Author: Joe Gitto

Most owners think of selling their business as a transaction that goes on their to-do list when they decide they are ready to sell. They are usually surprised that the process can stretch for the better part of a year. The preparation before it takes considerably longer. According to the Exit Planning Institute, only 20% to 30% of businesses that go to market actually sell.

That is not meant to be discouraging. It is the process. Knowing it is the difference between running a process and being run by one.

The headline number, and what it hides

The IBBA and M&A Source survey business brokers and M&A advisors every quarter. Their Q4 2025 Market Pulse report puts total time to close at six to twelve months, getting longer as deal size goes up.

BizBuySell, which tracks completed small business transactions, reported a median of 170 days to close across 9,586 sales in 2025, slightly higher than the 166 days it recorded in 2024.

That clock starts ticking when the business is officially in the market. It does not include the preparation, and the preparation is where the price is determined.

Stage one: preparation. Six months to three years.

This is the stage owners skip and the one that costs the most to skip.

Preparation is executing a well-constructed exit plan that will include, at a minimum, three to five years of clean financial statements, normalizing your earnings so a buyer can see what the business actually produces, and documenting the things that live only in your head (view our contingency plan here). We do this by providing a comprehensive audit of contracts, employment agreements, stock option agreements, leases and corporate records. Having a leadership team around you that is responsible and accountable, making sure you have the right people in the right seats, and closing whatever gaps a buyer’s advisor will uncover in due diligence.

Most owners arrive here with nothing. In the IBBA’s Q1 2025 survey, 90% of recent sell-side clients were first-time sellers and fewer than 5% had a written exit strategy when they first met an advisor. The Exit Planning Institute’s 2025 Generational State of Owner Readiness report found just 13% of owners with a formal exit plan, and among Baby Boomers only 22% with a written business transition plan and 5% with a formal exit planning team.

What stretches this stage: financials that need to be cleaned up and put into GAAP format, a business that cannot run without you, unresolved partner or ownership issues, and incomplete records. Not having a management structure around you. You will not have the time to devote to the transaction and you will not have the time to run the business to maintain historical revenue and profits. This is where business owners tend to lose control.

Stage two: going to market. 45 to 90 days.

We are building the confidential information memorandum, we are building the teaser, and we are constructing the outreach. We are combing our database for PE firms, family offices and private investors. Simultaneously, we are finalizing the financial package, the TTM model and an updated valuation of the business.

With all of that in place, we start our outreach to the potential buyers on our list. After the initial email contact, we hold a preliminary meeting with the potential buyer, secure an NDA, and then share our CIM and financial workbook. The goal is to receive multiple LOIs and have investor meetings with the buyers.

Duration varies enormously by industry. BizBuySell’s Q2 2026 data shows service businesses spending a median of 155 days on market, while manufacturing deals took a median of 247 days to close. Their Q3 2025 report recorded an overall median of 149 days on market, the fastest pace since 2017, which tells you the range moves with the cycle as well as the sector.

What stretches this stage: an asking price the market does not support, which is the most common cause by a wide margin. If owners have not engaged in the exit planning process, then they are going to go to market with an incomplete story, leading to many meetings and many questions.

Stage three: letter of intent. Two to four weeks to negotiate.

An LOI is a mostly non-binding document that sets price, structure, the buyer’s expectations of the seller post-closing, and any other issues that were addressed in the pre-LOI stage, along with an agreement on the length of the exclusivity period. Negotiating one can take a few weeks.

The exclusivity clause is the part that matters. Once you sign, you stop talking to other buyers, usually for sixty to ninety days. Your leverage is at its highest the moment before you sign and declines steadily after.

What stretches this stage: disagreement over structure rather than price. How much is cash at close, how much is a seller note, how much rides on an earnout. Market Pulse reported sellers receiving between 76% and 89% cash at closing depending on deal size, which means a real portion of the price is routinely paid later and on conditions.

Stage four: due diligence. Ninety to one hundred twenty days.

The buyer and their advisors examine everything. Financial records, tax returns, customer contracts, employee agreements, leases, insurance, permits, litigation, environmental exposure, and increasingly a quality of earnings analysis performed by an outside accounting firm.

