Exit Planning

Selling When You're Ready vs. Selling When You Have To

There are two kinds of restaurant sales. In the first, the owner has spent months — sometimes over a year — getting their business ready. The books are clean. The operations run without them in the kitchen every day. The lease is locked in with favorable terms. When it's time to go to market, they have options. Multiple buyers compete. The price reflects the business at its best.

In the second, something forces the decision. A health scare. A lease that's about to expire. Burnout that's been ignored for too long. The owner lists the business as-is, with messy financials, deferred maintenance, and a staff that can't function without them. The buyer pool shrinks. The offers come in low. The timeline drags.

The difference between these two outcomes isn't luck. It's preparation.

Exit planning is what separates the owners who sell on their terms from the ones who sell on someone else's. At Smith Allen Group, we work with restaurant owners across Southern California to build a deliberate path from where you are today to the strongest possible sale — whether that's 6 months away or 18.

When to Start Planning Your Exit

Most owners don't wake up one day and decide to sell. The idea builds over time. It starts as a passing thought during a brutal Saturday night service, then comes back during tax season, then starts showing up in conversations with your spouse.

If any of these sound familiar, it's time to start the conversation:

• Retirement is on the horizon. You've spent decades building this. You want to maximize your exit and fund the next chapter — not leave money on the table because you didn't plan ahead.
• Burnout is setting in. The 14-hour days that used to feel like building something now feel like survival. You still care about the business, but you know this pace isn't sustainable.
• The passion has faded. The restaurant still runs, the money is decent, but the fire is gone. You're going through the motions. That's not a character flaw — it's a signal.
• Health concerns have changed your priorities. A health scare — yours or a family member's — has a way of clarifying what matters. If you're thinking about what happens to the business if you can't run it, now is the time to plan.
• Your lease is expiring in the next 2-3 years. Lease terms are one of the biggest factors in restaurant valuation. If your lease is approaching expiration, you need to either renew on strong terms or sell while the remaining term still supports your price.
• Partnership dynamics have shifted. Partners who once agreed on everything now disagree on the fundamentals. Rather than letting the relationship deteriorate further, a planned exit protects everyone's investment.
• The market is strong and you want to capture it. Southern California restaurant demand cycles. When buyer activity is high and inventory is low, well-prepared businesses command premium prices.
• You want to pursue something new. A new concept. A different career. More time with family. Whatever it is, selling well means having the capital and freedom to pursue it without financial pressure.

The common thread: the earlier you start planning, the more control you have over the outcome. There are many valid reasons to sell a business — none of them require waiting until you're desperate.

The Exit Planning Timeline

Exit planning isn't a single event. It's a sequence of deliberate actions spread across months. Here's what the timeline looks like when it's done right.

18 Months Before Listing

This is the strategic phase. You're not selling yet — you're setting the foundation.

• Get a preliminary business valuation to understand your starting point and identify the gaps between where you are and where you want to be
• Hire a bookkeeper or accountant who understands restaurant financials — clean, accurate books are the single biggest value driver
• Review your lease terms: remaining years, renewal options, assignment clauses, and landlord requirements
• Begin reducing your personal involvement in daily operations — start delegating tasks only you currently handle
• Identify and document all owner add-backs and discretionary expenses

12 Months Before Listing

Now you're building momentum. The changes you make here will show up in the financials buyers evaluate.

• Focus on margin improvement — tighten food costs, review labor scheduling, renegotiate vendor contracts
• Address deferred maintenance: repair or replace equipment that's visibly worn, fix cosmetic issues, update anything that signals neglect
• Document recipes, prep procedures, opening/closing checklists, and vendor relationships in a format someone else can follow
• Cross-train key employees so the business can run for days without you present
• If your lease needs renewal, begin landlord negotiations now — not when you're under pressure

6 Months Before Listing

The business should be running well, and your financial trend line should be heading in the right direction.

