🔒How exit-ready are you? A framework for building value before you sell

In my work advising small and midsized business owners on business selling and due diligence, one truth stands out: Most owners wait too long to prepare for the sale of their business, and it costs them.

Whether your exit is 10 years away or completely unexpected, being exit-ready isn’t just good planning, it’s good business. A well-run, profitable company might lose potential value simply because it wasn’t ready when opportunity knocked. According to the Exit Planning Institute, 70–80% of businesses that go to market never sell, mostly due to lack of preparation and owner dependency.

What is exit readiness?

Exit readiness is your business’s ability to be sold or transferred smoothly at a fair or premium valuation without major disruptions. It requires more than just profitability. Buyers look for a business that is financially transparent, operationally systematized, and not overly reliant on the owner.

Even if you never plan to sell, building toward exit readiness improves efficiency, reduces risk, and increases strategic options including succession, partnerships, or capital raises.

Why most businesses aren’t ready

Owners are often too close to their operations to see what buyers see. They assume a strong profit-and-loss statement or loyal customer base is enough but overlook deal-killers like undocumented processes, uncleaned financials, lack of preparedness, personal expenses in the books, or lack of a second-in-command.

Here are common oversights in the lower middle market due diligence:

• Owner dependency (no business continuity without the founder)

• Unreliable financials (cash-basis books, missing reconciliations)

• Key-person risk (one major client or employee drives the business)

• Legal gaps (missing contracts, intellectual property issues, informal agreements)

Each of these lowers value and makes closing a deal harder.

The exit readiness checklist

A simple readiness framework helps owners assess their business across four key dimensions:

1. Financial hygiene

• Three years of accrual-based, clean financial statements

• Separation of personal and business expenses

• Accurate tax filings, payroll records, and reconciliations

2. Operational systems

• Documented business policies, also referred as standard operating procedures

• Cloud-based tools for sales, accounting, customer, and vendor management

• A business operating with minimal owner involvement

3. Strategic positioning

• Clear customer segmentation and growth strategy

• Low revenue concentration (no single client >25%)

• Up-to-date contracts, licenses, and legal compliance (like sales tax)

4. People & leadership

• A capable second layer of management

• Defined roles, employment agreements, and retention plans

• Company culture and team stability

Even addressing 60–70% of this list gives owners stronger leverage.

Getting started

Exit readiness isn’t a single project, it’s a mindset. I recommend owners conduct an exit audit annually. Many businesses partner with a certified professional accountant or M&A advisor to review books, uncover risks, and improve reporting.

In many cases, a quality of earnings analysis is performed, which is a diligence-grade financial report that not only impresses buyers but reveals operational blind spots owners didn’t realize existed. Exit-ready businesses can command 20–30% higher valuations, as they reduce perceived risk and build buyer confidence.

Final thought

You don’t need to plan your exit tomorrow, but you should be ready if tomorrow forces your hand. In today’s market, exit-ready businesses command stronger valuations, attract more buyers, and offer their founders real freedom of choice.

Krishna Abburi is senior - transaction advisory services at Citrin Cooperman Advisors, which has a Worcester office. Read his column about avoiding undervaluation here.