This is where the exit planning preparation provides a return to the seller. If your records are organized, diligence is a document exercise. If they are not, every gap becomes a question, every question becomes a delay, and delays become a reason to revisit the price.

Financing runs in parallel and has its own calendar. BizBuySell’s Q2 2026 survey found 78% of buyers expecting to use SBA financing. Bank timelines are not yours to control.

What stretches this stage: disorganized records, missing or unsigned agreements, lender requirements, landlord consents on leased property, licensing and permit transfers, and buyer’s counsel and seller’s counsel discovering they have different views of the same paragraph. Not being properly staffed or having the right people in the right seats, as well as the owner still being the center of all that happens in the business.

The biggest deal killer is surprises the seller did not disclose previously.

There is no way to make this stage pleasant. It is an audit conducted by someone with a financial interest in finding problems, on a business you have run for decades, while you are still running it. Owners consistently underestimate how much of their own time it consumes, even with a strong team of professionals surrounding them.

Stage five: closing. Thirty to forty-five days after diligence clears.

Definitive documents get drafted and negotiated. Purchase agreement, non-compete, employment or consulting agreement, escrow terms, working capital adjustment, allocation of purchase price for tax purposes.

Owners assume this part is a formality. It is not. The LOI settled the headline number. The purchase agreement settles who bears which risk, and that is where the real money often moves.

What stretches this stage: working capital disputes, indemnification caps and survival periods, tax allocation, and the availability of professionals trying to synchronize schedules.

A note on the LOI-to-close window

It is worth pulling stages three through five together, because that stretch behaves differently from the rest of the process.

Market Pulse puts the time from signed LOI to closing at roughly two to five months depending on deal size. That is the window where the deal is exclusive, the buyers and the sellers are spending real money on advisors, and you have stopped talking to anyone else.

It is also where most of the failures happen. Everything before the LOI is a marketing problem, and marketing problems are recoverable. Everything after the LOI is a verification and alignment problem. An owner who has spent two years getting the business ready walks through those months answering questions. An owner who has not spends them renegotiating.

The implication is that you should not enter this stage unprepared.

Stage six: transition and earnout. Ninety days to three years.

You are not done at closing. Almost every deal includes a transition period where you stay involved, typically ninety days to a year. If part of your price is an earnout, you may be tied to the outcome for two or three years after the initial wire hits.

Seller financing extends the relationship further. BizBuySell’s Q2 2026 survey found 90% of buyers expecting seller financing while only 29% of sellers planned to offer it.

Add it up

A healthy lower-middle-market business that spends twelve to twenty months preparing for an exit can expect the go-to-market process to take roughly six to eleven months from the time it hits the market until the money is fully in hand, with a further transition period after that.

For a business that starts from zero preparation, the odds are stacked against you.

The part nobody puts in the brochure

Many businesses that go to market do not sell. This is well understood among brokers and M&A advisors. The owner can mitigate this risk by proper preliminary planning.

The reasons are consistent and most of them are preventable. The price expectation was never supported by the earnings. The business could not run without the owner and no buyer could finance that risk. Diligence turned up something material that had never been disclosed. Or the owner ran out of patience partway through a process they had not budgeted the time or the emotional energy for.

BizBuySell’s Q3 2025 survey found 20% of owners openly acknowledging they are not prepared to sell. The share that is unprepared without knowing it is presumably larger.

What this means for you

Three things you can do this month whether or not you are selling.

Count backward. Take the year you want to be out, subtract the transition period, the close, the diligence, the marketing, and the preparation. If that lands in the past, you now know something useful.

Pull three years of financial statements and read them the way a buyer would. Anything you would have to explain is a diligence item, and diligence items cost time and eventually money.

Write down what happens to the business if you are unavailable for ninety days. Every item on that list lengthens the timeline and shortens the buyer list.

If you want a realistic timeline for your own business, Blue Sky offers a free one-hour consultation. No commitment, and no assumption that you are selling anything.

