Business exit planning: why owners should start three years before a sale

For most business owners, the decision to sell does not happen overnight.

There may be a point when you know you are ready to move on, or an approach from a potential buyer prompts you to consider what a sale could look like. But by then, many of the factors that determine the value of your business – and the amount you ultimately take home – have already been established.

That is why I often advise business owners to think about their business exit planning, at least three years before they expect to sell.

This does not mean putting your business into ‘sale mode.’ It means using that time to strengthen the business, address potential issues and develop a clear business exit strategy, so you have choices when the time comes.

Start with the value of your business today

The first question I would ask any owner considering an eventual sale is simple: ‘what would your business be worth if you sold it today?’

You may have a figure in mind, but it is important to understand how that business valuation has been reached and whether a buyer would see the same value.

• Buyers will look beyond turnover and headline profits: They will consider the quality and sustainability of those profits, the strength of your customer base, recurring income, growth prospects and the risks within the business.
• They will also look at how dependent the business is on you: If you are still responsible for winning most of the work, maintaining key client relationships and making the important decisions, that can affect how attractive the business is to a buyer.

Three years gives you time to change that. Building a stronger management team, documenting key processes and reducing reliance on the owner can make the business more transferable and potentially more valuable.

Make your numbers stand up to scrutiny

A buyer will want to understand the financial performance of your business in detail.

Your accounts and management information need to tell a clear, consistent story. Unusual costs, director transactions, personal expenses or significant fluctuations in profitability may all need to be explained.

Having several years to prepare means you can address weaknesses rather than explain them away. You can improve your management information and make sure financial records, contracts and other key documentation are organised and readily available.

This preparation can make due diligence considerably easier when the time comes.

Think about what a buyer will find

Due diligence can be one of the most demanding stages of a business sale.

A buyer and their advisers will examine areas including your financial performance, tax affairs, legal position, employees, customers, suppliers and commercial arrangements

You do not want to discover a problem for the first time because a buyer has found it. Some questions you may wish to consider:

• Are your key contracts properly documented?
• Are there historic tax issues to resolve?
• Is your intellectual property protected?
• Are there any disputes or liabilities that could become a concern?

Unresolved issues do not necessarily prevent a sale, but they can create uncertainty, slow negotiations or give a buyer reasons to negotiate the price.

Taking the time to prepare your business for sale means you can identify and deal with these issues before they become part of a negotiation.

Don’t leave succession until the last minute

For an owner-managed business, business succession planning can be one of the biggest challenges of an exit. If the business revolves around you, a buyer may be acquiring a business that could struggle when you leave.

Start delegating responsibility – give your senior team more autonomy and make sure important knowledge and customer relationships are not concentrated with one person.

The objective is not simply to make yourself redundant, it is to demonstrate that the business has the people, systems and relationships needed to continue performing after you have gone.

Tax planning needs time too

Tax planning for selling a business is another reason not to leave exit planning until the year of a sale.

The tax treatment will depend on how the transaction is structured, what is being sold and your individual circumstances. There may also be planning opportunities that require action well before a transaction takes place.

Example: Business Asset Disposal Relief (BADR) can reduce the Capital Gains Tax payable on qualifying disposals, but conditions need to be met over a qualifying period. The current rate for qualifying disposals made from 6th April 2026 is 18%.

This is a good illustration of why timing matters. Understanding the Capital Gains Tax implications of selling a business early gives you more scope to consider your options, whether that involves share ownership, company structure, succession or how funds are extracted.

Three years gives you options

Perhaps the biggest advantage of starting your business exit strategy early is having time to change the plan.

You may expect to sell to a third party but later decide that a management buyout, family succession or employee ownership is more appropriate. You may discover the business is worth more than expected and decide to grow for longer, or you may identify issues that need addressing before you can achieve the outcome you want.

Starting early gives you room to respond. If you wait until you have a buyer and are working to their timetable problems discovered during due diligence may be harder to fix and tax planning opportunities may have already been missed.

An exit should be planned, not rushed

Selling a business is often the culmination of decades of hard work. It deserves the same level of thought and planning that went into building it.

For me, good business exit planning comes down to three things:

1. Maximising value
2. Minimising avoidable risks
3. Giving the owner choices

Three years is not a hard rule, and every business is different, but if selling is somewhere on your horizon, starting the conversation now is likely to give you far more options than waiting until you have a buyer.

Download your free guide to selling your business

Our free Guide to Selling Your Business takes you through 10 key steps to help you prepare for a sale, understand the financial and tax considerations, and maximise the return from your business.

At Verallo, we help business owners plan ahead and navigate the financial, tax and strategic considerations involved in a successful exit – If you would like to discuss your own exit plans, please get in touch with our team.