The Cost of Waiting - Part 1
Why Exit Preparation Must Start Earlier Than Most Owners Think
Most business owners know that eventually they will leave their business. What many underestimate is how much the timing of their preparation can influence what happens when that day arrives.
For some owners, serious exit preparation begins when they decide they are ready to sell. They call their accountant, lawyer, wealth advisor or M&A professional and begin asking what needs to be done. That may feel like the beginning of the exit process. In reality, it may already be late.
A strong exit is rarely created during the transaction itself. It is usually built in the years before the transaction, while there is still time to strengthen leadership, reduce dependence on the owner, improve financial quality, diversify risk, demonstrate growth and build a company capable of performing without its founder.
The central issue is simple:
Preparing to sell a business and building a business worth buying are not the same thing.
· The first can sometimes be accomplished relatively quickly.
· The second usually takes time.
Canada Has an Exit Preparation Gap
The scale of the exit preparation gap is significant. The Canadian Federation of Independent Business reported that 76% of Canadian small business owners planned to exit their businesses within ten years, representing more than $2 trillion in business assets, yet only 9% had a formal succession plan.
More recent research from the Business Development Bank of Canada suggests the preparation gap remains considerable. In August 2026, BDC reported that nearly one in five Canadian companies plans to exit within five years, representing more than $300 billion in revenue.
Among businesses likely to exit within five years:
83% had taken at least one preparatory action,
only 29% had taken three or more concrete actions,
only 24% had a formal succession or exit strategy, and
only 44% had taken at least one action specifically intended to increase business value.
The issue is therefore not simply whether owners intend to exit. It is whether they are giving themselves enough time to create a company another owner will want to acquire and can confidently operate after the current owner leaves.
Owners May Underestimate How Long Transition Takes
BDC's advisory experts report that entrepreneurs tend to expect a business transition to take approximately two years. A complete transition, however, often spans three to five years. That difference matters because many of the characteristics that contribute to a transferable business cannot simply be created in the months leading up to a transaction.
Consider leadership: an organizational chart can be redesigned quickly. New job descriptions can be written. Responsibilities can be reassigned. But building a leadership team capable of consistently making decisions and operating the company without the owner takes considerably longer.
The same problem appears elsewhere in the business.
Processes: Procedures can be documented quickly. Demonstrating that employees consistently follow them without owner intervention requires operating history.
Customer concentration: A diversification strategy can be launched. Showing that revenue concentration has actually declined requires new customers and results.
KPIs: Metrics can be created in days. Demonstrating that management consistently uses them to operate the company requires time.
Growth: A strategy can be developed quickly. Proving that it produces sustainable growth requires execution.
Financial reporting: Reporting can be improved relatively quickly. Building a credible record of consistent financial performance requires multiple reporting periods.
Succession: A successor can be identified. Demonstrating that the person can successfully lead the company requires experience and evidence.
This is why time matters.
Time allows an owner to move from intention to evidence.
PwC Canada recommends that owners begin sale planning at least five years before the intended transaction, allowing time to establish objectives, create a value-creation plan,
develop the growth path and address legal and tax structures.
The exact timetable will vary from company to company - the underlying principle does not. Meaningful change takes time to implement, and even more time to prove.
Early Preparation and Late Preparation Are Fundamentally Different
Several years before an exit, an owner can ask:
What would make this a substantially better business?
That question encourages long-term value creation. It can lead to investments in leadership, systems, technology, customer diversification, recurring revenue, financial management and growth.
Several months before an exit, the question can become very different:
What can we fix before the buyer finds it?
That is no longer primarily value creation - it is risk mitigation.
The owner may suddenly be trying to:
· clean up financial information,
· document processes that have historically existed only in people's heads,
· repair or formalize contracts,
· resolve governance issues,
· explain customer concentration,
· address weaknesses in management,
· defend adjustments to normalized earnings, or
· demonstrate that the owner is no longer essential to everyday operations.
These are important activities, but the closer the company gets to a transaction, the fewer meaningful levers remain available.
The Owner's Real Advantage Is Time
Starting early does not guarantee a successful sale or a particular valuation. Markets change. Buyers have different strategic priorities. Economic conditions shift. Industry cycles matter. But time gives the owner something extremely valuable: the ability to act before those variables matter.
With sufficient runway, an owner can identify weaknesses and decide whether they are worth correcting:
· They can invest in leadership before they need a successor.
· They can diversify customers before concentration becomes a buyer concern.
· They can establish financial discipline before Quality of Earnings begins.
· They can demonstrate growth before presenting a forecast to a buyer.
· They can reduce their own involvement before someone asks whether the company can operate without them.
Most importantly, they can make those changes while they still have choices.
Do Not Wait Until You Want to Leave
The best time to begin exit preparation is not necessarily when the owner has selected an exit date. It is when the owner still has enough time to improve the underlying business. That may be years before an actual transaction and that is precisely the point.
A company with stronger leadership, better financial visibility, disciplined processes, diversified customers and less dependence on its founder is not merely easier to sell. It is usually also easier to grow, easier to manage and potentially more resilient.
That makes early exit preparation less about predicting when an owner will leave and more about creating a business that gives the owner choices when that time eventually arrives.
The objective should not simply be to prepare a company for sale - it should be to build a company worth buying.
The Question Every Owner Should Ask
Instead of asking: “When should I start preparing to sell?”, the better question may be: “If the right buyer appeared three years from now, would I have enough time today to build the company I would want them to see?”
If the answer is uncertain, preparation should probably already be underway. Because once the owner decides they must sell, the most valuable resource may no longer be money, advisors or opportunity. It may be the one thing they cannot buy back: time.
Coming in The Cost of Waiting - Part 2
Starting early creates time to make improvements, but improvements alone are not enough. A buyer must be able to see evidence that those improvements are real and sustainable.
Part 2 in this arc will examine why buyers need proof, not promises, and why exit readiness cannot simply be manufactured shortly before a transaction.
Selected Sources
· Canadian Federation of Independent Business, Succession Tsunami: Preparing for a Decade of Small Business Transitions in Canada, 2023.
· Business Development Bank of Canada, Many Entrepreneurs Are Ready to Pass the Torch, but Few Are Prepared, August 12, 2026; BDC Business Transition Survey, September 2025.
· PwC Canada, Selling Your Private Company? Know and Realize Its True Value.
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