Exit Planning: 3 Realistic Steps to Get You Started


You know you should do it. You’ve been meaning to get to it. It would protect your family in the event of your death, help ensure a comfortable retirement, allow others to begin to prepare to take over the business, and much more. But the fact is, you don’t have a clear succession or exit plan in mind.

In that regard, you’re in the same boat as the majority of owners of small businesses. According to the National Federation of Independent Business research, only 23 percent of small business owners have a robust, documented succession plan. In fact, 70 percent of family businesses don’t continue to the second generation due to the lack of a detailed succession plan.1 If, for whatever reason, you’re not positioned to dive in to succession or exit planning, it may be most practical for you to begin by putting a toe in
the water.

Consider this advice on getting started from Jerry Mills, of B2B CFO and author of The Exit Strategy Handbook2:

  1. Get a life insurance policy, ASAP. This could cover all of the expenses your family would face, as well as future needs, such as college, and potential taxes that could be billed to the estate. A well-structured policy will help protect your family and provide them with time to consider what to do about the business. So make life insurance coverage a number one priority.
  2. Educate yourself. Exit planning is a very complicated subject. There are decisions to make about selling to a third party, transferring within a family, and so on. And while business owners are very intelligent about their own businesses, exit planning may not be their area of expertise. Many business owners are probably going to roll their eyes and say, “Now I’ve got to read something else?” It’s worth any business owner’s time to find out how to fully realize the value of this significant asset. Knowledge is power. You can find any of a number of solid books on the topic, written by experienced professionals, on business bestseller lists.
  3. Begin to create a team of trusted advisors. Don’t wait until you are actually facing a transaction to try to put together a team. By team I mean professionals such as a tax advisor (CPA), a transactional attorney, someone in a merger and acquisition firm, a banker, a financial advisor. Take them out to lunch, host a dinner, or pick their brains in an informal way in the course of business. Ask questions – “I read this idea; what do you think?” It’s a way of enlarging your knowledge and, equally important, building relationships.

No business or owner fits into a cookie-cutter mold for succession or exit planning. By learning now about the terminology and mechanics of exiting a business, you’ll be well positioned to make good choices—and get good advice—when the time is right.

1 The Secrets of Family Business Survival, National Federation of Independent Business (NIFB), 2017
2 The Exit Strategy Handbook: The BEST Guide for a Business Transition, Jerry L. Mills, 2015

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