If You Own a Business, You Need an Exit-Planning Team

The four steps of exit planning for founder-owned businesses

For the past several decades, The Summa Group has been working with business owners, attorneys, CPAs, investment bankers, and other highly qualified fiduciaries in the field of middle -market mergers and acquisitions. The many transaction successes and failures we’ve witnessed over this time have made us believe that independent professionals must collaborate effectively in order to deliver superior outcomes to clients. Over the years, we’ve come to appreciate the importance of a multidisciplinary approach in establishing goals, creating plans to attain those goals, and persevering to see plans through to completion. Creating a plan to exit your business is no different. 

Every business owner will exit their business—it’s inevitable. A business will be sold, liquidated, brought public, or transferred to a family member or partner. Yet despite the inevitability of an exit, most business owners do not have an exit plan. The No. 1 reason private business sales fail or only partially succeed is a lack of planning on the seller’s part. And yet most business owners spend more time planning a family vacation than thinking about when and how to exit their business. In fact, only an estimated 28% of private businesses have done any exit planning. Research shows that the reluctance to plan is attributable to the supposed difficulty of the process and too many business and personal issues to consider, and requiring expertise from too many separate professionals. Due to lack of good planning, only 30% of family-owned businesses survive through the second generation. A Small Business Association study of 300 business owners who sold their companies within the last 12 months stated that 75% of respondents felt the sale did not accomplish their personal or financial goals.  

As Steven Covey reveals in his bestselling book, The 7 Habits of Highly Effective People, one essential element of effectiveness is to begin with the end in mind. Nothing could be truer as it pertains to exit planning. We believe every business owner should have a strategic exit plan regardless of their age and the stage of the life cycle of their company. We often start with one simple question “When do you intend to exit your business and what do the net proceeds need to be?” A founder aspiring to sell their business for $25 million in 10 years should make business valuation their primary strategic imperative from start to finish. If you want to have a successful exit, you need to look at it through a buyer’s eyes. Structuring the business with a logical acquirer in mind has the added benefit that it is attractive to investors in the initial stages. It shows them a clear path to exit and return of their invested capital. In our experience, venture capitalists who fund startup companies will not invest in a business unless they believe the founders have a good exit plan. Likewise, private equity groups will not buy or invest in a successful middle-market company without developing a detailed exit plan for themselves prior to investing. 

The major challenge facing every company founder is making the time to build out their trusted exit team of tax, legal, and investment advisory professionals during what is usually a period of rapid growth for their company. A founder’s focus and time is best spent on company-specific activities.  Most business owners we work with are the visionaries, idea generators, and relationship builders of their ventures. Their companies will do best when they stay focused in these areas. This can only happen if the founders have built a team early in this process with one of the advisors taking a leadership role. A founder’s exit will be defined by how well or how poorly they executed  upon the pre- and post-liquidity objectives. Those who begin to ask themselves, “What is my  business worth?” only when the time to sell arrives are far less likely to have their expectations  met. Waiting for the deal announcement to activate a battle-tested team of advisors often leads to  lack of planning, suboptimal outcomes, and a swarm of advisors making empty promises without having deep knowledge about the transaction. Ideally, business owners would develop their exit plan when they start their business. 


An exit plan is a comprehensive road map to successfully exit a privately held business. An exit  plan asks and answers all the business, personal, financial, legal, and tax questions involved in  selling a privately owned business. An exit plan is a way to ensure that the business owner is  consistently building their company to achieve their long-term personal and financial goals. The  exit-planning process involves helping business owners overcome several issues, including their  fear of letting go, their desire to avoid the stress it may cause their family, and not knowing when  to start. The crucial challenges business owners face during this process is dealing effectively  with business and financial issues like ownership transition, management training, retirement  planning, tax planning, and strategic direction, while at the same time managing the emotional  situation of all the stakeholders, including the owners themselves. 

Exit planning is a bespoke process. No solution is an exact fit for every business  owner.

Because so many variables and diverse professionals are involved, successful exit planning must follow a rigorous process to ensure each situation is handled in a  consistent manner for the business owner to achieve the best possible outcome. 

The exit-planning process consists of four steps:  


This initial step focuses on collecting information covering personal, business, financial,  family, and estate-planning goals. It also collects operating and financial information about the company. 


Using the operational and financial data, a detailed baseline business valuation is created to get an idea about fair market value of the business as well as providing some indication of how marketable the business is based on current market conditions. A personal financial strategy and analysis is created. The plan not only explores anticipated lifestyle needs and tax strategies, but also the type of financial legacy the founder wants to leave to family or the community. 


Based on the planning from the previous step, a review is conducted of legal options and  how to structure an exit to meet the business owner’s goals. This includes reviewing all exit options and ways to help maximize business value and minimize taxes. 


This is where having a cohesive, multidisciplinary team of advisors becomes most crucial.  During the pre-transaction due diligence, an M&A attorney is engaged. A CPA develops an appropriate strategy to help minimize taxes at the time of sale. An estate-planning attorney develops an estate plan that fits together with the tax plan and reflects the proceeds from the eventual sale. In advance of the exit, the founder engages a wealth-management team to determine how the net proceeds from the sale will be invested and managed to pursue their goals. When all of this is complete, an investment bank is engaged to implement the appropriate exit option. 


Exit planning is not a solo endeavor. During our careers as wealth managers, we have not met a  single professional who has all the knowledge, experience, or skills necessary to design a  successful exit plan on their own. The most successful business sales are a result of the  combined efforts of the best professionals you can assemble for your specific situation. The lead advisor could be the wealth manager, attorney, CPA, or investment banker with whom the owner and stakeholders work throughout the exit-planning process. Communication between the owner and the team is critical. In addition, the team members should have the best possible  credentials—ones that are in proportion to the magnitude of the assignment. Elite teams have  identified and worked with top professionals in their fields and know whom to turn to when asked  to help founders assemble their exit-planning team. An effective exit plan focuses on all the unique business, personal, financial, tax, estate-planning, and wealth-management issues involved in exiting a privately owned business. 

Deciding on an exit strategy might feel a little overwhelming, especially in the beginning stages  of developing your business, but the planning that comes along with it is essential in creating a successful transaction.

To increase the likelihood of a successful exit, a business owner must  assemble a team with a variety of skill sets necessary to design a comprehensive and integrated  exit plan. The Summa Group understands the multidisciplinary approach of working closely with  a founder’s most trusted advisors in order to prepare for your business exit ahead of time, but  also plan for life after your exit, with the goals of protecting and growing your wealth and  ensuring a legacy for your future generations, so you can focus on new ventures, personal goals,  and living a fulfilling life after the sale. 

Oppenheimer & Co. Inc. does not provide legal or tax advice, but will work with your other advisors to  assure your needs are addressed. The opinions of the author expressed herein are subject to change  without notice and do not necessarily reflect those of the Firm. Additional information is available upon  request. Investors should review potential investments with their financial advisor for the  appropriateness of that investment with their investment objectives, risk tolerances and financial  circumstances. 

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