Exit Planning is a business strategy!
An exit plan asks and answers all the business, personal, financial, legal, and tax questions involved in transitioning a privately owned business. It includes contingencies for death, disability, divorce, disagreement, distress and disease. Its purpose is to maximize the value of the business at the time of exit, minimize taxes, and ensure the owner is able to accomplish all his or her personal and financial goals in the process.
The Capitaliz Business Insights Report
The Business Insights Report delivers detailed recommendations and findings resulting from a comprehensive business review. The review takes the perspective of a buyer, providing how they might analyze the business.
The report includes an Overall Insight Score. This is a combination of financial, non-financial, exit and sale readiness, credit and benchmarking ratings.
Five Stages of Value Maturity
- IDENTIFY – Determine the initial value in your business in order to maximize that value. Conducting an annual business valuation will help determine what value factors to focus on to accelerate the value of your business.
- PROTECT – To best protect your value, you must consider the 5D’s: Death, Disability, Divorce, Distress, and Disagreement. Even if you do not think you will be affected by one of the 5D’s, without preparing for the worst, your value will be negatively impacted.
- BUILD – There are two ways to build value: increase your cash flow (EBITDA) and improve your multiple. Your multiple is the number assigned by the private capital market to the value of your tangible and intangible assets and their associated risks. Intangible assets include Human, Structural, Customer, and Social capital.
- HARVEST – After building your business value, it is time to harvest the fruits of your labor. There are numerous paths your business exit can take. You might discover that after reviewing your options, you decide not to sell your business and instead transition the company to a son or daughter, sell the real estate and keep the company, or continue to build value.
- MANAGE – You manage value throughout the course of your business lifecycle, but the most important time to do so is after exiting your business. To achieve the most value, you have to manage not only your business value but your personal and personal f inancial value as well.
The Three Legs of the Stool
A Successful Exit Strategy Has Three Legs:
- Maximizes Transferrable Business Value
- Ensures Owner is Financially Prepared
- Ensures there is a plan for “What Next?”
Peter Christman | Cofounder of the Exit Planning Institute | Author of The Master Plan
Additional Educational Resources
Business owners live for the struggle of launching their businesses. But one thing they often forget is that decisions made on day one can have huge implications down the road. You see, it’s not enough to build a business worth a fortune; you have to make sure you have an exit strategy, a way to get the money back out.
Partner, Tax, Value Acceleration & Exit Planning Services
What Is Exit Planning? Guide for Business Owners
Exit planning is the process of preparing a business and its owner for a successful ownership transition. It addresses business value, financial readiness, personal goals, operational health, and tax strategy in an integrated way that increases the likelihood of achieving a strong outcome on the owner’s terms.
Many business owners wait until they are ready to sell before thinking about exit planning, which often means leaving value on the table or encountering unexpected obstacles. An effective exit strategy begins years before the transaction and involves systematically improving the business, reducing risk, and aligning owner and business goals.
Windes helps business owners understand what exit planning is, assess where they stand today, and build a roadmap that prepares them for a confident transition whether through a sale, management buyout, family transfer, or other ownership change.
Frequently Asked Questions
Exit planning is the process of getting your business, and yourself, ready for the day you eventually step away, whether that’s a sale, a transfer to family or a management team, or another kind of transition. It goes beyond the financial side to also cover closing gaps that could hold back your valuation, making sure your personal financial goals are actually achievable once you exit, and building a realistic plan for what the transaction and the life after it will look like.
Your exit strategy is the actual plan for how you’ll eventually leave your business: whether you’re selling to an outside buyer, transitioning to family, handing it to your management team, or pursuing another path, along with your timing, target buyers or successors, and what you need financially to make the transition work. Without one, owners often find themselves reacting to an offer or a life event rather than exiting on their own terms.
Most owners need three to five years to properly prepare for a transition, though starting earlier gives you more room to improve the areas that drive your business’s value and address anything that could complicate a sale. If you’re not sure how far out your exit is, that’s actually a good reason to start the conversation now. The earlier you begin, the more options you’ll have when the timing is right.
