Exit PlanningBy Owen P.February 24, 2025Updated September 19, 2026

Creating a Successful Exit Strategy: The Six Decisions, in the Order They Have to Be Made

An exit strategy is six decisions: the date, the number, the books, owner dependence, the route and the team. What each one takes, and in what order.

An exit strategy is not a document you write at the end. It is six decisions taken in order: when you want to be out, what the business is worth, what condition the books are in, how much of the business is you, which route you are taking, and who you are paying to help. The order matters because the financial records are the long pole. Where a buyer borrows through the SBA 7(a) program on a purchase price of $3 million or more, the quality of earnings report the lender must obtain from October 1, 2026 includes a cash proof reconciling bank statements to the income statement and the tax return “on both a trailing 12-month basis and the last two fiscal years.” The books a buyer’s accountant will take apart are the ones you are keeping right now.

The short version: fix the date, get a real valuation engagement rather than a rule of thumb, get the financial statements to the level the buyer’s lender reads, then choose the route and the team.

This piece states rules and names the bodies that publish them. It is not tax or legal advice about your business.

Decision one: set the date, then count backwards

Almost nothing in an exit happens quickly, and the honest position on timing is that no credible all-market figure for how long a sale takes is published. What exists is sector data for businesses that did sell. In the second quarter of 2026 BizBuySell reported that service businesses saw “median days on market improved 9% to 155 days”, while manufacturing transactions took “247 days to close, up 17% year-over-year.” Both figures count only the listings that closed, so they say nothing about the ones that sat unsold, and there is no published overall median for the quarter.

Count backwards from your date using the things that have fixed durations:

Two full fiscal years plus the trailing twelve months. That is the window the SBA’s quality of earnings cash proof covers, and it is a reasonable definition of how far back a serious buyer will read.
One engagement cycle for financial statements. A review or an audit is a scheduled engagement with a CPA firm, not a report you request in the week a buyer appears.
The time it takes to make yourself replaceable. Hiring and handing over is measured in quarters.

Planning early is not the norm the exit-planning industry would like it to be, on its own numbers. The Exit Planning Institute, which sells the Certified Exit Planning Advisor credential and memberships to advisers, publishes findings from its own State of Owner Readiness surveys stating that “only 32% of owners have a documented exit plan”, that “53% of owners don’t have a written, formal transition plan” and that “78% of business owners still need to develop a transition team.” Treat those as the institute’s own survey results: it publishes no sample size, no recruitment method and no field dates for them.

Decision two: know the number, and know which kind of number it is

There is a difference between a valuation and a figure, and the standard-setters are explicit about it.

The Internal Revenue Manual states the framework: “The three generally accepted valuation approaches are the asset-based approach, the market approach and the income approach.” The SBA puts the same three in plain English for owners, describing the income approach as looking at projected revenue and accounting for potential risks, the market approach as comparing the business to similar businesses recently sold, and the assets approach as subtracting total liabilities from the total value of all assets.

On the industry multiple somebody will quote at you, the National Association of Certified Valuators and Analysts is direct in its Professional Standards: “Rules of thumb are acceptable as reasonableness checks, but should not be used as a stand-alone method.” That is the standard-setter saying a rule of thumb is a sanity check, not a valuation.

The second distinction is the one owners are most often sold past. NACVA’s standards define two levels of engagement. A valuation engagement applies the approaches the valuer judges appropriate and “results in a Conclusion of Value.” A calculation engagement is one where the client and the valuer agree in advance on specific approaches, methods and procedures, and it “results in a Calculated Value.” The standards require a calculation report to carry a legend saying so on its face: “This Calculation Engagement did not include all the procedures required for a Conclusion of Value.”

That distinction has a consequence if a buyer borrows. SBA SOP 50 10 8.1 requires the business valuation to state “the individual’s conclusion of value”, to be “requested by and prepared for the Lender”, and says the lender “may not use a business valuation prepared for the Applicant or the seller.” A cheap calculation you commissioned is useful for your own planning and will not do the lender’s job.

