Evaluating Exit Planning Advice - When Conventional Wisdom Serves You and When It Doesn't

Not all exit planning advice serves your interests equally. After working with business owners through hundreds of transactions, we’ve observed patterns where standard recommendations sometimes miss what actually matters for specific situations. Understanding when conventional guidance applies (and when it doesn’t) can mean the difference between an optimized outcome and a disappointing one.

Executive Summary

Business owners preparing for exit receive guidance from advisors, consultants, brokers, and industry publications. Much of this exit planning advice reflects genuine expertise refined through decades of transactions. But advisor incentives, industry conventions, and professional specialization can occasionally create tensions with specific seller situations, producing recommendations that prioritize process efficiency over outcome optimization for your particular circumstances.

This article examines how advisor incentive structures can create potential misalignment with seller interests, identifies specific situations where conventional wisdom may not apply to your business, and provides practical frameworks for evaluating any guidance you receive. We explore areas where standard recommendations work well alongside scenarios where they may fall short, including valuation approaches, timing recommendations, buyer selection, and deal structure preferences.

The goal isn’t cynicism about professional advisors. Most genuinely want their clients to succeed, and their expertise often proves invaluable. Rather, we aim to help you become a more sophisticated participant in your exit process, engaging more effectively with advisors rather than replacing their expertise. In our experience working with business owners, transaction satisfaction correlates strongly with active engagement in the advisory process. Owners who ask thoughtful questions, understand the reasoning behind recommendations, and contribute their unique knowledge of their businesses and markets consistently achieve better outcomes than those who passively accept standardized approaches.

Introduction

When you begin exploring exit options for your business, you’ll encounter considerable consistency in the guidance you receive. Many advisors recommend similar timelines, comparable preparation activities, and structured process frameworks. This consistency often reflects genuine best practices refined through extensive transaction experience (approaches that work well for the majority of middle-market deals).

But consistency can also indicate standardization around approaches convenient for advisory workflows rather than optimized for every client’s unique circumstances. When investment bankers frequently recommend 12-18 month timelines and competitive auction processes, it’s worth asking: does this reflect what’s optimal for my specific business, or what’s typical for the average engagement?

Our interest in examining exit planning advice more critically emerged from observing variation in outcomes. Some owners who followed every recommended step achieved excellent results. Others, following identical guidance, saw results that seemed disconnected from their preparation effort. The correlation between “doing everything by the book” and achieving optimal outcomes appeared weaker than we expected for certain business types and market conditions.

This observation led us to examine why conventional exit planning advice works brilliantly for some sellers and less well for others. What we found wasn’t an industry of bad actors. Most exit advisors genuinely work to help their clients succeed. Instead, we identified structural factors that can create gaps between standardized advisory approaches and specific seller situations: professional specialization that emphasizes certain value drivers over others, billing models that can influence timeline recommendations, and industry conventions that work for typical deals but may not suit atypical ones.

Recognizing these dynamics allows you to engage more effectively with your advisory team, asking better questions and ensuring recommendations are tailored to your circumstances rather than applied from a template. This isn’t about second-guessing every recommendation. It’s about becoming a more effective partner in your own transaction.

Understanding Advisor Incentive Structures

Every piece of advice you receive comes from someone operating within their own professional context, incentive structures, and areas of expertise. This isn’t problematic in itself. It’s simply reality. Most advisors work diligently for their clients, and understanding how structural factors can influence recommendations helps you engage more productively rather than defensively.

How Fee Structures May Influence Recommendations

Most M&A intermediaries work on success fees calculated as a percentage of transaction value. For middle-market transactions in the $2M-$20M range, these fees typically range from 5-10%, with smaller deals commanding higher percentages and larger deals lower percentages. This model creates obvious alignment with sellers on maximizing price, but it also produces potential tensions worth understanding.

Success fee structures can incentivize transaction completion alongside outcome optimization. An advisor who has invested six months working a deal has a natural interest in seeing that deal close. This doesn’t mean advisors routinely sacrifice client value to close deals. Reputation and referrals depend on satisfied clients, which creates powerful counter-incentives. But the tension exists, particularly in specific situations such as when walking away from a current offer might produce better results in a future process.

