Small Business Exits: May closed deal data
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How to Prepare Your Business for Sale: What Makes Owners Exit-Ready in 2025
Each month, Axial surveys its member network on a topic related to lower middle market M&A, aiming to spotlight what’s trending, what’s changing, and what’s working—straight from the dealmakers doing the work.
Last month, we focused on a question that often determines whether a deal runs smoothly or falls apart: What are the defining traits of an exit-ready business owner—and an exit-ready business?
We asked survey respondents to weigh in on the behaviors, mindsets, and preparations that separate truly ready sellers from those who still have work to do, as well as the structural and operational qualities that make a business attractive to buyers. Their answers revealed consistent themes—emotional readiness, valuation realism, and process preparedness on the owner side, and financial clarity, management strength, and scalability on the business side—alongside candid frustrations and “gold star” behaviors that can either hinder or accelerate a transaction.
We’re grateful to all the members who participated and shared thoughtful insights on this topic. If you have specific themes you’d like to see explored in future monthly surveys, please drop me a line here.
The #1 Trait Buyers Want: Realistic Valuation Expectations
What are the top 3 traits of an “exit-ready” business owner? (Multi-select)
When asked to name the top 3 traits of an exit-ready business owner, respondents overwhelmingly selected realistic valuation expectations (74.3%) and emotional readiness to exit (65.7%). These results suggest that mindset—more than mechanics—is what deal professionals most often see as the deciding factor between a successful exit and a stalled one. Unrealistic price expectations or emotional attachment to the business can derail a deal before diligence even begins.
Traits such as having a clear and committed exit timeline (28.6%) indicate that preparedness and clarity remain important, but secondary to mindset. Fewer respondents prioritized qualities like openness to feedback, family buy-in, or having post-exit plans, suggesting that while helpful, they may not be essential if the core elements—valuation realism and emotional detachment—are in place. Interestingly, traits often associated with long-term planning, like estate planning (5.7%) and M&A process fluency (5.7%), ranked lowest, indicating that tactical or technical readiness is often less of a concern than behavioral alignment.
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What are the top 3 traits of an “exit-ready” business? (Multi-select)
For businesses themselves, survey respondents placed the highest value on operational and financial fundamentals. Clean, GAAP-compliant (ideally audited) financials (77.1%) and a strong management team with low owner dependency (71.4%) topped the list. This reflects a clear investor and advisor preference for businesses that are both financially transparent and able to run without the owner—a signal that the company is truly scalable and transferable.
Lower on the list were strategic elements like a clear growth story (28.6%) and a succession plan (25.7%). These are still important, but likely viewed as easier to build post-close if the core structure is solid. Traits like recurring revenue (22.9%) and customer concentration management (25.7%) were also cited, but less often—possibly because they’re industry-dependent or less urgent in the face of poor financial hygiene or key-person risk. At the bottom, documented processes (17.1%) and addressed legal and compliance risks (8.6%) may be viewed as fixable during diligence, whereas clean books and leadership depth are harder to manufacture on short notice.
Red Flags That Kill Deals Before They Start
What would you consider red flags in a business owner preparing to sell or in the company itself?
| 🚩 Business Owner / Business Red Flags 🚩 |
|---|
| Unreasonable value expectations. Companies with a poor understanding of their own financial performance. Weak management and support staff. Warren Rose, Groce, Rose & Moore, LLC |
| Red flags would include an owner group's non-concurrence or buy-in on the sale. Also financial/accounting sloppiness is a concern. Joe Bieshelt, The Venture North Group |
| Founder stubbornness. A transaction is a negotiation process, and buyers are oftentimes not price-takers. Someone who is extremely stubborn and thinks the market will bend to them will make for a bad counterparty. Dennis Huang, Polychrome |
| Over inflated sense of valuation, and the expectation that if the next owner invests, the business will really take off. Greg DeSimone, Catapult Advisory Group |
| Sudden changes in the profitability of the business. Michael Vann, The Vann Group |
| Customer concentration. Dirty financials. No management or leadership outside of owner. No growth strategy. Luc Maestrello, Transact Capital Partners |
| A major concern is high management turnover, which can signal instability, cultural problems, or a lack of clear leadership. When key team members don’t stick around, it raises questions about the company’s ability to execute post-acquisition. Anonymous, Investment Bank |
| Inability to properly articulate how the business functions without the owners involvement in daily operations. Stanley Stilwell, Portage Equity Partners |
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If you’ve worked with a seller who was exceptionally well-prepared for an exit, what stood out?
| Business Owners Prepared to Exit |
|---|
| A clear understanding of how a well-orchestrated confidential marketing process not only drives a higher closing price, but also serves to identify a very well-matched acquirer for the business that shares the founding values and principles that made the company successful in the first place. Jon Mueller, Exit Partners |
| One seller that stands out, was incredibly proactive in moving along the process. Had answers to any question posed or was able to return a response quickly. Had all his ducks in a row with financials and data for QoE. Marc Weinberger, Lime Investors |
| They were bought into what we were uniquely bringing to the table for their business. It wasn't just the price or structure, but it was the appreciation of the value of the hands-on approach that we have with our companies. Dennis Huang, Polychrome |
| Long-term contracts with customers or long-term relationships with customers. The seller was flexible in terms of sticking around or transitioning out of the business after the transaction. Emotionally ready for the transaction. Bill Schloth, ASA Ventures Group |
| Determination and commitment to sell, communication, timeliness, open to feedback, open to exit planning suggestions. Andrew Plohy, August Cove Capital Inc. |
| Beyond the numbers, what really set this seller apart was his mentality. He approached the process like a partner, not a gatekeeper. He responded quickly, shared what he knew, and when he didn’t have an answer, he’d get it. That mindset made diligence smoother and gave buyers real confidence. Abe McDonald, Lane-Harkins |
| The seller had confidence in decisions and pre-decided parameters of an acceptable deal structure. Joe Bieshelt, The Venture North Group |
| The management team was already elevated to executive positions, and the seller made him/herself redundant. Mathew Burpee, Kepler Capital Corporation |
Which of the following best describes your ideal seller-owner relationship?
