Afrexai Exit Planning

# Exit Planning Framework

Generate a comprehensive business exit readiness plan. Covers valuation prep, buyer targeting, due diligence readiness, timeline planning, and post-exit transition.

## Usage

"Build me an exit plan for my SaaS company"
"Assess my business exit readiness"
"Create a 24-month exit preparation roadmap"

## What You Get

### 1. Exit Readiness Score (0-100)
Rate across 8 dimensions:
- **Revenue Quality** (25 pts): Recurring %, concentration, growth trajectory
- **Financial Hygiene** (15 pts): Clean books, GAAP/IFRS compliance, audit-ready
- **Customer Metrics** (15 pts): NRR >110%, logo retention >85%, diversification
- **Team Independence** (10 pts): Can it run without founder for 90 days?
- **IP & Moat** (10 pts): Patents, proprietary tech, switching costs
- **Legal Clean Room** (10 pts): No pending litigation, clean cap table, contracts assigned
- **Growth Story** (10 pts): TAM expansion, product roadmap, market position
- **Operational Maturity** (5 pts): SOPs documented, systems automated, KPIs tracked

### 2. Valuation Range Estimator

**SaaS Multiples (2026 benchmarks):**
| ARR Growth | NRR >120% | NRR 100-120% | NRR <100% |
|-----------|-----------|-------------|-----------|
| >40% | 12-18x ARR | 8-12x ARR | 5-8x ARR |
| 20-40% | 8-12x ARR | 5-8x ARR | 3-5x ARR |
| <20% | 5-8x ARR | 3-5x ARR | 2-3x ARR |

**Services/Agency Multiples:**
| EBITDA Margin | Growing >20% | Growing 10-20% | Flat/Declining |
|-------------|-------------|---------------|----------------|
| >25% | 6-10x EBITDA | 4-6x EBITDA | 3-4x EBITDA |
| 15-25% | 4-6x EBITDA | 3-4x EBITDA | 2-3x EBITDA |
| <15% | 2-4x EBITDA | 2-3x EBITDA | 1.5-2x EBITDA |

**Ecommerce/DTC:** 3-5x SDE (sub-$5M), 4-8x EBITDA ($5M+)

### 3. Buyer Landscape Map

**Strategic Buyers** (highest multiples):
- Competitors seeking market share
- Adjacent companies wanting your vertical/capability
- PE platform companies doing roll-ups
- International companies entering your market

**Financial Buyers** (PE/Growth Equity):
- Lower middle market PE ($10M-$100M enterprise value)
- Growth equity ($5M-$50M revenue companies)
- Search funds ($1M-$10M EBITDA targets)
- Family offices (patient capital, flexible structure)

**Individual Buyers:**
- ETA searchers (MBA-backed acquisition entrepreneurs)
- Industry operators looking to buy vs build
- SBA loan-backed buyers (up to $5M)

### 4. Pre-Exit Checklist (24-Month Countdown)

**Month 24-18: Foundation**
- [ ] Engage M&A advisor or investment banker
- [ ] Quality of Earnings (QoE) pre-assessment
- [ ] Clean up financials — separate personal, normalize add-backs
- [ ] Document all revenue streams with proof of recurring nature
- [ ] Update or create operating procedures for all core functions
- [ ] Resolve any legal issues (IP disputes, employee claims, contract gaps)

**Month 18-12: Optimization**
- [ ] Reduce customer concentration below 20% for top client
- [ ] Lock in key employees (retention bonuses, equity vesting acceleration)
- [ ] Eliminate founder dependency — delegate all daily ops
- [ ] Build management team that buyers want to retain
- [ ] Accelerate profitable growth (not growth-at-all-costs)
- [ ] Clean up tech debt, document architecture

**Month 12-6: Preparation**
- [ ] Prepare Confidential Information Memorandum (CIM)
- [ ] Build detailed financial model with 3-year projections
- [ ] Create data room with all due diligence documents
- [ ] Identify 30-50 potential buyers across all categories
- [ ] Get formal valuation or fairness opinion
- [ ] Tax planning — structure for long-term capital gains