This dynamic may subtly influence certain recommendations. Suggestions to be “flexible” on terms or to accept earn-out structures rather than renegotiating might reflect reasonable deal judgment, or might occasionally prioritize closing probability over value optimization. The key is understanding this potential tension exists so you can evaluate recommendations accordingly, not to assume malicious intent.

Advisors with strong reputations have compelling incentives to prioritize client outcomes precisely because their long-term success depends on referrals and repeat business. The structural tensions we’re describing are real but shouldn’t dominate your perception of advisory relationships.

The Trade-offs of Standardization

Advisory firms develop standardized processes because customization is expensive and consistency enables quality control. When you engage exit planning advice, you’re often receiving a methodology developed across many client engagements. This methodology represents accumulated expertise, which is valuable. But that expertise may reflect typical situations rather than your specific circumstances.

An advisor who recommends a competitive auction process has probably run dozens of successful auctions. Auctions work well for many middle-market transactions, particularly those with multiple natural buyers, commodity-like characteristics, and sufficient scale to justify buyer participation costs. But the same approach may be less optimal for highly specialized businesses where only one or two buyers would pay strategic premiums. The advisor’s exit planning advice reflects their genuine expertise without necessarily accounting for how your situation differs from their typical engagement.

Standardization also appears in preparation recommendations. Most advisors maintain checklists of pre-market activities. These lists look remarkably similar across firms because they’ve been refined through industry experience. For businesses with common value drivers and typical buyer pools, these checklists often prove valuable. For businesses with unusual characteristics, some items may be essential while others add cost without affecting outcomes.

Recognizing Expertise Boundaries

Advisors naturally emphasize areas where they add the most value. Tax advisors provide exit planning advice focused on tax optimization, which may be precisely what you need, or may emphasize tax savings at the expense of deal terms that matter more for your situation. Investment bankers emphasize process management but may have limited expertise in operational improvements that could increase value before going to market.

This isn’t dishonesty. It’s the natural result of professional specialization. When your expertise lies in M&A process, every situation looks like it needs M&A process expertise. When you specialize in value enhancement consulting, every business appears to need value enhancement work.

The challenge for sellers is integrating advice from specialists who each see part of the picture. No single advisor has expertise across all dimensions affecting exit outcomes, yet each provides exit planning advice within their domain of expertise. Consider developing a framework for integrating advice from multiple specialists, potentially with help from a lead advisor who can coordinate perspectives.

When Conventional Wisdom Works (And When It May Not)

Understanding how incentive structures and specialization can influence guidance prepares us to examine specific areas where standard exit planning advice may or may not apply to your situation. These aren’t cases of wrong versus right advice, but rather situations where context determines whether conventional approaches serve you well.

Timeline Recommendations in Context

Conventional exit planning advice often suggests 2-5 years to prepare for an exit. This extended timeline has become common industry practice. But what does this recommendation actually address, and when does it apply?

Extended timelines serve legitimate purposes when businesses have specific issues requiring time to resolve: customer concentration that needs diversification, management gaps that need filling, legal or regulatory problems that need resolution, or financial performance inconsistencies that need smoothing. For businesses with these concrete impediments, preparation time directly affects achievable value.

But generic timeline recommendations may be less relevant for businesses that are already well-positioned. A company with diversified customers, strong management depth, clean financials, and solid growth may not need years of preparation. It may be ready for market much sooner. In these cases, extended timelines may delay value realization without proportionally improving outcomes.

The key question isn’t “how long should I prepare?” but rather “what specific impediments exist in my business, and how long will they take to address?” For some businesses, the answer is 12-18 months. For others, it’s 3-4 years. For a few well-positioned companies, the answer might be “we could start now.”

Extended timelines also carry opportunity costs. Markets shift, buyer interest changes, and seller circumstances change during lengthy preparation periods. For businesses in cyclical industries or those dependent on specific market windows, preparation delays can mean missing optimal timing. A “perfect” data room completed after extended preparation may arrive after the best window has closed.

Advisory firms billing monthly retainers naturally prefer longer engagements. This is simply how their business model works. This doesn’t make their timeline recommendations wrong, but it does mean you should push for specificity: what exactly are we addressing during this preparation period, and what evidence suggests each activity will improve my outcome?