---

Sources

Every figure in this post traces to one of these. Nothing was estimated, rounded from memory, or inferred from a plausible range.

1. Exit Planning Institute, State of Owner Readiness: only 20% to 30% of businesses that go to market actually sell.
2. IBBA / M&A Source Market Pulse Q4 2025: total time to close of six to twelve months, rising with deal size; LOI to close of two to five months; sellers received an average of 76% to 89% cash at close.
3. BizBuySell, 2025 Year in Review: 9,586 closed transactions, median 170 days to close (up from 166 in 2024).
4. BizBuySell Q2 2026 Insight Report: median of 155 days on market for service businesses; median of 247 days to close for manufacturing; 78% of buyers expect SBA financing; 90% of buyers expect seller financing while 29% of sellers plan to offer it.
5. BizBuySell Q3 2025 Insight Report: 20% of surveyed owners admit they are not prepared to sell; median of 149 days on market, the fastest pace since 2017.
6. IBBA / M&A Source Market Pulse Q1 2025: 90% of recent sell-side clients were first-time sellers and fewer than 5% had a written exit strategy.
7. Exit Planning Institute, 2025 Generational National State of Owner Readiness Report: 13% of owners have a formal exit plan; among Baby Boomers, 22% have a written business transition plan and 5% have formed a formal exit planning team.

At a minimum, three to five years before you want out. Best practice is to always work with the end in mind.

That is the answer, and you will find it repeated across this industry without much explanation attached. The number is not a marketing figure. It falls out of a simple observation: the things that actually raise what your business is worth take years to work, and the things you can do in the last six months mostly do not change the price.

This post is written for someone who believes they may never sell. However, every business owner will exit their business at some point; the question is whether or not it will be on your terms. Two of the unknowns that exit planning protects business owners against are an unsolicited offer and death or disability. Most owners reading it are not planning anything. That is fine. Everything below is worth knowing anyway, because the same work that prepares a business for sale is the work that makes it worth more to own.

What “planning your exit” actually means

It does not mean listing the business. It does not mean telling your employees, your competitors, or your banker anything. Planning your exit is part of sound strategic planning.

From an owner’s personal standpoint, it means knowing three things: what the business is worth today, what you would need it to be worth to fund the life you want afterward, and what stands between those two numbers. That is it. Everything else is execution.

On a broader scale, it is planning what will happen to your business if you are incapacitated or no longer here.

Most owners have not done this. The Exit Planning Institute’s 2025 Generational National State of Owner Readiness Report found that just 13% of owners have a formal exit plan. Among Baby Boomers, the owners closest to the door, 22% have a written business transition plan and only 5% have assembled a formal exit planning team. The gap gets wider closer to the transaction. In the IBBA and M&A Source Market Pulse survey for Q1 2025, 90% of recent sell-side clients were first-time sellers, and fewer than 5% had a written exit strategy in place when they first sat down with an advisor.

Read that last figure carefully. These are not owners three years out daydreaming. These are owners who had already decided to sell. Nineteen out of twenty of them arrived with nothing written down.

What you can change in three to five years

This is the case for the window, item by item.

Reducing your own indispensability. If you are the business, its value plummets when you are gone. Fixing that means hiring or promoting someone, then actually handing over the relationships, the pricing authority, the hiring decisions. Not the org chart version. The real version, where customers call them instead of you. That takes a couple of years to build and another year for a buyer to see evidence it holds.

Diversifying the customer base. If your largest account is 35% of revenue, getting it to 15% means growing everything else. That is a sales cycle problem, and sales cycles take as long as they take.

Building a track record of clean financials. Buyers look back three years, sometimes five. If this year is the first year your books are right, you have one clean year and two that raise questions. Starting now means that by the time anyone looks, all three years are the good ones.

Fixing the things that show up in due diligence. Missing contracts, undocumented leases, an ownership structure that was set up in 1998 and never revisited, employment agreements that were never signed. None of these are hard. All of them take months and cost you leverage if a buyer finds them first.

