As a business owner, planning your exit isn’t something it’s wise to postpone. Like having a parachute for your plane, it’s good to know that you have a plan if the worst happens: things like illness, incapacity, or death.
Sadly, countless owners leave this up to chance because they don’t know they need to plan, don’t want to think about it, or get too caught up in the day-to-day of running their business to set up a process.
Whether you’re considering retirement, selling your business, passing it on to family, or just preparing for unforeseen circumstances, having a thoughtful exit plan protects your legacy, your family, and your financial future. This guide breaks down the basics of exit planning in clear, practical terms… so you can start taking action today.
What Does It Mean to “Exit Plan”?
Exit planning is the strategic process of preparing your business and personal affairs so you can take control and step away on your own terms, even if your departure is due to illness, incapacity, or death.
It’s about more than just selling your company. How can we ensure that the transition supports your goals, provides for your family and employees, and maximizes the value you receive for the years you’ve invested?
Too many business owners wait until the last minute to think about exit planning. This tends to lead to rushed decisions, lower sale value, or confusion among successors. Getting ahead of it gives you choices and peace of mind.
After all, it’s never good to start wondering how to use your parachute (or if you even have one) when the metaphorical plane is already crashing!
Why You Need an Exit Plan
Without an exit plan, you risk leaving your business and loved ones unprepared. Life is unpredictable, and circumstances like health changes or economic shifts can force decisions you’re not ready for.
An exit plan helps you:
Clarify your goals. Do you want to sell, transfer, close, or pass on the business? Knowing your goals shapes every other decision, so it’s important to figure this out first.
Maximize value. A thoughtful plan can boost the worth of your business and make it more attractive to buyers or successors.
Protect your legacy. You’ve worked hard to build your business. Exit planning ensures it continues in a way that reflects your values.
Support your family and team. Putting a plan in place gives clear direction for ownership, leadership, and financial transition.
Key Steps to Take in Exit Planning
Now that you understand why an exit plan is so important, it’s time to actually do it. How do you do it? What are the steps?
- Define Your Personal and Professional Goals
We already mentioned a version of this above, but you need to start by asking yourself what you want out of your exit. Are you retiring, pursuing new opportunities, or passing the business to a family member? Are you selling it to your employees? Your goals will influence your timeline and strategy.
- Determine What Your Business Is Worth
Understanding what your business is truly worth is essential. How can you determine that value? With something called a “valuation.” A valuation highlights strengths and weaknesses and helps you set realistic expectations for sale or transfer. Bear in mind that small business valuation is a notoriously tricky proposition, and – much like accounting or brain surgery – it’s oftentimes best left to a professional.
- Prepare Financial and Legal Documents
Solid financial records, up-to-date contracts, and clear legal structures make your business more attractive and easier to transition. Once again, working with professionals will smooth this process significantly.
We especially want to avoid a situation where someone (such as a surviving spouse or child) is trying to sort through decades of jumbled paperwork that has been stuffed into drawers and cardboard boxes… all while they’re trying to negotiate a sale of the family business. Not to mention putting them into the position of doing this while grieving the death of a loved one!
- Build a Succession Plan
If someone within your business (a partner, family member, or key employee) will take over, put a succession plan in place. This includes training, responsibilities, and formal agreements so the transition is smooth and agreed-upon. It’s also wise to talk this over with family members, especially in small businesses, so that everyone understands the plan ahead of time.
- Optimize for Tax and Estate Considerations
Exiting your business has tax implications and can affect your personal estate plan. Coordinate with legal and financial advisors to structure your exit in a way that minimizes unnecessary taxes and supports your broader estate plan.
- Communicate With Stakeholders
As I mentioned earlier, being transparent with partners, employees, and family (when appropriate) reduces uncertainty and ensures everyone understands the plan ahead. Even if family members don’t necessarily like the plan (for example, if a child thinks they’re ready to run everything while a key employee is actually more suited to the task), they are more likely to accept this if it has been discussed ahead of time.
This also gives you the opportunity to communicate the why of your business: what does it mean to you?
Start Sooner Than You Think
We don’t want to be totally ominous here, but the reality is that exit planning isn’t something to put off until a crisis. Again, it is unwise to start wondering about that parachute when the plane is already on fire! The earlier you begin, the more options you have… and the better prepared you’ll be when the time comes.
Even if you think you’re years away from leaving, taking small steps now can make all the difference down the road.
Need Help Getting Started?
Exit planning can feel overwhelming, but you don’t have to navigate it alone. An experienced attorney or advisor can help you clarify your goals, organize your business documents, and build a personalized strategy that fits your needs.
Contact us to schedule a consultation and take the first step toward securing your legacy.