For the market context around your number, business exit strategies and options carries the current BizBuySell medians and the IBBA multiples by deal size, and how to value a small business goes through the engagement itself and what it costs.

Decision three: get the books to the level the other side reads

Financial statements come in tiers, and the SBA ranks them in its own words: “Financial reporting is ordered by terms of thoroughness: (1) Audited Financial Statements, (2) Reviewed Financial Statements (Prepared to AICPA SSARS AR-C 90 standards), (3) CPA Compiled Financial Statements, and (4) Corporate Tax Returns.” It adds that “the credit analysis must primarily focus on the highest level of financial statements available.”

Level of financial statement	What the CPA provides	Who can issue it
Audit	An opinion on the financial statements	A CPA in a licensed firm
Review	Limited assurance, prepared to AICPA SSARS AR-C 90	A CPA in a licensed firm
Compilation	No assurance; the statements are presented, not tested	A CPA in a licensed firm
Internal statements and tax returns	Nothing beyond what you and your preparer produced	Anyone keeping your books

Moving up that ladder before you go to market is the single most useful thing an owner can pay for, because the buyer’s side starts from the highest level available.

Add-backs, and what a buyer will actually test

Owners talk about add-backs long before they talk about price, because the earnings figure a multiple is applied to is an adjusted one. For deals under about $2 million the metric is seller’s discretionary earnings, which the International Business Brokers Association defines as earnings before income taxes, non-operating and nonrecurring items, depreciation and amortization, interest, and “one owner’s entire compensation, including benefits and any non-business or personal expenses paid by the business.”

Read the words “one owner’s”. A business run by two working owners does not get both salaries added back.

No standards body publishes a blessed list of permissible add-backs. The closest thing to an authoritative list is the federal government’s description of what a quality of earnings report has to examine. SOP 50 10 8.1 requires that the report “identify and document all add-backs and adjustments to the seller’s reported earnings, including non-recurring revenue or expenses, above- or below-market owner compensation, related-party transactions, deferred maintenance, and accounting methodology differences between cash-basis and accrual-basis reporting”, and that it “reconcile the business’s accountant-prepared financial statements, tax returns, internal financial statements, and IRS transcript data to produce a normalized, adjusted earnings figure that reflects recurring, arm’s-length operations.”

That last item catches more small businesses than owners expect. If your management accounts are on one basis and your return is on another, someone will have to reconcile them, and it is cheaper to do it now than under a deadline. Our guide to cash vs accrual accounting sets out which methods the tax code allows and what changing method involves.

Decision four: reduce how much of the business is you

The quality of earnings requirement spells out what a lender expects its analyst to test on the revenue side: “the quality and sustainability of the business’s revenue base, including customer concentration risk, contract continuity, and the likelihood that existing revenue and margins will be maintained post-sale.” Each of those is something an owner can work on years ahead and cannot fix during diligence.

The same pressure shows up in the pricing metric. IBBA and M&A Source report that deals up to $2 million are quoted on seller’s discretionary earnings and deals from $2 million to $50 million on EBITDA. A buyer paying on EBITDA is paying for a business that runs with a hired manager in it, and the manager’s salary is a cost the earnings figure carries. Work that only you can do gets subtracted, one way or another.

Practical targets, in order of how often they decide a deal: a second person who can hold the main customer relationships, documented pricing and contract terms rather than terms in your head, a close that produces monthly statements on a schedule, and a written record of the operating routines that currently live with you.

Decision five: choose the route

The route determines which rules apply to the whole rest of the plan, which is why it comes after the number and not before. A sale to an outside buyer, a buyout by a partner or manager, a transfer to family, an ESOP and a liquidation each have their own governing rules, financing constraints and tax reporting. Business exit strategies and options sets out all five with the rule that governs each, and exit planning for retirement covers the case where the sale has to fund the rest of your life.