Auction Processes: When They Work and When They Don’t

Competitive auction processes enjoy widespread acceptance as the superior approach to maximizing value. Many investment bankers recommend running a “broad process” to “create competitive tension.” This sounds logical: more buyers means more competition, which should mean higher prices. And for many transactions, this logic holds.

Auctions often produce favorable outcomes for businesses with these characteristics:

• Multiple natural buyers who would value the business similarly
• Operations that are relatively standardized within their industry
• Clear financial performance that’s easy for buyers to evaluate
• Sufficient scale to justify the transaction costs of participating in an auction

But auctions may work less well for businesses with different characteristics:

• Highly specialized operations where only one or two buyers have strategic reasons to pay premiums
• Businesses requiring significant buyer education before value becomes apparent
• Situations where confidentiality is critical and broad marketing creates risks
• Deals where the seller values relationship and transition support as much as price

When running an auction with your optimal strategic buyer, you risk commoditizing what might be a unique opportunity for that specific acquirer. A buyer who would pay a strategic premium in a bilateral negotiation may reduce their offer to competitive levels when they see the business being shopped broadly.

Targeted processes involving 2-4 strategic buyers can balance competitive tension with relationship preservation. This approach captures much of the auction’s competitive benefit while maintaining the relationship dynamics that can drive strategic premiums. The right choice depends on your specific buyer landscape, something worth exploring thoroughly before committing to a process structure.

This isn’t to say auctions are wrong. They’re appropriate for many, perhaps most, middle-market transactions. But the blanket recommendation that auctions are always superior may not account for your specific buyer landscape and business characteristics.

EBITDA Focus: Necessary But Not Sufficient

Exit planning advice almost universally emphasizes EBITDA as the primary value driver. Advisors recommend “maximizing EBITDA,” consultants offer “EBITDA improvement programs,” and valuation discussions invariably return to this metric. EBITDA matters. It’s the foundation of most middle-market valuations.

But exclusive EBITDA focus can obscure important nuances. Different buyer types weight different factors alongside EBITDA:

Private equity buyers typically emphasize EBITDA quality, predictability, and growth potential. They care about sustainable cash flows they can leverage, opportunities for margin expansion, and multiple arbitrage potential. A PE buyer might pay 5-7x EBITDA for a business with strong growth trajectory versus 4-5x for one with flat growth. That’s a difference of 20-40% in valuation on the same current EBITDA.

Strategic acquirers may value revenue synergies, customer relationships, technology, talent, or market position more than current EBITDA. A strategic buyer might pay premiums for capabilities that don’t appear on your income statement. We’ve seen strategic premiums of 30-50% over financial buyer offers when the target filled a specific capability gap.

Individual buyers and search funds often prioritize owner-independent operations, lifestyle factors, and financing terms over pure EBITDA maximization.

We’ve observed situations where sellers cut marketing spending to boost short-term EBITDA, inadvertently damaging growth trajectories that buyers would have valued. Consider a business generating $1.5M EBITDA with 15% annual growth versus $1.7M EBITDA with 5% growth. At a 5x multiple, the first business might command $7.5M while the second gets $7.65M. But a growth-focused buyer might pay 6x for the first business ($9M) and only 4.5x for the second ($7.65M). The $200,000 EBITDA improvement cost $1.35M in value.

Most preparation adds value, but these examples show how single-metric focus can sometimes backfire when it conflicts with what specific buyers actually prioritize.

Due Diligence Preparation: Finding the Right Balance

Conventional exit planning advice emphasizes extensive due diligence preparation: organize your data room, clean up contracts, resolve potential issues before buyers arrive. This sounds prudent and often is. Preparation reduces deal risk, accelerates due diligence timelines, and prevents surprises that kill transactions.

But we’ve observed situations where extensive preparation created unintended consequences. Sellers who spent months preparing detailed data rooms sometimes surfaced issues that might not have been questioned in a lighter-touch process. The preparation process itself can generate concerns requiring explanation that buyers might never have raised independently.

More commonly, preparation addresses the wrong priorities. Sellers prepare for what they assume buyers will ask rather than what specific buyers in their market actually care about. We’ve seen data rooms containing thousands of documents that no one ever requested, while missing the few pieces of information buyers actually needed.

The key is targeted preparation: address genuine issues that would concern buyers while avoiding over-documentation that creates work without value. For businesses with significant problems (regulatory issues, customer concentration, management gaps, legal exposure), thorough preparation is essential. For businesses with clean fundamentals, extensive preparation may add cost without improving outcomes.

