CBB Exit Planning & Seller Preparation

Question 1

When should a business owner ideally begin exit planning before selling their business?

Accepted Answer

3-5 years before the intended sale

Answer

6 months before the intended sale

Answer

1 year before the intended sale

Answer

At the time of listing the business

Question 2

What does 'Seller's Discretionary Earnings' (SDE) measure in the context of exit planning?

Accepted Answer

The total economic benefit a single owner-operator derives from the business

Answer

The seller's personal federal income tax liability

Answer

The business's gross annual revenue before expenses

Answer

The business's total outstanding debt obligations

Question 3

Which action BEST improves a business's transferability and value before a sale?

Accepted Answer

Documenting standard operating procedures and creating training manuals

Answer

Increasing the owner's personal involvement in all daily decisions

Answer

Concentrating sales with a single high-volume customer

Answer

Delaying capital expenditures to maximize short-term cash flow

Question 4

What is the primary purpose of a business readiness assessment conducted before listing?

Accepted Answer

To identify weaknesses that should be addressed before bringing the business to market

Answer

To establish the final asking price for the business

Answer

To evaluate the financial qualifications of prospective buyers

Answer

To satisfy state licensing requirements for business brokers

Question 5

A business that generates 75% of its revenue from a single customer is said to have what issue?

Accepted Answer

Customer concentration risk

Answer

High scalability potential

Answer

Strong recurring revenue

Answer

A defensible competitive moat

Question 6

What is the purpose of 'normalizing' financial statements when preparing a business for sale?

Accepted Answer

To adjust financials by removing owner-specific and non-recurring expenses to show true earning power

Answer

To reduce reported income and minimize the seller's capital gains tax

Answer

To convert cash-basis accounting statements to accrual-basis format

Answer

To project future revenue growth for potential buyers

Question 7

Which factor is MOST likely to reduce a business's marketability when preparing it for sale?

Accepted Answer

The owner personally managing all key customer and supplier relationships

Answer

A diversified customer base with no single client above 15% of revenue

Answer

Strong recurring revenue under long-term contracts

Answer

Well-documented operational procedures accessible to all staff