Exit Planning Starts 12–24 Months Before You Sell: Here’s Why (and What to Do Now)

Most small business owners don’t think about exit planning until they’re already ready to exit. But by then, the best time to start was 12 to 24 months ago.

In the world of small and midsize business (SMB) transactions, value isn’t determined just by what your business does—it’s also determined by how cleanly you can prove it. Buyers pay for clarity. Banks lend against reliability. And valuation multiples increase when risk goes down.

At High Point Advisory Group, we work on both sides of the table—but we’re best known for representing buyers in a significant number of financial diligence engagements each year. That means we know exactly what buyers look for, what red flags trigger renegotiation, and what gaps quietly erode value behind the scenes.

If you want the highest possible price, the best deal terms, and a smooth closing process, you need to treat your exit like a business plan. And that means starting early—well before your broker lists the business or a buyer shows up with a letter of intent.

Why 12–24 Months?

If you’re selling a house, you can deep clean it the weekend before you list. But a business isn’t a house. It’s a living, breathing operation with years of decisions baked into the numbers. You can’t retroactively clean up last year’s financials—or suddenly systematize years of loosely tracked expenses—without raising red flags.

Buyers don’t just want to know what your business is doing today. They want to know what it’s done reliably for the last 2–3 years. If you wait until you’re “ready to sell” to prepare your financials, you’ve already missed your chance to influence the numbers the buyer will underwrite.

Here’s what 12–24 months gives you time to do:

• Normalize owner compensation and discretionary expenses
• Shift from cash-based to accrual-based financial reporting
• Resolve or reclassify liabilities that might derail diligence
• Create clean financials buyers and banks can trust
• Document systems, processes, and roles for smoother transitions

And maybe most importantly: you gain leverage. The more confidently you can defend your numbers, the less room a buyer has to re-trade or renegotiate after diligence.

What We Know Buyers Will Flag

Because we conduct a high volume of buy-side quality of earnings (QoE) and financial diligence reviews every year, we know exactly where deals get discounted. Buyers don’t just look at your top-line numbers—they look under them. And they’re often advised by someone like us, whose job is to spot risks that may justify a lower purchase price or less favorable terms.

Here’s what we see buyers flag most often:

• Unnormalized financials: Personal or one-off expenses disguised as business costs
• Inconsistent revenue recognition: Timing issues that inflate or distort earnings
• Owner-dependent operations: A business that can’t run without you
• Misclassified payroll: Contractors who should be W-2 employees
• Overstated working capital: Uncollectible AR or aging inventory

When we work with sellers, we apply that same lens—but proactively. We’ll help you identify and correct the exact issues buyers will highlight later. That’s the difference between being on defense versus presenting a clean, confident story upfront.

The Value Drivers That Take Time

Here are the key levers that create value—and why they require a runway of 12 to 24 months to optimize:

1. Normalized Financials

What’s on your tax return may not reflect the true earning power of your business. Buyers and lenders will expect normalized EBITDA or SDE—but they won’t take your word for it.

You need time to:

• Remove one-time or non-recurring expenses
• Reclassify personal or discretionary spending
• Adjust for below-market owner wages
• Apply consistent accounting practices month to month

Doing this over a multi-year period—not just the most recent quarter—gives the buyer confidence in the earnings trajectory and reduces their perceived risk.

2. Systematized Reporting

Buyers want clean, repeatable data. If your reporting is ad hoc or your financials live in spreadsheets, it’ll raise concerns about reliability.

Improve your credibility by producing:

• Monthly P&Ls with historical comparisons
• Balance sheets tied out with bank statements
• Location- or customer-level financial performance
• Documentation of assumptions behind key metrics

3. Clean Working Capital and AR Practices

Every buyer calculates a working capital peg during diligence—and if your receivables are slow or your liabilities are creeping up, the cash you thought you were getting at close may shrink.

It takes time to:

• Speed up collections
• Reduce inventory bloat
• Resolve aged payables
• Establish sustainable trends buyers will trust

4. Professionalized Payroll and Expense Tracking

Buyers will review every line item of your payroll and ask hard questions about team roles, tax treatment, and employment classification.

In the pre-sale runway, shift to:

• W-2 payroll for full-time staff
• Clear tracking of owner distributions
• Cloud-based payroll and expense software
• Documentation of employee roles and salaries

5. Process Documentation

Buyers don’t just want a business—they want a business they can run. If everything is dependent on you or a single legacy employee, they’ll worry the business will fall apart post-close.

Use the time to:

• Build an org chart with defined roles
• Create standard operating procedures (SOPs)
• Cross-train staff for key functions
• Reduce key-person risk

Early Prep Protects You Later

Cleaning up early doesn’t just increase price. It prevents problems.

We’ve seen too many sellers lose leverage in diligence because of avoidable surprises. Here’s how early prep gives you an edge:

• Fewer surprises: When your financials are clean and complete, diligence becomes confirmation—not discovery.
• More control: You shape the narrative around add-backs, owner involvement, and one-time costs—before the buyer does.
• Faster closings: Lenders move faster when the books are clean, reconciled, and tie to tax returns.
• Better terms: Clean financials reduce the likelihood of escrow, holdbacks, or price reductions due to perceived risk.

What You Can Do Today

Even if you’re not planning to sell for another year or two, there are steps you can take right now to get ahead of the curve.

✅ Start a Monthly Close Process

Begin closing your books on a regular cadence—even if it’s just you and your bookkeeper. This builds reporting muscle and ensures consistency.

✅ Categorize Owner Discretionary Expenses

Keep a running list of personal, one-time, or discretionary expenses. These become your add-backs—and documenting them upfront gives you the upper hand.

✅ Use Payroll Software

If you’re still paying people manually or mixing business and personal comp, it’s time to systematize. Use tools like Gusto or QuickBooks Payroll and track all compensation cleanly.

✅ Standardize Your Chart of Accounts

Ensure that revenue, COGS, payroll, and expenses are categorized consistently. If every P&L looks different, it’s a red flag for buyers.

✅ Schedule a Sell-Side Readiness Review

Our team at High Point can conduct a light-touch financial assessment that applies the same scrutiny a buyer’s diligence team will. We’ll show you where the risks are—and how to fix them on your timeline, not theirs.

Get There First—Because the Buyer Will

Diligence isn’t optional. It’s coming. The only question is: who’s driving the process—you or the buyer?

When you work with High Point Advisory Group on sell-side readiness, you get the benefit of our deep experience supporting buyers. We know how buyers think, because we’re the ones they hire. And when we’re on your side early, we help you think like them—so you can beat them to the punch.