Business Succession Planning

Selling well takes years. The work that drives the outcome happens long before the deal.

Owners often think of the sale as the event. In reality, it’s the result. The decisions made three to ten years before closing (how the books look, who’s running the day-to-day, how concentrated the customer base is, how the entity is structured) drive the multiple, the after-tax proceeds, and whether the deal closes at all.

Our role is to help owners run those years deliberately, in coordination with the personal financial plan that’s waiting for the proceeds.

Types of exit

• Third-party sale to a strategic buyer. Another company in or adjacent to your industry. Usually pays the highest multiple, because they expect synergies. Diligence is intense.
• Third-party sale to a financial buyer. Private equity, search funds, family offices. Pays for cash flow and growth potential, often expects the owner to roll some equity and stay involved.
• Internal sale, management buyout. Selling to existing leadership, usually with seller financing. Continuity is high; price is often lower than a third-party sale.
• Internal sale, ESOP. An Employee Stock Ownership Plan buys the owner’s shares. Real tax advantages for the seller (especially in a C-corp structure under IRC 1042) and a meaningful benefit for employees. Best suited to companies with steady cash flow and a leadership bench.
• Family transfer. Gift, sale, or hybrid to the next generation. Tax structuring, governance, and family dynamics carry as much weight as price.
• Partial recapitalization. Sell a majority or minority stake now, keep equity, take a “second bite” at a later exit. Common with PE buyers.

Each path requires different prep. The first decision is which path fits.

The 5-year readiness checklist

• Clean books. Three years of accurate, accrual-basis financials. Owner compensation and personal expenses fully normalized with add-backs documented. A quality of earnings (QoE) review-ready set of statements.
• Normalized owner comp. What does the role actually pay at market? Excess comp gets added back; undercomp gets subtracted. Buyers will run this either way.
• Second-tier leadership. A business that depends entirely on the owner is a job, not an asset. A real second tier increases the multiple and shortens diligence.
• Customer concentration reduction. No single customer above ~10-15% of revenue, if achievable. Buyers discount heavily for concentration risk.
• Recurring-revenue mix. Contracts, subscriptions, retainers, anything that gives the buyer visibility into next year’s revenue. Recurring revenue trades at meaningfully higher multiples than project revenue.
• Documented processes. Standard operating procedures, key vendor relationships, and customer-facing playbooks written down. Knowledge that lives only in the owner’s head is a discount.

2025-2026 M&A trends for small businesses

A few data points worth knowing, from the BizBuySell Insight Reports tracking small business sales nationally:

• The full-year 2025 median sale price across reported small business transactions was $350,000, with median cash flow of about $159,000 and median revenue around $703,000.
• Average cash flow multiples ticked up to roughly 2.6x SDE for full-year 2025, and roughly 2.7x in Q1 2026, with stronger, well-positioned businesses pulling higher multiples.
• The “Main Street” segment (transactions roughly $50,000 to $2 million) is where most closely-held service businesses land. The lower middle market sits above that, with different buyer pools and higher multiples.

These are national medians across thousands of transactions, not predictions for any specific business. Your industry, geography, size, growth profile, and recurring-revenue mix will move the multiple substantially.

Coordinating with the personal plan

The sale price isn’t what you keep. What you keep is the price minus federal capital gains, state tax (Florida is a real advantage here, no state income tax), deal expenses, any rollover equity, and any earnout you may or may not collect. The personal financial plan needs to model the after-tax number, not the headline.

Specifically:

• Net-of-tax proceeds. Asset sale vs. stock sale changes the answer significantly. So does entity type (C-corp, S-corp, LLC). This is a CPA and attorney conversation we sit in on.
• Retirement income needs. How much annual income does the household need post-sale? The required price falls out of the income need, not the other way around.
• Estate considerations. Sale proceeds may push the estate above the federal exemption (currently scheduled to step down after 2025 absent further legislation). Trust planning before the sale is much more powerful than after.
• Life after the sale. Sounds soft, but it’s the most common regret we see. Owners who don’t have a clear picture of what they’re retiring to often re-enter or regret the deal.

Common mistakes

• Waiting too long. Starting prep 12 months before a desired sale leaves no time to clean books, build a second tier, or reduce concentration. Three to five years is realistic; ten is better.
• Ignoring tax structuring. Asset sale vs. stock sale, F-reorganization, installment sale, QSBS, 1042 ESOP rollover, all of these can change the after-tax number by double-digit percentages. They have to be designed in, not bolted on.
• No plan for the proceeds. A lump sum equal to several years of household income lands, and the household has no plan for it. This is the single most fixable mistake.
• Sentimental valuation. “I built this for 30 years, so it’s worth X.” Buyers care about cash flow, growth, and risk. The valuation conversation has to anchor on those, not on the years invested.