How to Plan for a Successful Business Exit

How to Plan for a Successful Business Exit

August 10, 2018

You’ve worked hard for this. The late nights, weekends, and meals at your desk consisting of Ritz crackers and peanut butter have all come down to this. How many times have you caught yourself staring out the office window while visions of warm clear water, tropical music, and white sand filled your mind? Planning for a successful business exit will likely be the most exciting and stressful process you’ll encounter in your working life. Here are a few things you can begin thinking about to prepare for a successful transition.

Create a Vision

The most important thing you can do to prepare yourself for life after your business is to create a clear vision for the future. What will you being doing with your time and who will you be doing it with? Where will you live? Where will you vacation and how often will you travel? Have you always wanted to donate your time and experience to a charity? As Stephen Covey famously said, “begin with the end in mind.” From this, work backward to identify the steps you’ll need to put in place to accomplish this vision.

Aggregate Everything You Owe and Own in One Place

What will this vision cost? Business owners usually find themselves in the enviable position of having had the business (legally) pay for many expenses that cross over into personal life. These expenses may include a car, insurance, meals and entertainment, country club dues (though usually not deductible) and travel. Once the transition is complete, these items move over to the personal side of the cash flow statement. In addition, most business owners are paying themselves a salary and then take profit distributions throughout the year.

Figuring out how much is being spent personally can be a challenge. At least a year prior to the exit, we recommend using an account aggregation program to automatically track your personal expenses and focus in on what is currently being spent. Aggregation tools, such as or our own Boyd Wealth Planning Portal, allow you to pull together your credit card, bank accounts, mortgage(s), and investment accounts and sync all your transactions in one place.

Depending on how serious you get about categorizing transactions, you’ll get a clear picture of what is coming in and what is going out. Then you can add to the future spending plan those items that will no longer be covered by the business and any additional budget items that came out of the vision process.

Test the Plan

Once you have a clear vision and a working spending plan, it’s time to test that against the available assets and income sources. In a few cases, we’ve worked with a business owner who came to us post-liquidation, paid their tax bill, and then were shocked to learn that the net proceeds may not be adequate to fund the desired lifestyle. Particularly for young owners who exit before age 50, most fail to realize just how much capital it takes to fund what may become a 40 to 50-year retirement.

We receive a bit of pushback these days when we run a spending plan out to the youngest spouse’s age 100, however the risk of living too long and potentially running out of money is real. Having a planning runway before you get into negotiations puts you a strong position. You will know how much you need from the sale to fund your ideal lifestyle. If the potential sale price is adequate and you’re ready, you can successfully close the sale. If the price is not adequate, you can decide to keep building the business or adjust the future spending plan.

Assembling the Dream Team

Like the legendary 1992 US Olympic Basketball Team, you’re going to need your own Dream Team of professionals around you that are experts at business transitions. The typical team includes a CPA, Attorney, and CFP® practitioner.

The CPA can deliver a clear, industry-specific valuation of your business and advise on the best way to structure your deal to minimize the tax hit. There is usually a difference between the first offer and ultimate sales price, so know your numbers. There is also a difference in tax treatment between the purchase of goodwill and assets, for example, to both the buyer and the seller. You’ll want to negotiate these points as hard as you negotiate a sales price.

The attorney, usually having a niche in sales, purchases, mergers, and acquisitions, can work through the deal points and clarify language in the final documents. Will you stay on as an employee after the transition? If so, what is your operating agreement with the purchasing firm? You don’t want to wait until the first time you purchase a first-class flight to find out the new firm won’t allow it. If the new firm wants to hang on to some of your cash in escrow for a period of time, what are the specific reasons they can claw this cash back?

As mentioned above, a financial planner will help you paint a clear vision of your life for the future, identify income sources, and nail down a spending plan. What will you do with the proceeds of the sale? Will you pay down any remaining real estate debt? How will you invest the proceeds to generate income? How much will be retained in cash immediately and ultimately? How will taxes from your sale and subsequent investments impact your spending plan?


With the proper plan and team in place, the only thing left to do is execute. Putting all the pieces together may take some time and there will undoubtedly be twists and turns along the way. However, the rewards that come with the next chapter of your life will be worth the effort.

There are many facets of a successful business exit, but these points provide a strong starting point. We’ll cover other aspects of a positive transaction and well-planned future in upcoming posts.

Happy Planning,