Business exit strategy: Steps to plan and maximise value

Published Monday 2 February 2026

Table of contents

• What is a business exit strategy?
• Types of business exit strategies
• When to start planning your exit strategy
• How to prepare your business for exit
• Planning for a successful exit
• FAQs on business exit strategies

Key takeaways

• Start planning your exit strategy three to five years before you want to leave, as this timeline allows you to improve profitability, streamline operations, and maximise your business value by up to 30%.
• Make yourself redundant by delegating key responsibilities, training employees to handle daily operations, and creating systems that prove your business can operate independently without your constant involvement.
• Document all business processes in comprehensive manuals covering operations, administration, and staff procedures so new owners can understand and continue running the business smoothly.
• Get a professional business valuation 12–18 months before your planned exit to set realistic price expectations and identify specific areas where you can improve your business's worth.

What is a business exit strategy?

A business exit strategy is a plan for leaving your business while maximising its value and ensuring smooth transition. It involves preparing your business for sale, transfer, or closure to get the best possible outcome.

A well-executed exit strategy can increase your sale price by up to 30% while protecting the business you've built. The process typically takes three to five years and covers everything from financial preparation to operational independence.

Types of business exit strategies

There are several ways to exit your business, and the right one depends on your goals, industry, and financial situation. Understanding your options is the first step toward making a clear plan.

• Merger and acquisition (M&A): This is where you sell your business to another company, often a larger competitor. It can be a great way to get a good price, but you may lose control over your brand's legacy.
• Sell to insiders: You can sell the business to your management team or employees. This can be a smooth transition that preserves the company culture, but financing can sometimes be a challenge for the buyers.
• Pass it to family: Transferring ownership to a family member can keep the business legacy alive. It's important to handle this carefully to ensure fairness and a smooth handover.
• Liquidation: This involves closing the business and selling off its assets. It's usually a last resort, but owners must be aware that allowing a company to trade while insolvent can result in serious penalties for directors in Australia, including fines and imprisonment.

When to start planning your exit strategy

It’s always a good idea to think about your exit early. Ideally, you should start planning well in advance of your intended departure, as a five-year plan is often suggested to allow for a gradual transfer of control. This gives you enough time to improve profitability, streamline operations, and get your finances in order.

Starting early puts you in control. It allows you to choose the right time to sell and maximise your business's value, rather than being forced into a decision by unexpected events like illness or a market downturn.

How to prepare your business for exit

Business advisors and brokers recommend these nine steps to help get a plan in place. You can also refer to the Xero small business succession planning guide.

1. Pick a target buyer

Different buyers have different requirements and payment structures:

Family members:

• Ensure transparent, fair valuations to avoid family conflicts
• Consider gradual ownership transfer over time
• Document everything to prevent misunderstandings

Employees or management:

• Expect staggered payments from business cash flow
• Plan for longer transition periods as they learn ownership responsibilities
• Structure deals that protect your financial interests

External buyers:

• Prepare comprehensive financial records and operational documentation
• Be ready for thorough due diligence processes
• Focus on demonstrating consistent profitability and growth potential

2. Decide how fast you'll want out

Your exit timeline depends on your buyer and business type:

Gradual exit (2–5 years):

• Family or employee buyers who need time to pay
• Requires ongoing involvement and consulting arrangements
• Provides steady income but delayed full exit

Immediate exit (3–12 months):

• External buyers with full cash payment
• Complete break from business operations
• Best for product-based businesses with transferable systems

Assisted transition (1–3 years):

• Service businesses where client relationships are crucial
• You help transfer key client relationships
• Ensures business continuity and protects sale value

3. Get your accounting sorted

Financial preparation requires at least two years of clean, professional records. Buyers need to see consistent profitability and accurate bookkeeping.

Essential financial requirements:

• Profit and loss statements: Monthly records for 24+ months showing consistent income
• Balance sheets: Clear asset and liability positions
• Cash flow statements: Proof of positive cash generation
• Tax returns: Filed on time with no outstanding issues

Start improving profitability now. Changes take 12–18 months to show as sustainable trends rather than temporary spikes. You can use the Xero balance sheet template to organise your finances.

4. Make yourself redundant

Making yourself redundant proves your business can operate independently. This process typically takes 12–24 months:

Delegate key responsibilities:

• Train employees to handle daily operations
• Give team members authority to make routine decisions
• Create backup systems for critical functions

Reduce your daily involvement:

• Limit client contact to build team relationships
• Work fewer hours while maintaining performance
• Take extended breaks to test business independence

Measure progress:

• Business maintains profitability during your absence
• Team resolves problems without your input
• Client relationships transfer successfully to staff

5. Ensure your business is a well-oiled machine

Systematic processes demonstrate business maturity and reduce buyer risk. Focus on automating routine operations:

Key areas to systematise:

• Customer onboarding: Standardised welcome processes and service delivery
• Quality control: Checklists and approval workflows
• Financial management: Automated invoicing, payment collection, and reporting
• Staff management: Clear job descriptions, performance reviews, and training program

Document everything so new owners can understand how work gets done. Buyers pay premiums for businesses that run smoothly without constant management oversight.

