What is Business Exit Planning?

By Brett R. Pernicano on March 10, 2021

According to the Exit Planning Institute, 66% of American businesses are owned by Baby Boomers, who are set to retire in huge numbers over the next 10 years. This means there are a lot of business owners and entrepreneurs poised to sell their companies. However, implementing the right exit strategy makes all the difference in how much of your wealth you walk away with at the end of the day.

Even if you’re in the earliest stages of thinking about selling your business, it’s time to start strategizing. A business sale and ownership transition can take as long as several years to complete. Whether you’re ready to make a transition soon or simply want extra time to prepare, read on to gain a better understanding of the business exit planning process.

What is an Exit Strategy in Business?

Exit planning is a type of business strategy that makes your company transferable and, when you’re ready, sellable. A good exit strategy adds value to your business because a potential buyer (or heir, if you are a closely held family business) knows that the company will continue to run smoothly even without you there at the helm. Alternatively, your business assets will be prepped to liquidate should you choose to wind down the company.

The end result and the preparation leading to it depends on the type of exit you plan to make. Here is a brief overview of the most common types of business exit strategies that could benefit from the help of trustworthy financial advisors.

Family Transition

Some business owners want to keep the company in the family, whether your children already work there or simply want to retain ownership. This strategy works particularly well when your successor already works for the company and understands the vision and leadership you’ve brought to the company. It may also be easier to continue advising on the business if it stays in the family. On the downside, using a family transition plan as a business exit strategy is more likely to add emotions into the mix. Consider your own family and employee dynamics to craft the best course of action.

Sell to Partners or Employees

Your partners or employees may also have an interest in buying out your share of the business. This can be advantageous because these individuals may be personally passionate about the company and understand how the business works. On the downside, it’s important to make sure the necessary leadership skills are present to ensure the long-term success of the company.


Getting acquired by another business can often be a beneficial financial move. The process could be quick and result in a major lump sum of cash, especially if you prepare with a team of knowledgeable advisors before selling. Depending on the terms of the buyout, however, you may not be able to ensure the future of your employees’ jobs. For instance, being acquired by a competitor could result in layoffs after the sale takes place. Weigh the pros and cons alongside the structure of your business when considering this option.


Liquidation is designed for businesses with assets that can be sold off. Rather than selling the business as a whole, you instead wind it down to permanently close. You might sell inventory, real estate, or equipment. This option may not have the highest return, but it is fast and straightforward. Alternatively, you could liquidate over time. This involves withdrawing profits over a longer period of time instead of reinvesting the funds to expand the business.

What to Consider with Business Exit Planning

Before you choose the best type of exit strategy business plan, there are several factors to consider, both financially and emotionally. As the business owner, you are the only one to define a truly successful exit. That could be reaching a financial milestone or ensuring ownership is transferred to a specific person. Here’s what to think about before you enter the exit planning stage.

Financial Goals

While not the only type of goal to consider, the financial impact of exit planning is definitely an important one. For many business owners, selling the company is a part of retirement planning. Start by evaluating the current financials of your business, including whether you have any debts or investors that must be paid off. The strength of your current financials will impact your options for selling and the amount you’ll receive. Also consider your ideal type of financial payment. It could be a lump sum or it could be ongoing payments as a loan from the buyer.

New Ownership Goals

Next, think beyond how you want to sell the business and consider to whom you would want to sell it. Would you like to transition to a family member or an outside buyer? Do you have partners or co-founders who are also part of the decision-making process? If you have employees, it’s also important to consider how their jobs will be affected by your exit strategy. Transparency and ample notice should be part of your plan, especially if the business likely won’t move forward in its current state, either because of acquisition or liquidation.

Future Plans

Consider your own plans after you leave the business. Maybe you plan to retire, or maybe you want to pursue a new venture. Leaving your company can be an extremely emotional process. It’s helpful to work with your team of advisors to not only create an exit plan, but also a plan for your personal and potentially professional goals once the exit takes place.


There are several timing considerations to think about in the early stages of business exit planning. An exit could take six months or even six years. Start to gather your team of experienced advisors as soon as you start thinking about an exit strategy. They’ll help you evaluate your goals to figure out a realistic time horizon for transitioning out of your business. Whether you need to change some things to meet a monetary goal, prepare internal leaders to take over, or simply liquidate as quickly as possible, all of these considerations will influence your timeline.

Who is Involved with a Exit Strategy Business Plan?

More than likely, it took a team of people to grow your business to where it is today. It takes a similar amount of expertise and teamwork to create a successful exit strategy as well. Pull together the following professionals to make sure you’re prepared to maximize your exit planning process; after all, you only get one chance to launch yourself into the next phase of life.

Exit Planning Consultant

An exit planning consultant helps you evaluate the best strategy for your business. They’ll perform a full scale analysis of both your company and the broader industry. Your exit planning strategist can also help evaluate potential buyers, negotiate, and compile your business’s documents and financials.

Someone also needs to work as the quarterback of the deal and collaborate among all of the players involved. It’s definitely recommended to work with an exit planning consultant to ensure you make the most of this transition and collaborate with everyone else to make sure every step is executed properly.

CPA and Attorney

A CPA helps to analyze the value of the business and set a price. They can give cash flow projections, audits, and tax planning advice. If you’re crafting a long-term exit strategy, your CPA continually analyzes the financials to preserve the valuation or potentially even increase it if you’re growing the business.

An attorney contributes to the overall planning and also oversees the legal documents on your behalf. This could include transferring ownership to family, drafting acquisition documents, or converting stock ownership to employees — just to name a few options.

Human Capital Personnel

A third-party human capital expert can help you with the succession planning aspect of your business exit. It can be extremely beneficial in ensuring the long-term success of your company, no matter how large or small it may be. This member of your transition team can help train and develop existing employees into new leadership positions. They’ll also create a plan to ensure your own institutional knowledge isn’t lost after you leave the company. You may not need this service if you’re winding down the company, but it may be worth it if you plan to transition the business to a family member, partner, or employee.

Financial Advisor

The work doesn’t end once you sign the papers and officially exit the company. Now you need to make sure you steward the funds well to meet your own goals moving forward. That’s where your financial advisor comes into the exit strategy business plan. Dowling & Yahnke Wealth Advisors help with modeling the finances of the exit, particularly after the sale takes place and taxes are accounted for. We’ll help create a cash flow model and strategy to help you maximize the value of the exit and create a post-exit income stream.

Bottom Line

Creating a sound exit planning strategy is crucial to start as soon as you begin to think about life after your company. It can take a lot of preparation and planning to make sure you maximize the impact of your exit for lasting success.

Need help with how to manage sudden wealth or major liquidity from exiting your business? D&Y can help. Contact us today.



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