The exit-planning mistakes costing small business owners millions

For many small business owners, the day-to-day demands of running a company leave little time to think about an eventual exit. But according to experts Mark Collier, Senior Business Consultant with the University of Georgia Small Business Development Center; Adam Soyah, Founder of The Soyah Group Consulting; and Dr. Leroy Carson, Founding Director of Oglethorpe University’s Entrepreneurship and Innovation Center, that mindset can limit both a company’s value and its future.

In the latest episode of Business Trends Today, Carson begins by highlighting a common pattern among entrepreneurs. He observes that most small business owners tend to focus only on the tactical aspects of running their business, concentrating on immediate tasks, next month, or the next year. Carson notes that they seldom engage in strategic thinking that shapes the long-term direction of the business. This gap in strategic focus is precisely what leaves value on the table at exit.

“Most small businesses stay in the tactical ends of the business and they never rise up to the strategic.” – Dr. Leroy Carson 

Soyah agreed and pointed to a familiar framework for explaining why, referencing “The E-Myth” and its description of the three roles every owner juggles:

• Technician
• Manager
• Entrepreneur

He said most owners get stuck operating as the technician, working in the business rather than on it, which makes a smooth, profitable exit far harder to pull off later.

Owner dependency

Collier noted that this pattern frequently appears in his consulting work. He observes that owners who neglect strategic planning typically face difficulties when selling. “You have to begin with the end in mind,” Collier emphasized, noting that every business owner should have a clear roadmap for the company’s future transition, whether through a sale or another method.

“I’ve seen the good, the bad, and the ugly over the years. And I think what it boils down to is the lack of planning… you have to begin with the end in mind.”  – Mark Collier 

Notably, Soyah said the biggest red flag for buyers is an owner who is too deeply embedded in daily operations. That dependency raises the buyer’s perceived risk, which drags down both the sale price and the odds a deal closes at all. He also pointed to weak financial structure and a lack of revenue diversity as common issues that reduce a company’s value long before a sale is ever on the table.

Fear plays a role too, according to Soyah. Owners often resist preparing for an exit because they’re afraid of losing control, and that anxiety can bleed into how employees respond once a transition begins. Soyah said preparing a team in advance, rather than springing new ownership on them, makes for a far smoother handoff.

Changing the conversation

Collier walked through one of the most misunderstood terms in the sale process, EBITDA, which stands for earnings before interest, taxes, depreciation and amortization. He explained that buyers and private equity firms rely on that figure rather than net profit, since net profit strips out too much value that a new owner could otherwise use.

Add-backs matter here too, as Collier believed that many small business owners run personal expenses through the business to reduce their tax liability, and those expenses can often get added back into EBITDA before a multiplier is applied, so long as the books are clean and well documented. Soyah adds that organized financials make that process far easier for a buyer to evaluate and trust.
According to Collier, three factors tend to command the highest valuations:

• Low owner dependency
• Recurring revenue
• Predictable revenue streams

With Soyah adding operational structure to that list as well, since a business with clear, repeatable systems requires far less work for a new owner to run it successfully.

Further, Soyah said some companies sell at two or three times earnings, while others fetch seven to ten times earnings. The difference usually comes down to confidence and trajectory. A business with clean financials, consistent growth and few hidden liabilities carries far less risk for a buyer, which pushes the multiplier higher.

He cautioned that many owners overvalue their own businesses out of emotional attachment to the work they’ve put in, while others simply don’t understand how buyers calculate value in the first place. Soyah also emphasized that strategic buyers, those looking to add a business to an existing portfolio, typically pay more than buyers evaluating a company purely on its standalone numbers.

Systems make a business transferable

Nevertheless, Collier said a transferable business comes down to systems rather than personalities. He alludes to what he calls the three P’s as the foundation that makes a company sellable without the owner in the room:

• Policies
• Processes
• Procedures

Soyah said the easiest businesses to transfer are those with organized documentation already in place, from licensing and intellectual property to centralized records. He said due diligence on a well-organized company might wrap up in 90 days, while a disorganized one can drag on for a year or more.

Both consultants cited the same rule of thumb for timing. Since buyers typically review three years of financial history, Collier said owners should think of exit planning as a minimum three-year runway, even if a sale isn’t imminent.

“[The] exit has to be there as a goal, even if you do not sell it, because exit means optimize it… So I still think everybody should think to exit day one.” – Adam Soyah

Additionally, the panel discussed artificial intelligence and its growing role in business valuation and planning. Soyah said AI can generate a basic valuation model in seconds, but it can’t replace the judgment that comes from real experience guiding a company through a sale.

Carson agreed, adding that AI is a tool rather than a cure-all. He said the smartest business owners combine AI with mentors and outside resources rather than relying on either one alone.

Is now a good time to start a business

When asked whether current economic uncertainty makes this a risky time to launch a company, all three panelists pushed back on that idea.

Collier said the timing depends less on the economy and more on differentiation. He challenged prospective owners to clearly answer why a customer would choose their product over any other option in the market before moving forward.

Soyah pointed to his own background in HVAC, an industry he considers recession-resistant, and said he doesn’t fear AI eliminating jobs in that space so much as reshaping how the work gets done. He also stressed commitment as one of the biggest factors separating successful launches from failures, saying hesitation and self-doubt account for a large share of first-year business failures.

Carson offered the broadest take, arguing that it’s always a good time to start a business, even if it isn’t always a good time to start every type of business. He said downturns and disruptions often create their own opportunities, pointing to the surge in demand for personal protective equipment during the pandemic as one example.

All three panelists encouraged small business owners to seek out free local resources, including university-affiliated programs such as Oglethorpe’s Entrepreneurship and Innovation Center, Emory’s Hatchery, and Georgia Tech’s Tech Village, before making major decisions about growth or an eventual sale.