Poor planning can cost owners thousands or even millions of dollars, whereas proper planning enables both the owner(s) and their successors to achieve their goals and preserve the owner’s legacy.

Succession planning entails transitioning the management of the company to the next generation of leaders. Exit planning expands upon this by considering the goals of not only the business, but the owners as well. A complete exit plan should cover five essential planning areas:

Tax: A thorough analysis of the tax implications is essential to efficiently convert business ownership into personal wealth.

Legal: An experienced legal professional must be consulted to determine whether all aspects of the plan comply with current law and use up-to-date legal tactics to protect the owner(s) and their business. This includes reviewing key documents such as shareholder agreements, buy-sell agreements, key contracts (to ensure transferability), etc.

Financial: Financial models and retirement planning ensure the owners can achieve their financial goals up to and post-exit. Just as important is the intelligent use of risk-mitigating instruments, such as life and disability insurance.

Operational: A traditional succession-planning component must detail the orderly transfer of management to the next generation of leaders. It must also address the organization’s current and future operational needs, including financial, investment, and personnel needs.

Personal: A complete exit plan must also include a plan for the owner(s) to find personal fulfillment once they exit their business, maintain family harmony, and ensure the achievement of their family’s goals.


Owners must begin by determining when they ideally want to exit their business. Make this as specific as possible. Approximations like “I want to retire some time in the next five years” are too vague to drive action. When making this decision, owners should communicate and consult with their business partners and their family. An important note: Exiting refers to transferring ownership of the business. It doesn’t have to mean retirement.

Next, owners should assemble their core exit-planning advisory team. Third-party experts are invaluable in the planning process not just for their expertise, but also for their objectivity and experience. Look for professionals who have been involved in business transitions in the past and whom you trust. The team, at a minimum, should include a tax and business accountant, a business attorney, a personal financial advisor, and an exit-planning specialist. The team should meet regularly, at least once a year, to discuss progress, updates, and alterations.

Owners must then determine how much they need from their exit to achieve their financial goals. For most owners, this means financial freedom—having enough wealth that work becomes a choice, not a necessity. Owners should include in the assessment various lifestyle subsidies provided by the current business operations.

The advisory team can help assess the most efficient, tax-favorable way to begin building wealth outside of the business, reducing the required sale amount. The lower the required sale price, the greater the flexibility at the sale and the lower the risk of missing financial goals. Relying solely on the sale of the business to achieve financial goals is a risky retirement strategy.


Once owners understand the proceeds needed from their exit, they can consult with their advisors to determine their preferred exit method. There are five basic exit strategies: sell externally, sell internally (to the management team or employees), pass to family members, planned liquidation, or some combination of these. Becoming a passive owner, where the company runs itself, isn’t an exit strategy because it doesn’t remove the risks associated with ownership.

When selecting an exit strategy, owners should consider not just personal preference, but the feasibility of each method, and if it will achieve the stated financial goals. The transferable value of their business as well as the strengths and aspirations of the management team should be assessed. Selling price isn’t always the most important consideration to owners. Owners must gauge how much they value intangible items like legacy, preserving the culture, and taking care of employees. These items factor into the exit strategy and can often affect the final sale price and terms.


After selecting an exit strategy, owners can create their succession plan. Owners should begin by determining candidates and assessing their ability and willingness to replace them. Owners should leave ample time to test if their successors are ready for leadership and ready for the risks and challenges associated with business ownership (if they’re purchasing the business). Make these determinations as early as possible. Realizing too late that a key employee isn’t interested in ownership can derail the entire plan without adequate time to locate a replacement.

Additionally, some employees may require further training and professional development to thrive in their new roles.

After vetting their successors, owners should list all aspects of the business that they’re involved in, including processes and key relationships, and create a detailed plan for when and how to transfer these to their successors. Regular meetings should be held with the successors to hold them and the owners accountable. Furthermore, owners need to implement and standardize operational processes throughout the organization. To achieve a successful exit and maximize value, the business must be people- and process- driven, not owner-driven.

On the personal side, owners must also determine how they will find fulfillment post-exit. This is an often-underestimated part of many plans. Many owners derive their sense of identity and purpose from their role as business leaders. Once they transfer ownership, they need to find a replacement for this. Additionally, throughout this process, it’s critical for owners to communicate their plans to family and partners. They should make sure everyone’s in agreement and understands how the plan affects them. Never assume that everyone agrees and will go along with the plan.

Owners should start now. The longer they delay, the fewer options they leave themselves. Remember, no one is fully in control of when they exit. Illness or disability can strike without warning, as can changes in the economy.

Exit planning is a complex, interdisciplinary process that is unique for every company and owner. Always work with an advisory team of experienced professionals when crafting an exit plan and ensure the plan covers the five essential planning areas. Owners should review their plans annually to ensure compliance with any changes in applicable regulations, laws, or circumstances. Just like sound strategic planning, exit planning isn’t a static, onetime event. The earlier owners begin their planning process, the more likely they are to achieve their exit goals and preserve their legacy.

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