The Exit Planning Process: Larger Middle Market vs. Smaller Lower-Middle Market Businesses Exits

As a business owner, you pour your heart and soul into your company, working tirelessly to build it from the ground up. But what happens when it's time to say goodbye?

Whether you're planning to retire, move on to a new venture, or simply want to cash out on your hard work, exit planning is a critical process. However, the approach to exit planning is not one-size-fits-all, and the process can look very different depending on the size of your business

So how is the exit planning process different for a large, middle market company versus a small "main street" business exit?

1. Complexity of the Business

One of the biggest differences between large and small businesses is the level of complexity. Large companies usually have multiple locations, diverse staff, complex supply chains, and a variety of products or services.

This means that their exit planning process can take years to complete due to the complexity of untangling the business.

In contrast, small “main street” businesses usually have one location, a smaller staff, and a more straightforward product or service. This means that the exit planning process can be handled relatively quickly, sometimes within months.

However, just because the process can be faster, it does not mean that it’s less important.

2. The Role of Partnerships

Partnerships can play a major role in a business exit. In many large, middle market companies, there are often several partners involved, each with different stakes in the business.

This can make negotiations complicated and time-consuming. It’s important to have clear communication and alignment from all parties involved to ensure a smooth transition.

For small businesses, partnerships are often less common. Nonetheless, if there are partners involved, it’s usually a smaller group and the stakes can be more easily identified. Communication is still important, but the process can often be more straightforward.

3. Transitioning the Company Culture

When a large, middle market company is sold, it’s not only the business that’s changing hands. The company culture is also undergoing a significant transformation.

The staff, management, and overall work environment will change, which can cause anxiety and uncertainty. It’s important to work with a team of M&A advisors to address these concerns and ensure a successful transition.

For small “main street” businesses, the transition can often be smoother as there’s a smaller staff to manage. However, it’s still important to address the impact of the sale on the staff and culture. Communication, transparency, and empathy are key in ensuring a positive outcome.

4. Valuation

Finally, the valuation of a business plays a significant role in the exit planning process. Large, middle market companies have more complex financials, including multiple locations, products or services, and revenue streams.

This means that valuing the business can be a complicated process that requires expertise in financial analysis and forecasting.

In contrast, small “main street” businesses usually have simpler financials, which makes valuing the business more straightforward. Regardless, it’s still important to work with a team of advisors to ensure that the valuation is accurate and that you receive the best possible price for your business.

As you can see, the exit planning process is not the same for all businesses. Large, middle market companies and small “main street” businesses have unique needs and require different strategies. Whether you’re selling a large company or a small one, it’s important to work with a team of certified M&A advisors to navigate the complexities of the process.