One structural point worth taking early: the SBA treats a buyer who already works in the business very differently from an outsider. On an Owner Buyout, where at least one original owner stays in and guarantees the loan, the lender may reduce or eliminate the 10 percent equity injection and the transaction is exempt from the quality of earnings requirement. On an Initial Acquisition by an outside buyer, the 10 percent “cannot be reduced or eliminated.” If a manager might be the buyer, that conversation is worth having before you engage a broker.

Decision six: assemble the team

Four roles, and only some of the credentials have hard consequences.

A CPA gets the statements to the level above and handles the tax reporting of the route you chose. A credentialed appraiser produces the valuation: for an SBA-financed change of ownership the SOP will accept only an accredited “Qualified Source”, listed as ASA, CBA, ABV, CVA or BCA, independent of the loan production function. An attorney handles the sale agreement, the buy-sell agreement and the disclosure schedules. A broker or M&A intermediary runs the process; no fee schedule is published by the trade body, so ask for their fee schedule and their minimum fee in writing before signing a listing agreement.

Exit planning has its own credential, and it is worth knowing exactly what it is. The Exit Planning Institute’s Certified Exit Planning Advisor designation is a five-day online training program approved for up to 18 CPE hours and 14 CFP hours, with an examination included in the registration fee. Tuition as of September 2026 is $3,500 standard and $2,795 early bird, and the credential “must be renewed every three (3) years” with a minimum of 40 hours of exit-planning professional development, 20 of them from EPI. The institute states that more than 8,000 advisers hold it. EPI publishes no prerequisite license, degree or experience requirement, and CEPA does not appear on the SBA’s list of accredited sources for a business valuation. A CEPA coordinates the plan; the valuation, the attest work and the legal documents still come from people holding those credentials. Our guide to exit planning consultant services covers what that coordination role does and does not include.

Our directory lists CPA firms by state and city. Where the gap is a monthly reporting pack, a cash forecast and diligence-ready records rather than an annual filing, fractional CFO work is the better description of the hire, and what a fractional CFO costs sets out the published fee data.

Frequently Asked Questions

How far ahead should I start an exit strategy?

Far enough back that the records a buyer examines are already clean, which the SBA’s quality of earnings requirement puts at the last two fiscal years plus the trailing twelve months. Working up to a review or audit adds an engagement cycle on top of that, and reducing owner dependence takes longer still. No published figure says how long a sale itself takes across the whole market; BizBuySell reported median days on market of 155 for service businesses that sold in the second quarter of 2026 and 247 days to close for manufacturing.

What is the difference between a business valuation and a calculation of value?

They are two different engagements under NACVA’s Professional Standards. A valuation engagement lets the valuer apply whatever approaches professional judgment calls for and produces a conclusion of value. A calculation engagement uses approaches and procedures agreed in advance with the client and produces a calculated value, and the report has to state on its face that it “did not include all the procedures required for a Conclusion of Value.” An SBA lender requires a conclusion of value.

Do I need audited financial statements to sell my business?

Not as a legal requirement. It is a question of what the buyer’s side will rely on: the SBA ranks audited statements first, reviewed statements prepared to AICPA SSARS AR-C 90 second, CPA compilations third and tax returns fourth, and tells lenders to focus the credit analysis on the highest level available. The higher the level you can offer, the less of the price rests on the buyer taking your word.

Are add-backs negotiable?

They are argued rather than fixed, and no standards body publishes an approved list. The nearest authoritative description of what gets scrutinized is the SBA’s quality of earnings requirement, which names non-recurring revenue and expenses, above- or below-market owner compensation, related-party transactions, deferred maintenance, and differences between cash-basis and accrual-basis reporting. Documentation, not argument, is what survives that review.

Is a CEPA the same as a business valuation credential?

No. The Certified Exit Planning Advisor designation is a five-day Exit Planning Institute program with an exam and a three-year renewal cycle, and the institute publishes no prerequisite license or experience requirement for it. The SBA’s list of accredited sources for a change-of-ownership valuation names the ASA, CBA, ABV, CVA and BCA, and CEPA is not among them.

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