Growing earnings deliberately. Multiples climb with size. The Market Pulse Q4 2025 data shows average multiples rising from roughly 2.0x SDE for businesses under $500,000 up to 5.5x EBITDA in the $5 million to $50 million range. Moving up a bracket does two things to your price at once, because both the earnings and the multiple applied to them go up.

Getting your own financial house in order. The Exit Planning Institute found 65% of owners need to harvest value from the business to support their lifestyle afterward, and that the business represents roughly 80% to 90% of the typical owner’s net worth. If the number the business will produce does not cover the life you want, you need to know that with years to spare, not weeks.

What you cannot change in six months

Now the other side.

You cannot build management depth in six months. You can hire someone, but you cannot show a buyer that the hire worked.

You cannot fix customer concentration in six months. You can chase new accounts, and a buyer will read a sudden burst of new customers exactly as what it is.

You cannot clean up three years of financials in six months. You can restate them, and restated financials invite the question of what else was wrong.

You cannot make a bad year disappear. If earnings dipped, you either wait for the recovery or you sell into the dip.

And you cannot manufacture leverage. An owner with three years of runway can walk away from a bad offer. An owner who needs to be out by December cannot, and every buyer across the table knows the difference.

You cannot execute proper tax and estate planning to make your transaction as tax efficient as possible.

That asymmetry is the whole argument. The last six months are for executing a transaction. The three years before that are for determining what the transaction is worth.

The cost of the compressed timeline

None of this means a compressed sale fails. Businesses sell on short notice all the time. They sell for less, and on worse terms.

A rushed process usually costs you in three places at once. The multiple, because the risks you did not have time to fix are still there and get priced in. The structure, because more of the money moves into earnouts and seller notes when a buyer is uncertain. And the tax outcome, because the planning that reduces what you keep versus what you send to the IRS mostly has to happen before a letter of intent, not after.

Even a well-run process is not fast. Market Pulse data puts total time to close at six to twelve months depending on deal size, and that clock starts when you go to market. It does not include the preparation.

Why owners wait anyway

Knowing the window and using it are different things, and the reasons owners wait are usually good ones rather than lazy ones.

The business is busy. Planning an exit feels like admitting you are tired. Bringing in an advisor feels like starting something you are not ready to start. And there is a quiet superstition in it, the sense that thinking about the ending invites the ending.

There is also a practical objection worth taking seriously: you do not know when you want out, so how do you plan for a date you cannot name? The answer is that the date is not what you are planning for. You are planning for a condition. A business that could be sold well is a business that is ready whenever you decide, and it stays ready.

What the data shows is that the trigger, when it comes, is often not a decision at all. BizBuySell’s Q2 2026 Insight Report found 45% of owners citing retirement as their reason for selling and 21% citing burnout. Burnout does not arrive on a schedule you set. The same survey found 52% of owners reporting they had an exit plan while only 14% had obtained a professional valuation, which suggests a fair number of those plans are a general intention rather than a document with numbers in it.

There is no way to plan a real exit around a valuation you have never had. That is usually the first step, and it is a small one.

The five Ds, which do not check your calendar

Death. Disability. Divorce. Disagreement. Distress.

Those are the five ways owners exit businesses without planning to. They are not rare, and they are not hypothetical. If any one of them arrives before you have a plan, the timeline is set by the event and your family or your partners will be negotiating from the worst possible position.

This is the part of the argument that applies to owners who have no intention of selling at all. You may fully intend to run this company until you are eighty. You still have a spouse, a partner, a lender, and a key employee who all have exposure to what happens if you do not make it to eighty. A plan that sits in a drawer unused is cheap insurance. The absence of one is not.

A contingency plan is what answers those five questions before anyone has to ask them. It is not an exit plan and it is not a will. It is the short set of instructions that keeps the business running through the ninety days after something happens to you: who has signing authority, who talks to the bank, who tells the customers, how payroll gets met, what your family does with an ownership stake they did not ask for, and who they should call first.

