How To Plan For Your Business Exit

Keith Wetjen |

A key tenant of wealth management is planning, growing, and leveraging your assets - and, if you own a business, it's likely that it’s your biggest asset. There will come a time, however, when you'll be ready to leave your business. To do this, you'll need a well-thought out plan that puts you in control and leads you to a successful exit.

But, business exit planning requires time. It's also complex and multifaceted. Trying to exit your business without the support of trained specialists - and without taking into consideration your broader wealth management and life goals - can greatly impact its success.

To help, we've put together an overview of the different stages of business exit planning necessary to set you up for success

4 Key Phases for Preparing to Exit Your Business

There are four main phases we guide our clients through to help them develop a successful business exit plan. They are as follows:

1. Education 

2. Planning 

3. Execution 

4. What now?

1. Education 

Transitioning out of your business is a big event, and it’s not one to take lightly. There are many elements that make up a successful business exit, so your starting point should be learning about the options available to you. 

When you start to learn more about different business exit strategies, you’ll be in a better position to decide what is right for you, as the business owner. 

It's also important to learn what not to do, to help you have both a positive experience while planning and a positive outcome upon exiting.

Some common business exit pitfalls include:

  • Not giving yourself enough time to properly plan an exit. The last thing you want to do is feel rushed when leaving your business. This could mean you accept conditions that aren’t ideal or that compromise on what you want and need. Business exit planning can, and should, start many years before you plan to leave your business. 

  • Failing to consult experts across a number of disciplines. Your business exit will have wealth, legal, tax, and estate ramifications. Things in these areas can get complex, quickly. Having the right advisors on hand - and working together - is crucial. 

  • Quickly accepting the first offer that comes along. In doing so you may miss a better offer with a better buyer and terms.  

  • Ignoring market conditions. There may be moments when it’s just not the right time to sell or leave your business. This could be due to a lack of demand for your products and/or services. The right moment might also come sooner than you expected. By paying attention to market conditions, you’ll be better positioned to make the right move.

2. Planning 

Once you have learned about the different parts involved in an exit plan and have decided on the right strategy, you’ll then enter the planning phase. 

During this phase, there are a number of areas you’ll want to address. These include the following action points:  

  • Decide on Your Ideal Buyer
    • This could be someone you know, like a family member, business partner, or an employee. It could also be a complete outsider. You may also decide to liquidate and close your business. This decision will depend a lot on your vision for how your business should look after you leave.  
  • Make Sure Your Finances Are in Top Condition
    • When all your numbers are in order you know the true value of your business and can get the right offer. It also makes it easier for prospective buyers to review the state of your business. 
  • Write Process Manuals
    • If you were to leave suddenly, an outsider should be able to pick up where you left off and run your business. Having thorough process manuals makes this possible. It’s also something that a potential buyer is likely to look for. 
  • Assemble a Team of Specialist Advisors
    • When you exit your business you’ll need help in the form of a multi-disciplined group of advisors such as wealth managers, financial advisors, accountants, and lawyers. With the help of an advisor from the Entrust Wealth Partners team, you’ll be able to make sound plans that make sense for your and your family's future.  
  • Minimize Your Role in the Business
    • For you to hand over your business to someone else, you have to make yourself obsolete. You’ll want to work toward gradually winding down your role in the business so that it can function without you once you’ve made your exit.  
  • Make Contingency Plans
    • It’s also a good idea to have some contingency plans in place. These are necessary because while you may have the best laid plans, unexpected factors can arise, such as lifestyle changes and unexpected illness.

These factors may mean transitioning out of your business sooner than you expected, or waiting a bit more time. It’s important to be prepared for a number of outcomes.   

3. Execution 

This is the transactional phase of the exit and the moment where the education and planning you’ve done with your advisory team will pay off. 

Entrust Wealth Partners is uniquely positioned to help you navigate the complexities of this phase and has a number of resources and strategic partners who can command competitive opportunities in the marketplace on your behalf.

When you have access to the relevant specialists, you’ll then be able to execute your exit strategy on your terms. They’ll also help you think about your plans going forward. 

4. What now? 

When you’ve been planning the exit of your business for years and then the exit is successfully completed, it’s natural to be left wondering, what do I do now? 

For this reason, planning for when you’ve left your business is an important element of your exit strategy. Just like someone retiring after 40 years of work, business owners need to plan for the next 20-30 years of their life. 

Exiting your business can bring up a lot of thoughts and emotions. These involve thinking about how you want to spend your time once you’ve exited the business, how you’ll financially support those plans, and how this big life transition is going to impact your identity and lifestyle. 

Our advisors have guided many business owners through this transition and know that for you to have a fulfilling transition, the question of “what next?” needs to be considered throughout the process. 

Next Steps

Preparing for a business exit is not something you can do overnight. In fact, the average time it takes is 5 to 15 years. Therefore, you can’t start planning for an exit early enough. 

Contact your Entrust Wealth Partners advisor to learn more or contact our Entrust Wealth Partners office at (860) 838-3730 to get started planning your business exit. 

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for individualized tax/legal advice. Please consult your tax/legal advisor regarding your specific situation. Entrust Wealth Partners and LPL Financial do not provide tax/legal advice or services.

This material was prepared by Courtney Henry Consulting.