• Run your numbers through the SDE Calculator to see how your preparation has impacted valuation
• Compile 3 years of tax returns, monthly P&L statements, and a current balance sheet
• Resolve any outstanding tax issues, liens, or legal matters that could complicate due diligence
• Take a hard look at your online presence — reviews, social media, Google Business Profile — and shore up anything that doesn't reflect the current quality of the operation
• Schedule a formal valuation with your broker to set a realistic, data-driven asking price

3 Months Before Listing

Final polish. You're preparing to go to market.

• Work with your broker to prepare the Confidential Information Memorandum
• Ensure the physical space is clean, organized, and presents well for buyer visits
• Confirm all licenses and permits are current and transferable
• Brief your accountant and attorney — they'll need to be responsive during due diligence
• Mentally prepare for the process: it takes time, there will be tire-kickers, and the first offer isn't always the best one

Financial Preparation

If there's one area where exit planning pays for itself ten times over, it's here. Buyers and their lenders make decisions based on your financials. Unclear, inconsistent, or incomplete financial records are the number one deal killer in restaurant transactions.

Financial performance is the critical factor in every business sale. Here's what preparation looks like:

• Normalize your Seller's Discretionary Earnings. SDE is the number your business will be valued on. We help you identify every legitimate add-back — personal expenses run through the business, one-time costs, above-market owner salary — and document them clearly so buyers and lenders accept them without pushback.
• Build a clean P&L trend line. Buyers want to see revenue and earnings trending up, or at minimum stable. If your numbers are erratic, 12 months of focused management can smooth that line significantly.
• Resolve tax issues. Unfiled returns, outstanding balances, or cash-heavy reporting that doesn't match deposits — these all surface during due diligence and kill deals. Address them now while you have time.
• Separate personal from business. Personal cell phone bills, family car payments, vacations coded as business travel — these may be legitimate add-backs, but they need to be clearly identified and documented, not buried in the books.
• Get professional bookkeeping in place. Even if you've been managing QuickBooks yourself, having a professional prepare your final 12-18 months of financials adds credibility that buyers and lenders respond to.

Operational Preparation

A restaurant that requires the owner to be present 60 hours a week is worth less than one that runs smoothly in their absence. This isn't about your work ethic — it's about what a buyer is purchasing. They're buying a business, not hiring themselves into a job.

• Reduce owner dependency. If you're the only one who can open, close, manage the line, handle vendors, and solve problems — the business has a single point of failure. That's a risk buyers discount for. Start delegating systematically.
• Document everything. Recipes with exact specs. Prep lists. Opening and closing procedures. Vendor contacts and ordering schedules. Equipment maintenance records. The more documented your operation, the more transferable it is.
• Cross-train your team. If your head chef leaves and nobody can run the kitchen, you have a problem — and so does any buyer evaluating the business. Build redundancy into every key role.
• Address deferred maintenance. That walk-in compressor you've been nursing along. The hood system that needs deep cleaning. The dining room carpet that's seen better days. Buyers notice these things, and they deduct for them — often more than the cost of just fixing them.
• Update equipment and systems. You don't need to renovate, but modern POS systems, functional equipment, and a well-maintained space signal a business that's been cared for. It changes the buyer's perception from "fixer-upper" to "turnkey."

Lease Preparation

The lease is the silent driver of restaurant valuations. A great business with a bad lease — short remaining term, above-market rent, no assignment clause — is a business that's hard to sell. A good lease can add tens of thousands of dollars to your sale price.

• Know your remaining term. Buyers and SBA lenders typically want to see at least 5 years remaining on the lease, including option periods. If you're under that threshold, renewal negotiations become urgent.
• Negotiate before you need to. Landlords negotiate differently when your lease expires in 3 years than when it expires in 6 months. Start the conversation early, from a position of strength.
• Review the assignment clause. Can you transfer the lease to a buyer? Are there restrictions? Does the landlord require approval? Some leases give the landlord the right to raise rent or renegotiate terms on assignment. Know what you're dealing with before you're mid-deal.
• Understand your rent-to-sales ratio. If your rent exceeds 8-10% of gross sales, it's going to raise flags with buyers. If it's in a healthy range, that's a selling point worth highlighting.

