Devising your Exit Timeline: Start with your Ideal Exit Date

If you’re a business owner, there’s one thing we’re sure you subscribe to:

Every goal needs to be accompanied by a deadline.  

Deadlines are the vehicle that turns goals & strategies into plans. They promote:

• Accountability 
• Urgency 
• Measurability 
• Focus and Prioritization 
• Commitment Level

Planning for your exit should be no different. 

A great exit outcome requires a great plan. And a great plan requires deadlines that map to each planning milestone. 

Our advice: craft an exit timeline with the end in mind. 

And start by establishing your ideal exit date. 

Your ideal exit date is the date by which you want to sell your business. It may represent when you want to retire. Or it may represent when you ideally want to move on to your next, more promising opportunity.

Most importantly, it characterizes how you think about the opportunity cost of your time. And the opportunity cost of indecision. 

Owners that have an ideal exit date & an associated exit timeline:

• Are psychologically more prepared for the sale process
• Exude credibility with their motivation and commitment level
• Can use the timeline to keep every relevant stakeholder aligned 

Business owners we speak with often overlook this vital, initial step. They haven’t spent the time to think critically about their ideal exit date. What are the implications of retiring 6 months – 3 years later? What is the cost of elongating this sale process?

Even if you are simply ‘exploring’ an exit to see if you can get the right price, having a firm date by which you hope to reach a firm decision will prevent you from drawing out the evaluation process. 

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A brief anecdote: 

We ran an exercise with an owner a few weeks ago to help them establish their ideal exit date. They were looking to divest one of their divisions to invest in another. 

In the process, we connected a few dots that the owner had overlooked:

• The division they were looking to divest was losing $10K per month
• They estimated that the proceeds from the sale, reinvested into the new division, would generate $4M over 5 years ($67K/month)
• So, the opportunity cost for each month that elapsed until a sale was ~$77K

Obviously, this isn’t perfect math. But it is directionally accurate. 

Understanding their opportunity cost allowed the owner to cement their ideal exit date.
Cementing their ideal exit date allowed them to realize the relationship between speed and price in their process, and create a robust exit timeline. This, in turn, prompted them to hire an M&A Advisor to maximize both objectives.

The moral of the story: identifying your ideal buyer and valuation aren’t enough. Those need to coexist with an ideal exit date. Honing in on this date will benefit your process and psyche immensely.

Speak with an Axial Exit Consultant

Axial platform data suggests that selling a business takes an average of 358 days. This varies by industry and financial profile—see the breakdown below.

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Market Date: refers to the moment you start engaging in conversations with potential buyers.

Below are the key milestones and events that occur in the process of selling a business, along with the suggested time frames relative to an ideal exit date. We’ve also included what each step entails and provided beneficial Axial resources for each.

Business Exit Timeline

Begin Exit Planning ~ 1,000 Days Out

Key Steps

• Prepare Family:  Have conversations with family about the exit.
• Optimize Operations: Improve financial performance, streamline operations, and reduce liabilities.
• Plan Succession: Identify and prepare key management personnel.

Resources To Review

• CEO’s Guide to Business Transition Planning
• Visit Axial’s Business Owner Resource Center
• Subscribe to Exit Ready

Start M&A Search ~ 18 Months Out

Key Steps

• Research Advisors: Look for advisors with experience in your industry and a track record of successful deals.
• Request Advisor Referrals: Seek recommendations through offerings such as Axial’s Advisor Finder program to identify the best potential matches.
• Evaluate Fit: Assess potential advisors for compatibility with your business values and goals.

Resources To Review

• Axial’s Advisor Finder Program
• The Complete Guide to Hiring an Advisor

Hire M&A Advisor ~ 15 Months Out

Key Steps

• Conduct Interviews: Interview shortlisted advisors to understand their approach and strategy.
• Negotiation Terms: Agree on fees, responsibilities, and expectations in a formal engagement letter.

Resources To Review

• Ask These Questions Before Hiring an M&A Advisor
• Axial’s 2024 M&A Fee Guide

Begin M&A Process ~ 12 Months Out

Key Steps

• Prepare Financials: Ensure all financial statements are accurate, up-to-date, and audit-ready.

• Create Materials: Develop a compelling teaser, information memorandum, and other marketing documents with your advisor.
• Identify Buyers: Work with your advisor to create a list of potential investors.

Resources To Review

• The Avoidable Mistakes That Derail Deals
• 7 M&A Documents Demystified

Execute LOI ~ 6 Months Out

Key Steps

• Review Terms: Carefully examine all terms and conditions outlined in each LOI you receive.

• Negotiate Terms: Address any issues or concerns and negotiate terms that are favorable to your business.

Resources To Review

• The Key Elements of the IOI
• Sealing the Deal: Breaking Down the LOI

Close The Deal ~ Ideal Exit Date

Key Steps

• Due Diligence: Facilitate the buyer’s due diligence process by providing requested information promptly.

• Finalize Agreements: Work with legal and M&A advisors to finalize purchase agreements and other necessary documentation.

Resources To Review

• Due Diligence and the Art of Preventing the Broken LOI
• The Seller’s Guide to Preparing For Life Sale

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We launched Exit Ready just over a year ago with the goal of educating exit-curios business owners to better prepare them for a future sale. If you’re interested in receiving this newsletter, please complete the form below.