“Statistics also show that only 20%-30% of businesses that go to market actually sell; leaving up to 80% of those without solid options to harvest their wealth and ensure economic continuity into the next generation.”

– Exit Planning Institute

Every day business owners fight to keep their company open, employees employed, service their customers, and grow their personal wealth. With over 70% of a business owner’s wealth trapped in their business it is becoming vital for business owners to regularly explore succession planning and exit strategies. Successful businesses are prepared for a sale throughout every stage of their growth cycle. However, to know how much the business owner needs, net of taxes, they need to work with an Exit Planner and CERTIFIED FINANCIAL PLANNER™ to forecast the family’s financial needs, expected tax impact, estate planning concerns, asset protection strategies, & more. The team of Financial Planners at C-Suite Planning™ will work closely with you and your team of exit planners, lawyers, accountants, and other business professionals to maximize your financial exit.

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What is Exit Planning?

Exit Planning is not a new concept and yet when we speak with Entrepreneurs about their transition plan when they decide to retire, or move on to the next project, many of them do not fully understand their exit options – or even what their company is worth. Which is quite surprising considering their business is their largest assets – and unlike their house it is illiquid. Therefore, knowing how much their business is worth AND how to maximize the exit price should be something on the business owner’s mind.

Why is Exit Planning important?

Many people think Exit Planning is focused on the final exit price and yet there are a number of items / tasks that need to be accomplished before the ultimate exit. For example, the business owner can pull multiple levers in their business to increase revenue, cut overhead expenses, optimize staffing, layout a five year strategic and marketing plan, and create the necessary legal protections for trademarks, copyrights, or setting up employment contracts.

When a business owner pulls one or more of the aforementioned levers, or others not mentioned, there is a direct link to the value of the business. In fact, the two types of buyers for a business – a financial buyer or a strategic buyer – look at the levers differently and can arrive at different valuations for the same business. This is just another reason the business owner needs to understand how to price their business.

Who should join the Exit Planning team?

After many years of working with business owners we have come to realize there are two types of owners. The first is focused very much on working “in” their business and enjoys the day to day minutia. The business is usually smaller and the owner is working on closing new business or fulfilling on existing business. The second, on the other hand, is focused “on” growing their business in order for it to eventually become owner independent (able to operate on its own without direct input from the owner). While both owners care deeply for their businesses they usually have different priorities. So why is this important?

Today there are approximately 6.5 million businesses making less than $1 million per year and another 300,000 making less than $100,000,000 per year. As revenues increase business owners become more open to the idea of creating an optimal exit for themselves, their employees, and their stakeholders. However the line between being open to exit is usually around the point where the business becomes owner independent. Reasoning? Financial buyers want to know if they purchase a business it can continue operating even after the founder is gone. Alternatively, the strategic buyer wants to ensure the business will fit seamlessly into their business as either a new arm or an extension of an existing arm. Both buyers want to ensure the new purchase can continue producing well beyond the purchase.

For a business to reach an optimal exit the business owner needs to build a team that is focused on helping them find an optimal price. This team should consist of:

  • An exit planner
  • A corporate attorney
  • An accountant
  • A financial planner or wealth manager
  • A therapist (in some cases)


How Does A Financial Planner or Wealth Manager Fit In?

A critical component to the entire Exit Planning process is the exit price. In order to determine the MINIMUM exit price the business owner needs to understand how much they need to walk away with from the sale of the business, after taxes, before they can begin soliciting offers.

To calculate a minimum exit price a Financial Planner who has extensive experience working with business owners can create an Executive Financial Plan that looks at the business owners financial assets, income and expense requirements, personal and financial goals, and expected longevity in order to determine the financial resources needed to fund the rest of owner’s life. Once a number is determined the Financial Planner can work with the rest of the exit planning team to build an exit plan that creates an optimal and tax efficient exit.

Without the Financial Planner the business owner, and their team, will not know how to unlock the value in the business owner’s largest asset.

Too often business owners are focused “in” their business and run the risk of losing sight of a bigger picture. A balance needs to be struck between working “in” the business and working “on” the business. Ask yourself this:

If a synergistic buyer approached you and stated they wanted to purchase your business as part of their expansion, would you be able to give them a realistic exit price? Would you know how much you need to walk away with in order to live a comfortable life – net of taxes or shareholder distributions?

Without understanding this information business owners, like you, run the risk of remaining trapped on the hamster wheel with the weight of their business, and family’s livelihood, on their shoulders. It is time for things to change and for business owners to understand how much they need to reach financial independence – based on current and future household expenses.

Schedule time with our team to discuss your exit strategy!