Exit Planning Starts Earlier Than You Think

When business owners finally decide to think about selling, they often assume the hard work is already done. After all, that’s why the company is successful in the first place, right? But there’s a difference between building a business and building something a buyer will pay top dollar for. Too often, that difference only becomes painfully clear when it’s already too late.

Seasoned business brokers see this pattern time and again: owners who wait to start exit planning until they’re tired, burned out, or simply “ready to sell” often end up with slower momentum, messy financials, and limited options by the time they actually decide to go to market. These aren’t outliers. This is what happens when preparation lags behind success.

Studies show that a huge chunk of transactions fail because sellers haven’t bridged the gap between business performance and sellable value. For example, transaction analyses report that 25–40% of business sales end up failing entirely due to preparation gaps — issues that existed long before a buyer ever made an offer.

The result is lost value, wasted time, and leverage that could have stayed in the founder’s pocket. Here’s how late preparation quietly destroys value, and why starting early changes everything:

1. Late-Stage Prep Limits Valuation

While starting exit preparation 12-18 months before a sale may feel like plenty of time to prepare for an exit, it’s usually already too late to meaningfully change the drivers of value.

Starting late forces founders into reaction mode instead of strategic positioning. The objective switches from building value to defending it. Financials are cleaned up just enough to survive diligence, not structured to provide financial clarity or demonstrate durable growth. Systemic weaknesses are explained away instead of fixed. As a result, buyers — who prize confidence and predictability — apply lower valuation multiples and tighten terms, because they see more risk than upside.

Instead of being paid for potential, sellers are priced for risk.

2. Late Preparation Eliminates Long-Term Value Levers

Not all value drivers can be pulled on a short timeline. When founders wait too long to prepare, they lose access to the improvements that take years to prove.

Structural value levers — reducing owner dependency, diversifying revenue streams, deeply understanding unit economics, and building repeatable operational excellence — don’t meaningfully change in a single year. And buyers want evidence, not promises. 

That evidence takes time: multiple reporting periods, multiple operating decisions made with better data, clear visibility into what actually drives profit, results that hold up across cycles, and proof that a business can run independently of the owner.

When preparation starts late, many of these improvements remain plans, not results. And buyers discount plans.

3. Leverage is Lost by Waiting Too Long

Leverage in a sale comes from options. The more options you have — multiple buyers, flexible timing, proven performance — the more negotiating power you hold.

Founders who delay planning often find themselves with:

• A limited buyer pool because they waited until the market dictated urgency
• Pressure-driven negotiations, where emotional or personal timing trumps strategy
• Loaded deal terms like heavy earn-outs and holdbacks because the buyer sees risk
• Little control over timing, forcing a sale when conditions aren’t ideal
• Reduced negotiating leverage, with fewer opportunities to push back on unfavorable terms
• Less ability to walk away from a bad deal

After years of building, no founder wants to accept that timing, not effort, is what ends up dictating the outcome. 

The Compounding Effect of Early Preparation

Preparation isn’t about selling earlier; it’s about running the business better. When founders put the work into making their business exit-ready, they not only have the option of pulling the escape hatch when the timing is right, but they also have a business that runs better and increases in value.

When founders start preparing years ahead:

• Disconnected systems consolidate into a single source of truth, reducing noise and guesswork
• Financial reporting improves, and decisions become data-driven
• Forecasting ties operating drivers to financial outcomes, giving leaders confidence to act
• Operational risk declines as issues are identified and addressed earlier
• Talent depth reduces owner reliance, making the business more durable
• Strategic clarity attracts better offers, stronger buyers, and better terms

Those improvements don’t just add up — they compound, leading to stronger financials, broader buyer interest, and ultimately better terms.

The Real Cost of Waiting

Waiting isn’t neutral, but it is understandable. Most founders aren’t avoiding exit planning; they’re simply busy running the business. They’re head down, solving problems, serving customers, managing people, and keeping things moving. Working in the business leaves very little time or energy to work on it, especially on something that feels distant or theoretical.

The problem is that time keeps moving anyway. By the time many founders finally turn their attention to exit planning, the shape of their exit — valuation, timing, and terms — has already been set by decisions made years earlier. The result is less leverage, fewer options, and deals that don’t fully reflect the value of what they spent a lifetime building.

Exit readiness isn’t a last-minute checklist. It’s a long game. And the earlier it becomes part of how you run the business, the more control and value you keep when it matters most.

If you are ready to make your business exit-ready and positioned to command top dollar, Phoenix Strategy Group can help you build the financial clarity, credibility, and discipline buyers pay for. Schedule a Call Today.

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