Another way to help yourself with your exit strategy is to get prepared well ahead of time for what similar companies have been going for out in the marketplace. That’s another reason to develop an early relationship with a business broker or M&A advisor.

A common complaint about sellers is that they have unrealistic expectations on what their companies are really worth. Unlike the real estate market, which can be fairly well defined and there’s numerous transactions that are well published, sales of companies are not so. Transactions are fewer, details ore often not published.

You might say, "Well, what about public companies in our industry? That’s pretty readily available information." That’s true, but being public doesn’t necessarily translate to private company valuation. Normally, there can be a pretty substantial discount. First, the public company is likely to be larger side. As the company grows in side, they usually command a higher multiple on their earnings. Secondly, except for very small companies in the market, once companies are at a certain size in the public market they have very good liquidity, shares can be easily sold. That’s not the case with a private company and as a result there’s a liquidity discount that gets supplied to private companies as well.

So, keep abreast ahead of time on what similar companies are getting sold for. You could get some limited information depending upon your industry by using public sources, such as Google. Even better will be tapping into the database of a business broker, a merger and acquisition firm.

Another advantage to keeping abreast of the market valuation is timing. Valuations can swing tremendously based upon the cycle of the market. These can vary by particular industry, although there can be some common overall market characteristics. You want to be wired in to when it can be the optimal time for you to sell your business.