The owners who most need one are the least likely to have one. The Exit Planning Institute found documented contingency plans in place for 74% of Millennial owners and 60% of Gen X owners, but only 30% of Baby Boomers, the group closest to an actual transition. The gap is wider on buy-sell agreements: 69% of Millennial owners had updated theirs within the past three years, against 16% of Baby Boomers. An agreement built around a valuation from 2011 and a partner who left in 2016 is not protection. It is something to be litigated.

This is also the one piece of this work that pays off the day it is signed rather than three years later. It takes a weekend, not a quarter, and it commits you to nothing.

The demographics make this less theoretical than it sounds. McKinsey’s Great Ownership Transfer report found that more than half of US small-business owners are now over 55, up from roughly 30% in 2002, and that one in four is 65 or older. In the Exit Planning Institute survey, 58% of Baby Boomer owners said they planned to exit within five years, and 75% of owners overall within ten.

Another non-planned factor is an unsolicited offer. This is not as uncommon as you would think.

But I do not want to sell

Then do not. The work still pays.

A business that runs without you is worth more and it is also a better business to own. You take vacations. You stop being the bottleneck on every decision. Your best people stay because there is somewhere for them to go.

A business with diversified customers is more resilient. That matters in any conditions, and conditions have been uneven. The Federal Reserve’s 2026 Report on Employer Firms found 77% of small employer firms reporting rising costs or tariff-related cost pressure.

A business with clean financials borrows more cheaply, survives a Q of E, gets completed more quickly, and tends to develop a level of trust with the buyer.

None of that requires you to sell anything. Exit planning should be part of your business strategy long before you decide to bring your business to market, and most of it is indistinguishable from just running the company well.

What this means for you

Three things you can do this quarter, none of which commit you to anything.

Write down the year you would like to stop working in the business. Not sell. Stop working on it. That date, minus three to five years, is when preparation should start, and it may already have passed.

Ask what the business would have to net you, after tax, to fund the life you want. Then compare that against the roughest possible valuation range. If those two numbers are far apart, that gap is the actual project, and it takes time.

Answer one question honestly: if you were out for ninety days starting tomorrow, what breaks? Write down the list. That list is your exit plan’s first draft, and you just built it for free.

How much time your business needs

Three to five years is a guideline, not a rule. Some businesses need eighteen months. Some need eight years, usually the ones most dependent on the founder. What is not variable is the direction of the tradeoff: every month of runway is a month of leverage, and leverage is what gets paid for at closing.

If you want to know where your business stands and how long your particular list would take, Blue Sky offers a free consultation. No commitment, and no assumption that you are selling anything.

---

Sources

Every figure in this post traces to one of these. Nothing was estimated, rounded from memory, or inferred from a plausible range.

1. Exit Planning Institute, 2025 Generational National State of Owner Readiness Report (2025): 13% of owners have a formal exit plan; among Baby Boomers, 22% have a written business transition plan and 5% have formed a formal exit planning team; documented contingency plans are held by 30% of Baby Boomers, 60% of Gen X and 74% of Millennials; buy-sell agreements have been updated within the past three years by 16% of Baby Boomers, 53% of Gen X and 69% of Millennials; 58% of Baby Boomers plan to exit within five years and 75% of owners within ten years; 65% need to harvest business value to support their post-exit lifestyle, and the business represents roughly 80% to 90% of the typical owner’s net worth.
2. IBBA / M&A Source Market Pulse Q1 2025: 90% of recent sell-side clients were first-time sellers and fewer than 5% had a written exit strategy before the initial meeting.
3. McKinsey Institute for Economic Mobility, The Great Ownership Transfer (February 2026): more than half of US small-business owners are over 55, up from roughly 30% in 2002; one in four is 65 or older.
4. IBBA / M&A Source Market Pulse Q4 2025: average multiples rise with deal size, from 2.0x SDE under $500K to 5.5x EBITDA in the $5M–$50M range; total time to close runs six to twelve months depending on size.
5. BizBuySell Q2 2026 Insight Report: 45% of owners cite retirement as their reason for selling, 21% cite burnout, 52% report having an exit plan and 14% have obtained a professional valuation.
6. Federal Reserve, 2026 Report on Employer Firms: 77% of small employer firms reported rising costs or tariff-related cost challenges.