A Framework for Evaluating Exit Planning Advice

Rather than simply cataloging when standard advice applies, we propose a framework for evaluating any guidance you receive. These questions help you engage more effectively with advisors, not replace their expertise. Most business owners lack extensive M&A experience, so this framework helps ask better questions rather than make independent technical judgments.

Question One: Who Benefits From This Recommendation?

For every recommendation, consider who benefits if you follow it. Often the answer genuinely is you. Most advisors make recommendations they believe serve client interests. But understanding benefit alignment helps you weight advice appropriately.

When an investment banker recommends an exclusive engagement with an aggressive timeline, consider: they benefit from locked-in fees and process efficiency, while you benefit from speed to market. These interests may align perfectly. Or the aggressive timeline may not suit your situation, in which case you should explore the trade-offs collaboratively.

When a consultant recommends an extended value enhancement program, they benefit from an ongoing billing relationship, while you benefit from improved value if the improvements actually materialize and outweigh the cost and time invested. Ask for evidence that similar businesses achieved measurable value increases from comparable programs.

Question Two: What Evidence Supports This Recommendation?

Request specific evidence that the recommended approach produces better outcomes for situations like yours. Anecdotes about individual transactions provide context but not proof. Ask about systematic patterns across multiple comparable situations.

You may discover that some “best practices” in exit planning advice rest on surprisingly thin empirical foundations. Many recommendations persist because they’ve been repeated throughout the industry without rigorous testing. When advisors cite their experience, ask about the distribution of outcomes: how often did this approach work well, and when did it fall short?

Reputable advisory firms should be able to point to transaction patterns, client outcome examples, or at least detailed case studies supporting their recommendations. If evidence is unavailable, that doesn’t make the recommendation wrong, but it does mean you’re relying on professional judgment rather than proven patterns.

Question Three: What Are The Alternatives?

Conventional exit planning advice sometimes presents recommendations as if no alternatives exist. The standard process becomes the only process. But alternatives always exist, and understanding them helps you evaluate whether the recommended path truly suits your circumstances.

When an advisor recommends an auction process, ask about bilateral negotiations or targeted processes: when would those work better? When they recommend an 18-month timeline, ask what an accelerated process would look like and what risks it would create. When they recommend specific preparation activities, ask what happens if you skip them.

Good advisors welcome these questions because they lead to better-tailored recommendations. Frame your questions as seeking to understand and learn rather than challenging competence. This collaborative approach typically strengthens rather than strains advisory relationships.

Question Four: Does This Match Your Buyer Reality?

The ultimate test for exit planning advice is whether it aligns with what actually happens in successful transactions for businesses like yours. If possible, talk to owners who have recently sold similar businesses. Ask what they actually did versus what advisors recommended. Ask what mattered most versus what proved irrelevant.

You may discover gaps between advisory recommendations and transaction realities. Activities that advisors insisted were essential sometimes prove optional. Issues that advisors dismissed as unimportant occasionally prove critical. Real-world feedback from comparable transactions provides invaluable calibration.

Question Five: What’s The Cost Of Being Wrong?

Some exit planning advice, even if imperfect, carries low costs if it proves unnecessary. Other advice, if wrong, produces significant harm. Understanding this asymmetry helps you decide how much scrutiny each recommendation deserves.

Advice to delay your exit carries high costs if wrong. You may miss optimal market windows or face changed personal circumstances. Advice to prepare certain documents carries lower costs if wrong. You’ve invested time and money but haven’t fundamentally damaged outcomes. Weight your evaluation effort based on the magnitude of potential downside.

Working Effectively With Your Advisory Team

The point of understanding advisor incentives and evaluating recommendations thoughtfully isn’t to become adversarial with your advisors. Most exit advisors are experienced professionals who genuinely want to help you succeed. The goal is engaging more effectively, as an active participant rather than passive recipient of guidance.

Build Collaborative Relationships

The best outcomes typically come from sellers who treat their advisory relationships as partnerships. Share your priorities, constraints, and concerns openly. When you disagree with a recommendation, explain why rather than simply overruling or silently ignoring advice. Good advisors will either adjust their recommendations based on your input or explain more clearly why their original advice applies to your situation.

