	You give up control and take on a new boss; make sure you want to work for them
Orderly wind-down	A business that really is just you	Sell the assets and the customer list; don’t pretend it’s a company sale

In the UK, each route has its own tax treatment, and the rules change. Don’t plan around a rate you read about; get an accountant to model the routes before you choose one.

How long does it take to sell a business, and what does leaving it late cost?

Properly done, exit planning is a two to five year programme. The cost of leaving it too late is not the professional fees; it’s the price. A business that depends on its owner can sell for a fraction of what the same profit would fetch with a management team in place, and plenty don’t sell at all. The owner ends up working longer, selling cheaper, or closing a business that could have paid them for the rest of their life.

Where do I fit?

I’m Dr Lewis Haydon, a business coach and mentor in Birmingham, UK. I own and invest in businesses, and I mentor owners of established businesses, usually £1m to £20m turnover, who want to scale and, in time, exit. The work we do together is the first part of this article: the management structure, the delegation and accountability, the cash and profit, and the plan to make the business run without you. Your accountant and lawyer handle the deal; I help you build the thing worth doing a deal for.

If that’s where you are, start with a virtual coffee. My prices are published.

See also: how to find and vet a business coach or mentor in the UK.