How to Create a Business Exit Plan

There is a version of exit planning that most business owners have in their heads. It goes something like: run the business for another few years, call a broker, list it, and cash out. That version almost never works the way they expect.

By the time most owners are emotionally ready to sell, the window to actually improve their outcome has mostly closed. The preparation that matters takes years, not weeks.

The buyers we work with review 120 to 150 deals per week. And the businesses that command the best multiples and close cleanest are not necessarily the most profitable ones. They are the ones where the owner clearly ran the company with an exit in mind, sometimes years before listing. Where nothing surfaces in due diligence that looks like a surprise. Where the financials tell a coherent story and the operation does not fall apart when you remove the founder from the equation.

Here is what a real business exit plan looks like from the side of the table that writes the checks.

What a Business Exit Plan Actually Is

A business exit plan is a structured strategy for transitioning ownership of your company in a way that maximizes value, minimizes deal risk, and positions you to actually close. Not to list. To close.

It is not a letter of intent. It is not a number your broker pulled together over lunch. It is a multi-year operational roadmap that makes your business more attractive, more financeable, and more transferable to a qualified buyer.

Most sellers do not have one. They have a vague intention to “sell someday” and a rough idea of what they think the business is worth (usually too high, sometimes dramatically so). Those are not the same thing as a plan.

The Core Problem: Buyers Fund What Banks Will Approve

Before anything else, understand this. Most qualified buyers use SBA 7(a) financing. SBA lending is the dominant tool for acquisitions under $5M, and SBA lenders underwrite deals based on debt service coverage. Not on how proud you are of what you built. Not on what your neighbor’s company sold for.

The practical implication is that your asking price needs to work inside a financing formula. The formula looks roughly like this.

Say your business has $400K in seller discretionary earnings (SDE) and you list at 3.0x. The purchase price is $1.2M. The SBA loan covers 80 to 85% of that, or somewhere around $960K to $1M. Annual debt service on a 10-year SBA loan at current rates runs $95K to $110K, give or take. That leaves the buyer with $290K to $305K in cash flow after debt payments, which clears the SBA’s minimum debt service coverage ratio (DSCR) target of 1.25x.

That deal is fundable. That deal closes.

Now try it at 4.5x SDE because a broker told you that is what similar businesses sold for. Run those same numbers. The DSCR fails. Buyers cannot get the financing. Your deal does not close regardless of how many letters of intent you collect. Three LOIs on a deal that cannot clear underwriting are worth exactly nothing.

Your exit plan has to start with what is financeable, not what feels fair.

How to Create a Business Exit Plan: Five Foundational Steps

The actual process of building an exit plan is not complicated. Executing it over 24 to 36 months is where most owners fall short.

Step 1: Know your real valuation range right now.

Not your aspirational number. Not your broker’s listing estimate. The number a buyer’s underwriter will approve. Get your last three years of P&L statements and a clean add-back schedule. Calculate your actual SDE or EBITDA after removing legitimate owner add-backs. Apply a realistic multiple (SDE multiples for most Main Street businesses close between 2.0x and 3.0x). That is your baseline. If the number disappoints you, that is actually useful information. It tells you exactly how much value you need to build before listing.

Step 2: Identify and close the valuation gaps.

Every business has two or three things that compress its multiple or kill its financing. Common culprits: customer concentration (one client over 20% of revenue is a red flag), owner dependency (the business cannot run without you), messy books, and deferred maintenance. Each of these has a fix. Some take six months. Some take two years. Build a plan around the ones that apply to you and prioritize by impact.

Step 3: Build a management layer.

Owner-dependent businesses are the hardest to finance and the lowest-valued. A buyer taking over a business where all client relationships, operational knowledge, and key decisions run through the owner is buying a job, not a company. Start building the team that lets the business run without you. Even one strong operations manager changes the acquisition story significantly. We will come back to owner dependency in more detail below because it is that important.

Step 4: Clean up your financials three years out.

SBA lenders want three years of tax returns. Three years. Minimum. What those returns show matters enormously. If you have been aggressively running personal expenses through the business (and most owners have), a legitimately structured exit plan involves working with your CPA to dial that back and show cleaner income. Every dollar of documented SDE translates to $2 to $3 in purchase price at typical multiples. The math on clean books is not marginal. It is significant.

Step 5: Understand your deal structure options before you list.

Most sellers do not think about deal structure until they are sitting across from a buyer in negotiations. By then, they are working from a position of limited knowledge against buyers who do this every day. Know in advance that a typical SBA deal structure includes an SBA loan, a 10% equity injection from the buyer, and a seller note on standby. That standby means no payments to you for up to 10 years while the SBA loan is in repayment. Zero interest. Zero payments. For up to a decade. That seller note is not a concession. It is the standard structure that makes deals financeable, and we achieve these terms on more than 90% of our deals. Sellers who treat it as a red flag tank their own deals.

What to Do With Customer Concentration

Customer concentration is the single most common issue we see that kills or compresses deals at the LOI stage.

Think about it from the buyer’s side. A business where 40% of revenue comes from one client is a fundamentally different risk profile than one where the top 10 clients each represent 8% to 12% of revenue. The first business has a single-point-of-failure problem. If that client leaves during the transition (and transitions are stressful periods where client relationships get tested), the business is worth half of what was agreed on paper. No SBA lender will ignore that risk, and no serious buyer should either. Most will either walk or price it in with a significant discount or earnout.

