Exit planning is one of the most consistently misunderstood areas of business finance. The conventional wisdom — start thinking about it when you're ready to go — is exactly backwards. The founders who get the best outcomes are the ones who start three to five years before they intend to sell.
Why timing matters so much
Business valuations are driven by a handful of factors: revenue trajectory, profitability, EBITDA multiples in your sector, quality of earnings, management depth, customer concentration risk, and contract structure. Almost none of these can be fixed in the final six months before a sale.
If your three largest clients account for 80% of revenue, a buyer will either discount their offer heavily or walk away. Fixing that concentration problem takes time — often two to three years of deliberate business development. Starting that work the year before you want to sell means you're solving it on the buyer's timeline, not yours.
"The best time to start exit planning is when you have absolutely no intention of selling. That's when you have the most time to act on what you find."
What exit planning actually involves
Understanding your current valuation
The starting point is an honest assessment of what your business is worth today — and why. This means understanding the EBITDA multiples for your sector, what adjustments a buyer would make to your reported profit (add-backs, one-offs, owner-related costs), and where your business sits relative to comparable transactions.
Identifying value gaps
Every business has gaps between what it's worth and what it could be worth. Common ones include:
- Over-reliance on the owner (if you can't take a month off without the business suffering, a buyer will worry about what happens after completion)
- Customer concentration (one or two clients accounting for a disproportionate share of revenue)
- Undocumented processes and systems (buyers pay more for businesses that run without constant owner input)
- Weak or non-existent management team (a buyer wants to buy a business, not a job)
- Messy finances (unnormalised accounts, personal costs run through the business, inconsistent accounting policies)
Tax structuring before the event
Business Asset Disposal Relief (formerly Entrepreneurs' Relief) provides a 10% CGT rate on the first £1 million of qualifying gains. Qualifying requires meeting specific conditions around shareholding and involvement — conditions that must be met for at least two years before the disposal. Planning for this can only happen with lead time.
Similarly, if you're considering an Employee Ownership Trust structure, an EMI share option scheme, or a management buyout, the groundwork takes time. These are not things you can arrange in the weeks before completion.
The role of your finance team in exit preparation
Quality of earnings is one of the most scrutinised areas in any due diligence process. Buyers want to see clean, consistent management accounts that support the profit figures in the statutory accounts. If your management accounts don't exist, or exist but tell a different story to your year-end figures, you'll either lose buyers or be re-priced at completion.
Runway works with business owners in the years before a planned exit — cleaning up financial records, building management reporting, identifying and resolving value gaps, and helping owners understand their realistic options. If you're thinking about an exit in the next three to five years, now is the right time to start the conversation.
