If you’re planning to sell your business or retire within the next five years, now is the time to prepare. Too often, small business owners are so focused on managing their day-to-day operations that they don’t take the time to prioritize what comes next. Succession planning gets delayed—often until it’s too late.
While there is no single “right time” to start thinking about succession, waiting too long can limit your options, reduce your business’s value, and make the transition far more difficult than it needs to be. Even if an exit isn’t imminent, there are actions you can take now to strengthen your position and make the company as attractive as possible to potential buyers.
Why It Pays to Plan Ahead
Succession planning should be an ongoing conversation, regardless of your stage in the business life cycle. While it may not be top of mind during the startup or early growth phases, the need for a plan becomes increasingly important as the business matures.
Planning early gives you the flexibility to respond to the unexpected—whether it’s a surprise acquisition offer, a health issue, or a shift in personal priorities. Without strong financial reporting and operational systems already in place, you may find yourself scrambling to catch up. Buyers will almost always request three to five years of financial records. If those aren’t ready—or if what you provide raises questions—it can stall or even sink a potential deal.
Common pitfalls include inconsistent trends in financial performance, lack of preparedness of the management team, or internal financials that don’t match tax filings or CPA-issued financial statements. In some cases, owners haven’t taken the time to normalize their profit and loss statements to reflect discretionary expenses tied to personal use. These discrepancies create uncertainty for buyers during due diligence and can complicate a transition if not addressed early.
Preparing for a Successful Sale
Once you’ve committed to preparing for an eventual transition, there are key steps to help you navigate the sale process successfully.
Establish your timeline. Determine the ideal time for you to sell, with the earliest and latest target dates to close a deal. This will guide your entire preparation process.
Get your finances in order. Make sure you’re producing monthly financial reports and that they align with your tax returns and any financial statements issued by your certified public accountant. Reconcile discrepancies and make any necessary journal adjustments to keep your internal books clean and consistent. Financial transparency is the first thing any potential buyer will scrutinize.
Highlight performance to drive value. To attract top offers, show at least three years of strong financial performance, including revenue growth. Develop a detailed budget and a long-term forecast that outlines the company’s expected future growth while documenting any assumptions made.
Reduce your debt. Establish a plan to settle any outstanding debt before a potential sale. Having too much debt can deter potential buyers.
Document your business processes. Clear and well-organized procedures will allow the continuity of smooth operations following the transition to new ownership.
Bring advisors into the planning process. Whether you are years away from selling, retiring, or just starting to consider a sale, involving trusted advisors early can make all the difference. Even the savviest business owners can overlook key issues without the benefit of outside expertise.
Working with a team of accountants, attorneys, and consultants will help ensure all legal, financial, and tax implications are addressed while maximizing business value. Advisors can spot red flags, anticipate challenges, and ensure a clean handoff—whether to a buyer, partner, or family member before any formal due diligence takes place. The goal isn’t just to get through the process, but to do it in a way that protects what you’ve built and sets everyone up for success.
What Happens When You Plan—And When You Don’t
We’ve seen how both scenarios play out.
In one case, a client decided to sell their business unexpectedly, without involving any advisors beforehand. There had been no review or cleanup of their financials, and no formal valuation or planning—just an internal assumption about the business’s worth.
When they went to market, buyers valued the company at about half of what the owner had expected. The reason? Poor financial reporting and inconsistencies in the documentation provided to buyers created doubt. With better preparation, they could have presented a clearer financial picture and potentially justified a higher asking price.
In contrast, we’ve worked with plenty of clients who took the time to plan their transition well in advance. They cleaned up their books, organized their financial records, and brought in advisors to guide the process. As a result, the process moved much faster, required less back-and-forth with attorneys and bankers, and gave buyers the confidence needed to meet the seller’s terms.
Deal success ultimately comes down to credibility through proper planning and execution. Many owners believe their business is worth more than the market suggests. However, when faced with financial reporting inconsistencies, buyers tend to hesitate. Clean, consistent reporting not only supports your asking price—it strengthens your position in negotiations and signals that the business is well-managed and ready for transition.
Start the Conversation Now
Whether you’re planning to sell, transfer ownership to a family member, or simply keep your options open, the message is the same: don’t wait. Start having conversations about it now, regardless of where you are in your business life cycle. Market conditions shift. Life happens. The earlier you plan, the more control you retain.
Succession planning is a complex process, but it doesn’t have to be chaotic. With early planning and the right guidance, you can navigate the complexities of the sale process with confidence.
Adam Pettinella is Director of Advisory Services and Morgan Andrychuk is Consulting Manager at 1RDG, the financial center, which provides businesses with a full range of management, compliance, and advisory services. For more information, visit 1RDG.com.