Exit Strategy Planning
How to build a business that can be sold. Understand what acquirers look for, how to increase valuation, and when to consider exit options.
By BusinessOpportunity.ai Research Team
Even if you plan to run your business forever, building one that could be sold creates options and forces discipline. The qualities that make a business sellable—predictable revenue, documented processes, reduced owner dependence—are the same qualities that make it easier to run.
Why Exit Planning Matters Early
Many founders think about exit only when they're burnt out or have an offer. This is a mistake:
- Valuation drivers take years to build
- Tax optimisation requires advance planning
- Buyer relationships develop over time
- Clean operations must be built, not faked
What Acquirers Look For
1. Predictable Revenue
What they want:
- Recurring revenue (subscriptions, retainers)
- Long-term contracts
- Low customer concentration
- High retention rates
Red flags:
- Project-based revenue
- Top customer >20% of revenue
- Declining or volatile revenue
- High churn
2. Growth Trajectory
What they want:
- Consistent year-over-year growth
- Large addressable market
- Clear growth levers
- Proven scalability
Red flags:
- Declining growth rates
- Saturated market
- Growth dependent on founder
- Unclear market opportunity
3. Operational Independence
What they want:
- Documented processes
- Strong management team
- Systems and automation
- Minimal owner involvement in operations
Red flags:
- Owner does everything
- Key person dependencies
- Tribal knowledge
- No standard procedures
4. Clean Financials
What they want:
- GAAP-compliant accounting
- Separated personal/business expenses
- Accurate revenue recognition
- Clear cost structure
Red flags:
- Mixed personal expenses
- Cash-basis accounting
- Unclear revenue timing
- Tax optimisation that obscures profit
5. Defensible Position
What they want:
- Proprietary technology or IP
- Strong brand recognition
- Network effects
- Switching costs
Red flags:
- Easily replicable offering
- No barriers to competition
- Commoditised market
- Platform dependency
Valuation Multiples by Business Type
| Business Type | Revenue Multiple | EBITDA Multiple | |---------------|------------------|-----------------| | SaaS (>40% growth) | 8-15x ARR | 20-40x | | SaaS (under 20% growth) | 3-6x ARR | 10-15x | | E-commerce (branded) | 2-4x | 4-8x | | E-commerce (reseller) | 0.5-1.5x | 2-4x | | Agency/Services | 0.5-1x | 3-6x | | Content/Media | 2-5x | 6-12x | | Marketplace | 3-8x | 15-30x |
Key insight: Recurring revenue commands premium valuations
Building Exit Value Over Time
Year 1-2: Foundation
Focus on:
- Proving product-market fit
- Establishing repeatable processes
- Setting up proper accounting
- Building initial team
Year 3-4: Scale
Focus on:
- Growing recurring revenue
- Reducing owner dependence
- Documenting everything
- Building management layer
Year 5+: Optimise
Focus on:
- Maximising profitability
- Strategic positioning
- Relationship building with potential acquirers
- Clean-up of any issues
Exit Options
1. Strategic Acquisition
Best for: Complementary businesses, technology/IP
Pros:
- Highest valuations
- Synergy premiums
- Quick closes possible
Cons:
- Culture clashes
- Job uncertainty for team
- Integration challenges
2. Private Equity
Best for: Profitable businesses with growth potential
Pros:
- Partial liquidity possible
- Growth capital
- Operational expertise
Cons:
- Debt financing pressure
- Performance expectations
- Eventual second exit needed
3. Individual Buyer
Best for: Smaller businesses, owner-operated
Pros:
- Simpler process
- Often founder-friendly
- Continued legacy
Cons:
- Limited buyer pool
- Lower valuations
- Financing challenges
4. Employee Buyout (ESOP)
Best for: Values-driven exits, tax optimisation
Pros:
- Tax advantages
- Employee retention
- Legacy preservation
Cons:
- Complex structuring
- Valuation limitations
- Ongoing obligations
Common Exit Mistakes
1. Waiting Too Long
Burnout leads to distressed sales. Start planning 2-3 years before you want to exit.
2. Over-Optimising for Exit
Don't sacrifice business health for metrics that look good on paper.
3. Neglecting Due Diligence Readiness
Buyers will scrutinise everything. Issues discovered late kill deals.
4. Single Buyer Process
Competition creates leverage. Always have multiple interested parties.
5. Ignoring Post-Exit Life
What will you do after? Many founders struggle with identity without their business.
Key Takeaways
- Plan for exit from day one
- Recurring revenue commands premium valuations
- Owner dependence destroys value
- Clean operations take years to build
- Multiple buyers create leverage
Explore our industry pages for exit potential data, or get our Business Opportunity Report for detailed exit analysis of specific opportunities.