Co-authored by Gary Braun, Pivotal Advisors, and Andy Schwandt, Sunbelt Business Advisors / True North M&A
At some point, every business owner exits their business.
The only question is whether that exit happens on your terms—or someone else’s.
That’s not meant to be alarming. It’s reality.
Research shows that roughly 50% of business-owner exits are involuntary, often because of one of the “Five Ds”: death, disability, divorce, disagreement or distress. Even more sobering, approximately 70% of business-sale transactions eventually fail, and among owners who successfully sell, nearly 75% profoundly regret the decision within a year.
These figures underscore a simple lesson: Waiting until you’re ready to sell is often too late.
We spend our days helping business owners build, grow and ultimately transition value—but from different sides of the table.
At Sunbelt Business Advisors and True North M&A, we see what buyers pay premiums for and what causes deals to fall apart.
At Pivotal Advisors, we help companies improve sales performance, build stronger leadership teams and create sustainable growth.
We’ve both come to the same conclusion:
The things that make a business more valuable are usually the same things that make it a better business today.
That’s what this series is about.
We’ll walk through the key drivers of business value, explain what buyers are looking for and share practical steps owners can take long before an exit is on the horizon.
Many owners think exit planning starts a few months before a sale.
It doesn’t.
The strongest exits are usually the result of decisions made years earlier.
According to the 2023 National State of Owner Readiness Report:
That’s important because buyers don’t just examine where your business is today. They look at years of performance.
Ideally, owners should begin preparing three to five years before a transition. Improvements need time to affect performance, appear in the financial results and build buyer confidence.
The improvements you make today need time to show up in the numbers.
Value creation isn’t just about preparing a business for sale. It’s about building a stronger company.
The same characteristics buyers value are the characteristics owners benefit from every day:
Whether you sell in two years, 10 years or never, these improvements make your business more resilient and easier to operate.
What’s good for selling your business is also good for operating your business.
One of the biggest misconceptions owners have is that there’s one obvious buyer for their business.
In reality, there are several types of business buyers, and each values a company differently.
The 2023 Minnesota State of Owner Readiness research found that:
Let’s look at those options.
An internal buyer could be:
Owners often prefer this route because it rewards the people who helped build the company.
The challenge is that internal buyers frequently need seller financing, an earnout or another creative deal structure. Those arrangements can affect the purchase price and increase risk for the seller.
Many owners assume a competitor will pay the highest price.
Sometimes they do. Often, they don’t.
Because competitors already serve similar customers and markets, they may see less unique value in the business than other buyer groups do. A competitor might decide it can invest in its own company rather than acquire another one.
Private equity groups and other financial buyers focus on investment returns.
They care deeply about:
In short, they want confidence that the business can thrive without you.
Strategic acquirers are looking for leverage. Their objectives might include:
When your company solves a strategic problem or fits into a buyer’s larger growth plan, that buyer may pay significantly more than it would based on financial performance alone.
Some of the highest-value transactions come from buyers the owner never considered.
These buyers aren’t obvious competitors or financial investors. They’re organizations pursuing a strategy that happens to align perfectly with your business.
That’s why a competitive sale process matters. More qualified buyers can create:
The market ultimately determines the price. Without following a competitive process, it can be difficult to know whether you found the right buyer or received the best available price and terms.
At the highest level, almost every business-valuation discussion comes down to two factors: risk and growth.
The lower the perceived risk, the higher the potential value.
Buyers ask questions such as:
Buyers pay for confidence in future cash flow.
They want evidence that growth is:
That’s why every value driver we’ll discuss in this series ultimately comes back to one question:
Does it reduce risk or increase growth?
If the answer is yes, it likely increases value.
One of the most common mistakes we see is waiting.
Owners often assume they’ll focus on transition planning when the business is at its peak. Unfortunately, life doesn’t always cooperate.
Owners can discover too late that they haven’t allowed enough time to:
By the time they’re ready to act, performance may already be declining or circumstances may have changed.
That’s when options become limited—and limited options rarely lead to optimal outcomes.
Preparing early isn’t only about maximizing the price of a future sale. It can help you respond to an unsolicited offer, transfer the company to the next generation, bring in a partner or protect your family if an unforeseen event occurs.
Readiness creates options.
Over the coming weeks, we’ll break down the key drivers of enterprise value one by one:
For each topic, we’ll explain:
We’ll start with one of the most important questions in exit planning:
Can your business run without you?
What happens to your business when you're not there to make decisions, manage relationships, or close deals?
Owner dependency can limit growth today and reduce what buyers are willing to pay tomorrow. In Part 2, Gary Braun and Andy Schwandt explore why building a business that runs independently of its owner is one of the most important steps toward creating lasting value.
This article is part of a collaborative series from Pivotal Advisors and Sunbelt Business Advisors / True North M&A exploring the factors that build enterprise value and help business owners create more options for the future.
Gary Braun and Andy Schwandt bring perspectives from different sides of the business-value equation: improving company performance and understanding what buyers value.
Follow the series for practical guidance and real-world stories about creating a stronger, more valuable and more transferable business.
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