Exit Planning 101: what business owners should start doing 5 years before a sale
Givens LLP | February 19, 2026
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For many Canadian entrepreneurs, their business is their biggest asset—and often their retirement plan. Yet most owners don’t begin thinking seriously about their exit until a sale or succession is right around the corner.
The reality? The best exits are planned years in advance. Starting at least five years before a potential sale gives you time to increase the value of your business, reduce taxes, clean up financials, and ensure a smoother transition for you and the buyer.
Here’s what smart business owners should start doing now.
1. Clarify Your Exit Goals
Before you think about numbers, think about outcomes.
Ask yourself:
- Do I want to sell to a third party, management team, or family member?
- When do I want to step back from day-to-day operations?
- What does “success” look like financially and personally?
Your exit strategy will shape everything from how you structure compensation, to how aggressively you reinvest in growth. Having clarity early helps you make decisions that align with your long-term goals instead of short-term tax savings.
2. Clean Up Your Financial Statements
Buyers (and lenders) pay for reliable, transparent numbers. Five years out is the perfect time to:
- Separate personal expenses from business expenses
- Normalize owner compensation
- Eliminate one-time or non-recurring items
- Ensure your financials are consistent year over year
Clean financial statements make your business easier to value, easier to finance, and more attractive to serious buyers. They also help you spot operational inefficiencies that could be quietly eroding profits.
3. Reduce Dependence on You as the Owner
If your business can’t run without you, buyers will see risk—and risk reduces value.
Start building a management team and documenting processes so the business can operate smoothly without your constant involvement. This might include:
- Delegating client relationships
- Formalizing internal procedures
- Training key staff to handle critical functions
A business that “runs itself” is more valuable and more transferable.
4. Understand Your Tax Exposure Early
Selling a business can trigger significant taxes. In Canada, one of the most valuable tax advantages available to eligible business owners is the Lifetime Capital Gains Exemption (LCGE), which allows individuals to shelter up to $1.25 million of capital gains on the sale of qualifying shares as of 2026. But it’s not automatic. Your corporation must qualify as a Qualified Small Business Corporation (QSBC) at the time of sale, and there are tests that must be met well in advance
Planning early gives you time to:
- Ensure your corporation qualifies as a QSBC well before a sale
- Purify the company by removing excess cash or passive investments that could disqualify QSBC status
- Review share structure to ensure shares are eligible for the LCGE
- Address shareholder loans, related party balances and retained earnings
- Coordinate personal and corporate tax planning to maximize after-tax proceeds
QSBC eligibility isn’t something you can fix at the last minute. The rules require that certain conditions be met over time (including asset-use tests in the 24 months leading up to the sale). Waiting too long can mean missing out on a significant tax exemption.
5. Know What Your Business Is Really Worth
Many owners are surprised by how the market values their business. A professional valuation or high-level estimate can:
- Set realistic expectations
- Highlight value drivers
- Identify weaknesses that could reduce your sale price
Understanding what increases value, such as recurring revenue, diversified clients, strong margins, and documented systems, gives you time to intentionally improve those areas before going to market.
6. Strengthen Contracts and Reduce Risk
Buyers look for certainty. Loose agreements, undocumented arrangements, or unclear ownership can delay deals or reduce value.
Now is the time to:
- Formalize key customer and supplier contracts
- Review leases and long-term obligations
- Ensure intellectual property is owned by the company
- Address any outstanding legal or compliance issues
The fewer surprises during due diligence, the smoother (and more profitable) the transaction tends to be.
7. Build Your Personal Exit Plan Too
An exit isn’t just a business transaction—it’s a personal transition.
Five years out is the right time to think about:
- Personal financial planning and retirement goals
- What life looks like after the sale
- Whether you want to stay on for a transition period
- Estate planning and wealth preservation
Aligning your personal plan with your business exit plan helps ensure the sale actually supports the life you want after the transaction closes.
Start Early, Exit Smarter
Exit planning isn’t about preparing to leave tomorrow; it’s about building a stronger, more valuable business today. Even if you ultimately decide not to sell, these steps improve profitability, reduce risk, and give you more options in the future.
At Givens LLP, we work with business owners years before a sale to help them clean up financials, plan tax-efficient exits, and position their businesses for maximum value. If an exit is on your horizon, don’t wait—early planning can be the difference between an acceptable sale and an exceptional one. Let’s get started.