**Month 6-0: Execution**
- [ ] Launch controlled auction or targeted outreach
- [ ] Manage NDAs and information flow
- [ ] Navigate LOIs — compare structure, not just headline price
- [ ] Due diligence support (expect 60-90 days)
- [ ] Negotiate purchase agreement, representations, escrow
- [ ] Plan transition period (typically 6-24 months)

### 5. Deal Structure Decoder

**Common structures and what they mean for sellers:**

| Structure | Seller Risk | Tax Impact | When Used |
|----------|-----------|-----------|-----------|
| All Cash | Lowest | Immediate gain | Strong seller position |
| Cash + Earnout | Medium | Deferred gain | Revenue validation needed |
| Cash + Seller Note | Medium | Installment sale | Buyer financing gap |
| Equity Rollover | Highest | Tax-deferred | PE recaps, strategic mergers |
| Asset Sale | Varies | Ordinary income risk | Liability protection for buyer |
| Stock Sale | Varies | Capital gains | Simpler, seller-preferred |

**Earnout Red Flags:**
- More than 30% of total value in earnout = risky
- Earnout period >2 years = too long
- Metrics you can't control post-close = avoid
- No accounting standard specified = dispute guaranteed
- Buyer can make decisions that tank your earnout = walk away

### 6. Tax Optimization Strategies

**US Sellers:**
- QSBS exclusion: up to $10M or 10x basis tax-free (Section 1202)
- Installment sale: spread gain over payment period
- Opportunity Zone reinvestment: defer and reduce gains
- Charitable remainder trust: donate appreciated stock pre-sale
- ESOP sale: 1042 rollover for C-corp shareholders

**UK Sellers:**
- Business Asset Disposal Relief (BADR): 10% rate on first £1M
- EIS/SEIS reinvestment relief
- Holdover relief for gift of business assets
- Entrepreneurs' Relief planning (lifetime limit)

### 7. Post-Exit Transition Plan

**Founder Transition (typical terms):**
- 6-month transition: light involvement, knowledge transfer
- 12-month transition: part-time advisory, customer introductions
- 24-month transition: full operational handover (PE-backed deals)
- Non-compete: usually 2-3 years, geographic + industry scope

**What to negotiate before signing:**
- Transition compensation (salary + benefits continue)
- Acceleration of remaining equity/earnout on termination
- Scope of non-compete (narrower = better for you)
- Ability to invest in non-competing businesses
- Personal brand rights (can you still speak, write, consult?)

## Industry Exit Benchmarks

| Industry | Median Multiple | Median Deal Size | Avg Time to Close |
|---------|----------------|-----------------|-------------------|
| B2B SaaS | 7.2x ARR | $28M | 6-9 months |
| IT Services | 1.8x revenue | $12M | 4-6 months |
| Healthcare IT | 5.5x ARR | $35M | 8-12 months |
| Ecommerce | 4.1x SDE | $2.5M | 3-5 months |
| Agency/Services | 4.8x EBITDA | $8M | 4-7 months |
| Manufacturing | 5.2x EBITDA | $15M | 6-9 months |
| Fintech | 9.1x ARR | $45M | 7-10 months |

## Common Exit Killers

1. **Customer concentration** — One client >25% of revenue scares every buyer
2. **Founder dependency** — If you ARE the business, it's worth less without you
3. **Messy financials** — Commingled expenses, no monthly close, no forecasting
4. **Key person risk** — Critical employees with no contracts or retention plan
5. **Revenue quality** — One-time revenue dressed up as recurring
6. **Undisclosed liabilities** — Tax issues, pending claims, contract breaches
7. **Unrealistic expectations** — Pricing based on 2021 multiples, not 2026 reality

## Resources

- [AI Revenue Leak Calculator](https://afrexai-cto.github.io/ai-revenue-calculator/) — Find where your business is losing value before exit
- [AI Agent Context Packs](https://afrexai-cto.github.io/context-packs/) — Industry-specific frameworks ($47/pack)
- [Agent Setup Wizard](https://afrexai-cto.github.io/agent-setup/) — Automate operations to reduce founder dependency

**Bundles:** Pick 3 Packs $97 | All 10 Packs $197 | Everything Bundle $247