Increasing Business Value Before You Sell

Exit planning isn't just about getting organized. It's about making targeted improvements that directly increase what a buyer will pay. Here are the moves that actually move the needle:

• Improve margins, not just revenue. A restaurant doing $1.2M in sales with 8% net margins is worth more than one doing $1.5M with 3% margins. Tighten food costs, optimize labor scheduling, and eliminate waste. Margins drive SDE, and SDE drives your sale price.
• Secure the lease. Negotiating a 5+ year lease with reasonable escalations and clear assignment language can add $50K-$100K or more to your valuation. This is often the highest-ROI action in the entire exit planning process.
• Build a management layer. If you can step away for a week and the business runs without you, you've added real value. A kitchen manager, a front-of-house lead, and a bookkeeper who knows the operation — that's a team a buyer can inherit.
• Grow the revenue trend. Even modest growth — 5-10% year over year — changes the narrative from "flat business" to "business with momentum." That narrative shift directly impacts how aggressively buyers compete and what multiples they'll pay.
• Clean up your digital presence. High Google review scores, an active social media presence, and a functional website all signal a healthy brand. Low ratings or an abandoned online presence create doubt.
• Eliminate red flags. Outstanding health violations, pending lawsuits, unresolved ADA issues, expired permits — these don't just reduce value, they can kill deals entirely. Resolve them during the planning phase, not during due diligence.

Frequently Asked Questions

How far in advance should I start planning my exit?

Ideally 12 to 18 months before you want to list. This gives you time to clean up financials, strengthen operations, secure favorable lease terms, and build a positive trend line that buyers and lenders want to see. That said, even 6 months of focused preparation can meaningfully improve your outcome compared to listing with no preparation at all.

Will exit planning cost me anything?

The initial consultation and assessment are free and confidential. Exit planning itself is about making changes within your business — improving your books, tightening operations, addressing lease issues — that cost effort and attention more than money. Some owners invest in minor upgrades or professional bookkeeping, but these costs typically pay for themselves many times over in the final sale price.

Can I start exit planning while I'm still deciding whether to sell?

Absolutely. Most of the steps involved in exit planning — cleaner financials, stronger operations, better lease terms — make your business more profitable and easier to run regardless of whether you sell. Many owners start the process uncertain and find that the clarity they gain helps them make the decision with confidence, one way or the other.

What if my restaurant isn't profitable right now?

Unprofitable restaurants can still be sold, but the path looks different. Buyers may be purchasing the location, equipment, and lease rather than the cash flow. In some cases, 6 to 12 months of focused improvement can shift the business from unprofitable to marginally profitable — which dramatically changes the buyer pool and sale price. We'll give you an honest assessment of your options.

Do I need to tell my employees I'm planning to sell?

No, and in most cases you shouldn't — at least not during the planning and marketing phase. Premature disclosure can cause key employees to leave, disrupt operations, and reduce your business value. The changes you make during exit planning — better systems, cross-training, documentation — benefit the business whether you sell or not. There's no reason to announce your intentions early. We help you manage this confidentially throughout the entire process.

Start the Conversation

Whether you're ready next month or next year, the conversation starts the same way: a confidential, no-obligation discussion about where your business stands and what it would take to position it for the strongest possible sale.

We're not going to pressure you to list. We're not going to rush your timeline. What we will do is give you an honest picture of your business's current value, a clear roadmap for increasing it, and the confidence to make the decision on your terms — whenever that is.

See where your numbers stand today with our free SDE Calculator, or fill out the form and we'll schedule a confidential conversation. No pitch. No commitment. Just clarity.

When you're ready to move forward, we're here to manage every stage of the sale.