Why Business Exit Planning Should Start Sooner Than You Think
I’ve heard multiple stories from investors who have turned away companies, not because of their product or market potential, but because they were missing critical elements required for a successful exit—clean financials, clear reporting, and operational readiness.
The most recent example came during an panel at an event we recently attended, hosted by the Exit Planning Institute in Philadelphia, where investors shared how often this lack of preparation becomes a deal-breaker. These are avoidable issues if addressed early. Business exit planning should begin as soon as a company finds product-market fit and starts generating meaningful revenue.
Business exit planning is much more involved than simply collecting a list of potential acquirers, and working with a qualified business growth consultant can expedite this process. The article “Starting a small business is hard. Exiting can be even harder, but planning early is the key” in the Associated Press highlights how involved this process is.
Business Exit Planning Key Considerations
Timing: Don’t wait for a deal to start preparing. Exit planning should begin once growth and revenue stabilize. This article by Forbes “Why Every Entrepreneur Needs An Exit Strategy” highlights the importance of thinking about an exit strategy once you’re generating $2MM in annual revenue.
Financial Readiness: Your financials must be audit ready. That means no double-counting revenue, accurately tracking ARR (if it applies to your business), reconciled accounts, and clarity around every dollar spent. The article “Business Succession And Exit Planning: Key Areas to Maximize Value” highlights the importance of financial readiness to maximize the value of your business.
Data Room: Build a data room early and keep it current. Include financial models, contracts, KPIs, and legal documents. We recommend reviewing the Business Exit Planning page by Cresset Capital, which provides insights into essential exit strategies, including the organization of critical documents for potential buyers. However, every business is different and you should always consult with an expert to identify documents that are unique to your company.
Reporting: Create a monthly reporting rhythm. Share MD&As that explain results, variances, and what’s driving performance.
How Do We Know?
Marion Street Capital has facilitated successful business exit strategies for multiple successful companies from a diverse range of industries:
Consumer Electronics Exit: Marion Street Capital delivered its FinOps solution and served as the strategic CFO for an early-stage consumer electronics company. When the company doubled its revenue to $50MM within two years, the exit process was relatively seamless. Because strong financial reporting and operational controls were already in place, investors were able to conduct diligence quickly, negotiate a fair agreement with the seller, and move forward without delays.
Healthcare Facility Growth: Marion Street Capital also worked with a healthcare facility, implementing financial controls and strategic oversight. These efforts helped the company secure term sheets to invest in growth, scale from $0 to $50MM in annual revenue within 3 years, and seamlessly pass state and federal audits.
Business Exit Planning Self-Assessment
As a business owner or executive, ask yourself:
Do we have a 3-to-5 year financial forecast based on historical performance?
Is our data room well organized and up to date?
Are our financials clean and ready for audit?
Are we reporting monthly financial performance against forecasts?
Are our revenue projections tied to our sales pipeline?
Could we pass a quality of earnings audit today?
Do we fully understand our cap table?
Are there expense management controls in place?
Is there a contract strategy aligned with financial goals?
If you answered “yes” to all these questions, congratulations! Your company is well-positioned to begin planning to pursue its exit strategy when the time comes. If not, now is the time to build the financial infrastructure and discipline required to get there. That’s where Marion Street Capital’s business growth consultants can help.
Whether it’s implementing clean reporting, building your data room, or managing the entire financial readiness process, we partner with companies early to ensure they’re fully prepared when the time comes to exit.
Learn how to raise capital with organizational agility as a growth catalyst. Contact Marion Street Capital for expert guidance on scaling or sourcing growth capital for your innovative growth company. Explore our FinOps services and discover how together we can make the perfect preparations to prepare your business for maximum sales success.