So what do you do about it?

If you have a concentration problem, your exit plan should include a 24 to 36 month campaign to diversify your revenue base. Add clients. Invest in business development for the first time in years if you have to. Let nothing grow above 20% of total revenue if you can avoid it. This alone can add 0.5x to 1.0x to your final multiple, which on a $400K SDE business means $200K to $400K in additional purchase price. That is real money for what amounts to a sales and marketing effort.

How Buyers Evaluate Owner Dependency (And Why It Tanks Deals)

When we underwrite a deal, one of the first questions is: what happens to this business if the owner disappears on day 61 after close?

If the answer is “probably fine, the team handles most operations,” that is a fundable deal. If the answer is “well, the owner has all the client relationships and handles all the estimating and does the banking and the key supplier relationships are personal,” that is a distressed acquisition at best. Possibly not even fundable.

Owner dependency affects more than valuation. It affects whether SBA lenders will approve the deal at all. Lenders want to see that the business has continuity independent of the seller. The longer your planned transition period, the more flexible lenders may be, but the cleanest version of your exit plan is one where management infrastructure exists before you list.

The practical fix is not glamorous. Document your processes. Delegate your relationships. Hire or promote at least one person capable of running day-to-day operations without calling you. Two to three years before you plan to list is the right window to start. Side note: this is also why proof of cash matters so much when buyers are looking at your business. If the documented operations do not match who is actually doing the work, the whole story falls apart in diligence.

All of that covers the preparation side. But there is a whole separate set of issues around timing and process that catches sellers off guard.

The SBA Timeline Sellers Almost Always Underestimate

Once you have a signed letter of intent, the clock starts. But it is not a fast clock.

A standard SBA-financed acquisition takes 60 to 90 days from LOI to close. That window includes 30 to 45 days for buyer due diligence, 2 to 4 weeks for SBA lender underwriting, and additional time for final document preparation, escrow, and legal review. In our experience, the deals that hit 90 days usually have at least one hiccup in the financials or a lender question that requires additional documentation.

If your financial records are disorganized, that timeline stretches. If the lender finds something unexpected in your tax returns or bank statements (and “unexpected” can mean something as mundane as a revenue spike you never explained), the deal can stall or fall apart entirely. Your exit plan should include a pre-due-diligence self-audit where you review your own financials the way a buyer’s team would.

Work with your accountant and attorney before you list. Know where the problems are before a buyer finds them. You would be surprised how many deals die because a seller was blindsided by something in their own records.

Timing Your Exit Around the Numbers

There is a right time and a wrong time to sell from a financial perspective.

Buyers and lenders look at the most recent 12 months of financial performance heavily. If your best revenue year was three years ago and you have been declining since, your multiple will reflect that decline. No amount of exit planning overcomes a deteriorating P&L. But if you just had a record year and the prior two years were strong and consistent, you are in the best position to list.

Your exit plan should include a target window tied to financial performance, not just a date you decided on. If your business is down this year, consider whether 12 to 18 more months of operation gets you to a stronger position before listing. That patience can be worth hundreds of thousands of dollars at close.

This is one of the most common mistakes we see sellers make. They list when they are emotionally ready rather than when the financials tell them to. The business does not care about your timeline. The numbers are the numbers.

Frequently Asked Questions

How far in advance should I start planning my business exit?

Three to five years is the ideal window. That gives you enough time to close valuation gaps, clean up financials, build management infrastructure, and diversify your customer base before listing. Sellers who start 12 months out face a much harder process and typically leave significant money on the table.

What is a realistic valuation for my business?

For most Main Street businesses, SDE multiples close between 2.0x and 3.0x. EBITDA-based deals typically close between 2.5x and 4.0x. The exact multiple depends on industry, recurring revenue, customer concentration, owner dependency, and whether the deal clears SBA financing thresholds. Be skeptical of any estimate above 3.5x SDE without a clear financing rationale behind it.

What is a seller note and do I have to accept one?

A seller note is a portion of the purchase price the buyer pays you over time rather than at closing. On SBA deals, seller notes are typically placed on full standby, meaning you receive no payments for up to 10 years while the SBA loan is in repayment. This is standard deal structure, not a warning sign. Refusing a seller note on an SBA deal will eliminate most qualified buyers from your pool.

How long does it take to create a business exit plan?

The planning document itself takes 2 to 4 weeks to develop with the right advisors. The execution of that plan, including improving financials, building management layers, and addressing operational gaps, typically takes 24 to 36 months. The planning is fast. The preparation is what takes time.

Do I need a broker to create a business exit plan?

No. An exit plan is developed before you engage a broker. It is the preparation work that happens upstream of listing. You will want your CPA, an attorney with M&A experience, and ideally an advisor who understands how buyers underwrite deals. Once the business is ready to list, a broker or a direct connection to qualified buyers becomes the next step.

Ready to Understand What Buyers See in Your Business?

Regalis Capital works with serious, pre-qualified buyers who finance acquisitions using SBA 7(a) lending. When one of our buyers looks at your business, the evaluation follows the same framework this article describes. There is no cost to you as the seller. No commissions. No obligation.

If you want to connect with a well-funded, properly advised buyer who is ready to close, start the conversation here.