Exit Readiness Model - How Ready Is Your Business to Sell?

I built this template to help any business understand their readiness for an exit. It can also be used to help understand the value of a business you are trying to buy. The framework is not specific to any one industry and hits on key aspects such as financial health, governance, risk, scalability, and more. After going through this exercise, it will become clearer how sellable your business is and if it is more likely to sell on the higher or lower end.

$65.00 USD

After purchase, the template will be immediately available to download. It is also included in the Business Valuation bundle and The Super Smart Bundle.

exit scorecard

Template Features:

  • Measure key metrics across 7 main categories.
  • 24 sub categories.
  • Simply adjust all cells that are highlighted in yellow.
  • Grading scale from 1 to 10 and final letter grades for each main category and a final overall grade.
  • Assign weights to each sub category and main category.
  • Conditional formatting (green/yellow/red) for good and bad grades.
  • The Summary page is formatted for printing on 8.5 x 11.
The current weights and thresholds have been researched and are what I think is reasonable, but as a user of this template that takes this to consult for clients, you can adjust the weights as needed. Or, for internal use feel free to adjust the weights to what you believe makes the most sense.

The template will likely be used once a year to assess how ready your business is to exit and the more ready (closer your final grade is to 10) the closer you will be to a maximum valuation.

How to Use This Template and General Guidelines

To be considered "ready" for an exit, a final score in the range of 7 to 10 typically indicates that the company is in a strong position. Here's a more detailed breakdown:

  • 9-10: Excellent readiness, indicating that the company is highly attractive to potential buyers or investors.
  • 7-8.9: Good readiness, suggesting the company is generally attractive but may have a few areas for improvement.
  • 5-6.9: Moderate readiness, indicating there are several areas needing improvement before a successful exit.
  • 3-4.9: Poor readiness, suggesting significant work is needed in multiple areas to prepare for an exit.
  • 0-2.9: Very poor readiness, indicating the company is not in a suitable state for exit.
  • General Considerations for Exit Readiness Scoring System
Comprehensive Evaluation:

This scoring system covers all critical aspects of the business, including financial health, market position, operational efficiency, management and governance, legal and regulatory compliance, strategic vision, and risk management.

Objective, quantifiable metrics are used where possible to reduce bias and increase the accuracy of the assessment.

General Considerations for the Exit Readiness Scoring System:
  • Regularly update the evaluation (quarterly or yearly) to reflect changes in the business environment, market conditions, and company performance.
  • Compare your scores against industry benchmarks to understand how your company stacks up against competitors.
  • Keep detailed records of the scoring process, including the data and rationale behind each score, to provide transparency and support decision-making.
  • Identify specific areas for improvement based on the scoring results and develop action plans to address weaknesses.
  • Incorporate feedback from key stakeholders, including executives, employees, and external advisors, to refine and improve the scoring system.
  • Ensure that the scoring criteria align with the company’s strategic goals and exit objectives.
  • Be flexible in adjusting weights and criteria as the business evolves and new priorities emerge.
Stress Testing:

Stress test the scoring system by considering different exit scenarios and market conditions to ensure its robustness and reliability.

Final Thoughts

By using this structured and systematic approach, you can gain a clear and objective understanding of your company's readiness for exit. Regularly review and update the scores to ensure you remain on track and address any areas that need improvement to enhance the attractiveness of your business to potential buyers or investors.

Detailed Breakdown

A (Excellent) - 9 to 10:
Indicates that the company is in an outstanding position across all evaluated metrics.
The business is highly attractive to potential buyers or investors and is well-prepared for an exit.
Minimal improvements needed, if any.

B (Good) - 7 to 8.9:
The company is in a strong position with good performance across most metrics.
Generally attractive for an exit but might have a few areas that need some improvement.
Minor adjustments or enhancements can further solidify its readiness.

C (Average) - 5 to 6.9:
The company has an average standing with balanced strengths and weaknesses.
It may require several improvements to become more attractive for an exit.
Focus on key areas for development to elevate its overall readiness.

D (Below Average) - 3 to 4.9:
Indicates that the company is below average in several key areas.
Significant improvements are needed to prepare for a successful exit.
Prioritize addressing major deficiencies to enhance its market position and attractiveness.

F (Failing) - 0 to 2.9:
The company is in a poor state with serious issues in multiple areas.
Not currently suitable for an exit; substantial work is needed.
A comprehensive turnaround strategy is required to address fundamental problems.

Disclaimer: This is not financial advice and I am not a financial advisor. Use the model at your own risk and with your own data inputs.

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