Financial Experts Warn Business Owners Against Late-Stage Exit Planning

Melissa Houston, founder of The Sellable Firm, and representatives from major financial institutions warn business owners about the value gap, which is the difference between an owner's expected valuation and the price buyers are actually willing to pay.

Experts state that attempting to resolve structural issues—such as owner dependence, customer concentration, or low profitability—six months before an exit is generally ineffective. Buyers typically require a sustainable track record of performance rather than short-term improvements to justify a higher price.

To mitigate these risks, PwC suggests implementing profit-improvement initiatives two years before a sale and establishing a management team at least one year prior to demonstrate operational stability. JPMorgan Chase & Co. recommends a longer horizon, advising that succession planning begin three to five years before a transition to ensure value-increasing strategies produce measurable results.

Failure to address these gaps early often results in lower purchase prices. In some cases, it forces sellers to accept earnouts or provide increased seller financing to bridge the valuation difference.