6. Write down how everything happens in your business

Business documentation helps new owners take over smoothly. Create comprehensive manuals covering all operations:

Operations manual:

• Step-by-step procedures for core business functions
• Supplier contacts and ordering processes
• Customer service protocols and escalation procedures

Administrative guide:

• Financial processes including invoicing and payments
• Legal requirements and compliance procedures
• Technology systems and password management

Staff handbook:

• Detailed job descriptions with responsibilities and requirements
• Training procedures for new employees
• Performance management and review processes

Templates and forms:

• Standardised documents for recurring tasks
• Customer contracts and service agreements
• Internal communication formats

7. Figure out how to drive up the valuation of your small business

Improve your business valuation by building on strengths and fixing weaknesses. Conduct a thorough assessment of value drivers:

Strengthen key assets:

• Customer base: Build loyalty programs and long-term contracts
• Intellectual property: Protect trademarks, patents, and proprietary processes
• Market position: Develop competitive advantages and unique selling propositions
• Financial performance: Improve profit margins and revenue consistency

Address major weaknesses:

• Operational dependencies: Reduce reliance on key employees or suppliers
• Financial issues: Resolve cash flow problems and outstanding debts
• Market risks: Diversify customer base and revenue streams
• Compliance gaps: Ensure all legal and regulatory requirements are met

Work with external advisors like accountants or business consultants to get objective assessments and improvement recommendations.

8. Get a guideline business valuation

Professional business valuation provides realistic sale price expectations. Get assessments from qualified professionals 12–18 months before your planned exit.

Valuation professionals:

• Business brokers: Specialise in small business sales and market conditions
• Certified valuers: Provide formal appraisals for legal or financial purposes
• Accountants: Offer preliminary assessments based on financial performance

Common valuation methods:

• Earnings multiple: two to five times annual profit, although many industries have their own rules of thumb; for instance, a supermarket might be valued at five weeks' turnover.
• Asset value: Book value plus goodwill and intangible assets
• Market comparison: Similar business sales in your area and industry

Use these valuations to set realistic price expectations and identify areas for improvement. If the estimate is lower than expected, consider delaying your exit to build additional value.

9. Work on a sales pitch

Your sales pitch should demonstrate business value and growth potential. Develop a compelling 2–3 minute presentation covering key elements:

Essential pitch components:

• Business overview: What you do, who you serve, and your unique value proposition
• Growth story: Specific achievements like revenue growth, customer expansion, or market share gains
• Financial highlights: Key metrics such as profit margins, revenue trends, and cash flow stability
• Future opportunities: Realistic growth potential with supporting market data

Supporting evidence:

• Customer retention rates and satisfaction scores
• Financial performance over 3–5 years
• Market size and growth projections
• Competitive advantages and barriers to entry

Keep your pitch factual and realistic. Buyers appreciate honest assessments more than overly optimistic projections.

Planning for a successful exit

Planning your exit strategy is essential for every business owner. Whether you exit by choice or circumstance, preparation determines your outcome.

Benefits of early planning:

• Higher sale prices: Well-prepared businesses sell for 20–30% more than unprepared ones
• Better business performance: Exit preparation improves efficiency and profitability while you're still running the business
• Reduced stress: Having a plan gives you control over timing and terms
• Business continuity: Proper preparation ensures your business survives after you leave

Start your exit planning today, regardless of when you plan to leave. The improvements you make will benefit both you and your future buyer.

Ready to begin? Speak to your accountant or business advisor about developing your exit strategy. If you don't have an accountant, you can find one in the Xero Advisor Directory.

You can also try Xero for free to streamline your bookkeeping and make your business more attractive to buyers.

FAQs on business exit strategies

Here are answers to some common questions about planning your business exit.

What are the 4 main exit strategies?

The four most common exit paths for a business owner are selling to an outside buyer like a competitor, selling to an inside buyer like your employees, passing it on to family, or closing the business and liquidating its assets.

When should I start planning my business exit strategy?

You should start planning your exit at least three to five years before you want to leave. This gives you time to get the business in the best possible shape and maximise its value for a potential sale.

What are the 5 D's of exit planning?

The five Ds are common events that can force an unplanned exit: Death, Disability, Divorce, Disagreement between owners, and Distress (financial trouble). In the event of a death, for example, the estate's executor must be registered as the legal personal representative within 28 days of the grant. Having a plan in place helps protect your business from these risks.

How long does it take to exit a business?

The time it takes can vary widely. A planned sale to an outside buyer can take six months to a year or more from start to finish. An internal sale to employees or family might take longer, while a liquidation can be quicker but often yields less money.