When asked to describe their ideal seller-owner relationship, 44.1% of respondents said “it depends on the deal” — highlighting the reality that no one-size-fits-all approach works in lower middle market transactions. Flexibility is key, as preferences often shift based on the business model, management depth, or buyer strategy. Still, nearly a third (32.4%) prefer the seller to stay on short-term to support the transition, indicating that continuity and knowledge transfer are often valued. Fewer respondents favored longer-term involvement, with 17.6% supporting seller participation as a board member or partner, and only 5.9% preferring that the seller retain a minority stake, likely reflecting concerns about future alignment, control, or the need for a clean break.
Notably, no respondents selected “fully exits at close,” suggesting that most deal professionals view some level of continued involvement, at least temporarily, as beneficial to post-close success.
How much does the macroeconomic environment influence interest in a business?
Responses to this question show that while the macroeconomic environment matters, it doesn’t dictate deal interest across the board. One-third of respondents said macro conditions have little impact—“a good business is a good business.” Another third acknowledged some influence, mainly on valuation. Only 12.1% said macro timing is critical, while 21.2% said it depends on the industry. These results suggest that most deal professionals remain focused on fundamentals, with flexibility to navigate broader economic cycles.
What industry-specific factors most impact a company’s exit readiness?
Industry-specific factors can play a major role in shaping a company’s exit readiness, often more so than broader macroeconomic trends. Warren Rose emphasized the importance of understanding the competitive landscape and industry growth stage, noting that these elements can directly affect how buyers perceive a company. Christopher Goebel added that industry cyclicality can heavily influence timing and attractiveness, particularly in sectors where demand fluctuates. These perspectives suggest that timing a sale to align with favorable industry momentum can be just as critical as having strong financials.
Don Bielen emphasized the importance of having a defensible product line, signaling that differentiation within an industry can make or break exit outcomes. Joe Bieshelt highlighted the pace of change within an industry, cautioning that “when leadership fails to keep up, value can erode quickly.” These comments reflect a shared concern: that sellers must understand not just their internal readiness, but also how industry trends—whether it’s innovation, consolidation, or disruption—shape buyer interest and deal dynamics.
Pet Peeves & Gold Stars
To close the survey, we asked deal professionals two simple but telling questions: What are your pet peeves with owners in a transaction? And How can an exiting owner earn a gold star with you? The responses reveal a clear divide between what frustrates buyers and advisors—and what earns their respect. Common concerns included sellers being indecisive, unprepared, overly emotional, or unrealistic about their value. On the flip side, “gold star” behavior consistently involved preparation, transparency, and a willingness to collaborate. Here’s how select Axial members answered, in their own words.
| Axial Member | Pet Peeves | Gold Stars |
|---|---|---|
| Mathew Burpee Kepler Capital Corporation | I've frequently seen sellers who believe their replacement salary is $x for valuation purposes, but insist on a considerably higher value for their time post-closing. | Develop a succession plan before starting the M&A process, ensure key staff members are aligned and aware, and ensure all key systems and processes are documented and structured. |
| Matt Gilbert Gilbert & Pardue Transaction Advisors | Moving the goal posts - not looking at the deal through the buyer's or lender's eyes. | Communicate well and realize that a transaction advisor is a partner not a vendor. |
| Todd Cummiskey Vercor | Not being upfront about the business or their wants. | Have their business dialed in and being direct with their objectives. |
| Dennis Huang Polychrome | When they bring in someone who has been totally absent from the process at the last minute. Oftentimes this person is purely financially focused, and reduce everything down to only the numbers. The numbers are obviously important, but it flattens all buyers and reduces any kind of edge or relationship that may have been developed. | Someone who is motivated to continue working with the business can see the value of what we are bringing to the table as investors. We are happy to pay up for great businesses, but we want there to be shared risk going forward. |
| Andrew Plohy August Cove Capital Inc. | Undecidedness, lack of communication, and lack of transparency. | Be clear, decisive, responsive, open, and flexible. |
| Mack Browder Mack Browder & Associates | Not being committed to the process; wanting to change the deal in middle of process. | Be professional, have good financial records, and don't draw unnecessary lines in the sand. |
| Luc Maestrello Transact Capital Partners | Lack of speed, emotional attachment, poor attitude, not listening to advisors. | Be open, patient, and take it day by day. |
| Spencer Williams Madfarm Advisors | At times we have to frequently reiterate with sellers that we can't place value on concepts that don't show up in their financial statements or in a data-driven forecast. | Have your financial house in order - use the right accounting system or ERP; have your CFO, Controller, or a consultant design your financial statements for business decision making (i.e. not just for a tax return), and invest in quality bookkeeping that will deliver actionable statements every month. |
Exit-Readiness and the Strategic Role of the M&A Advisor
The survey responses make one thing clear: being exit-ready isn’t just about clean financials or succession planning—it’s about mindset, expectations, and strategic clarity. These are the areas where experienced M&A advisors create the most value. Whether it’s guiding owners through emotional decision-making, aligning on valuation, or preparing the business to withstand buyer scrutiny, advisors help bridge the gap between intention and execution. The traits that respondents say define a successful seller are often the very things advisors are hired to instill.
If you’re interested in more insights drawn from Axial member surveys, check out these recent articles:
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