This collaborative approach requires investment. Expect to spend significant time (potentially 40-80 hours over several weeks) developing competence in your specific transaction dynamics. This investment pays dividends through better decision-making and more productive advisory relationships.

Ask “Why” Frequently (But Constructively)

Push advisors to explain the reasoning behind recommendations, framing your questions as seeking to understand rather than challenging their expertise. “Help me understand why this approach works better for our situation” produces more useful responses than “Why should I believe that?”

Advisors who can articulate why a particular approach suits your situation and what alternatives they considered are providing tailored guidance. Those who can only offer standard playbooks may not be accounting for your specific circumstances. Either way, the conversation improves your understanding.

Seek Multiple Perspectives

No single advisor sees the complete picture. Investment bankers understand deal processes but may miss operational issues. Accountants understand financial presentation but may miss strategic positioning. Attorneys understand contract terms but may miss relationship dynamics.

Deliberately seek perspectives from advisors with different expertise and different incentive structures. Your accountant has no stake in whether you run an auction or bilateral process. Their perspective on that choice may be more objective than your investment banker’s. A lead advisor can help coordinate these perspectives into coherent strategy.

Verify With Transaction Participants

The most valuable insight comes from people who have recently completed transactions similar to what you’re contemplating. Advisors describe what should happen; transaction participants describe what actually happened. Prioritize learning from the latter.

Ask other owners: What surprised you? What advice proved valuable? What would you do differently? These conversations often reveal insights that advisory playbooks miss.

Actionable Takeaways

Engage actively while maintaining collaboration. Owner engagement correlates with transaction satisfaction. Your job isn’t to accept or reject advisor recommendations wholesale. It’s to understand them deeply enough to make informed decisions while preserving productive working relationships. This approach requires significant time investment, potentially 4-8 weeks during advisory selection and onboarding.

Push for situation-specific guidance constructively. Generic exit planning advice (prepare for several years, maximize EBITDA, run an auction) provides limited value without customization. When advisors offer generalities, ask how their recommendations specifically apply to your business characteristics, buyer landscape, and personal objectives. Frame questions as learning opportunities.

Understand incentive structures without becoming paranoid. Advisor incentives can create potential tensions in specific situations. This doesn’t mean advisors are untrustworthy. Most work hard for their clients, and their long-term success depends on client satisfaction. But understanding incentive dynamics helps you evaluate recommendations more effectively, particularly around timelines, process structure, and deal terms.

Focus preparation on genuine value drivers. Rather than following detailed checklists, identify specific impediments to value in your business and address those directly. Preparation for preparation’s sake adds cost without improving outcomes. Ask advisors to prioritize activities by expected impact on transaction value.

Match process to buyer reality. The right transaction process depends on your buyer landscape. Auctions work well when multiple buyers would value your business similarly. Bilateral or targeted processes may work better when strategic premiums come from specific acquirers. Explore these trade-offs before committing to a process structure.

Recognize the limits of self-evaluation. This framework helps you engage more effectively with advisors rather than replace professional expertise. Most business owners lack extensive M&A experience, and complex technical decisions still require experienced guidance. Use these questions to improve advisory conversations, not to second-guess every technical recommendation.

Conclusion

The exit planning industry has developed substantial expertise helping owners navigate transactions. Most advisors bring genuine value, and conventional approaches work well for many middle-market deals. But the relationship between standardized advice and optimal outcomes is more nuanced than “follow the playbook and succeed.”

We’ve examined how advisor incentive structures can influence recommendations, identified situations where conventional exit planning advice may not apply to specific circumstances, and provided frameworks for engaging more effectively with your advisory team. This knowledge doesn’t make you an expert, but it makes you a more effective participant in your own transaction process.

The owners who achieve optimal exit outcomes share a common characteristic: they treat advisor recommendations as inputs to their own decision-making rather than instructions to be followed without question. They engage collaboratively rather than adversarially. They understand that most conventional advice works for most situations, but they take responsibility for determining whether their situation is typical or exceptional.

Your exit represents the culmination of years or decades building your business. The stakes are high enough to warrant engaging thoughtfully with the guidance you receive. Ask questions, seek evidence, understand alternatives, and maintain the collaborative relationships that produce the best outcomes. That’s not skepticism. It’s the partnership approach that serves everyone involved.