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Exit Planning, Pre-Sale Preparation

"Acquisition Prep"

Overview

The Core Concept

Acquisition Prep (or Exit Planning) is the proactive work a business owner performs to make their company sellable. It is not just about deciding to sell; it is about structuring the business so that a buyer can step in and run it without the founder.

This involves auditing financial records for accuracy (often moving from cash to accrual accounting), documenting standard operating procedures (SOPs), securing intellectual property rights, and reducing customer concentration risks.

Why It Matters

  • Maximizes Valuation: A clean, organized business commands a higher multiple than a disorganized one with the same revenue.

  • Speeds Up Due Diligence: When documents are ready, the sale process moves faster, reducing the risk of the deal falling through.

  • Identifies Deal Breakers: Prepping early reveals legal or financial issues (like a missing trademark) that can be fixed before a buyer sees them.

Key Components

  • Financial Recasting: Adjusting P&L statements to show the true earning potential of the business (adding back discretionary owner expenses).

  • SOP Documentation: Creating a "manual" for the business so the buyer knows how to operate it.

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