How – Exit Strategy

It’s a three step process:  Evaluate; Strategize; Execute.


An exit strategy is just a road map outlining steps to achieve your goals – both personally and for the business.   Setting these goals is the starting point.  It’s an evaluation of where you are and envisioning where you want to be.

Personal Envisioning

It starts with setting goals for your personal life.  Where do you see yourself in ten years?  That may be too long of a time horizon for some business owners.  How about five year goals?

This step in the exit planning process is all about envisioning your “next act”.  Once you have successfully transitioned out of your business, then what?  Do you have a plan that addresses these aspects of “life after business?”

Business involvement – Do you plan to exit your business completely or transfer ownership overtime to ensure a smooth transition?  Or perhaps you plan to sell 100% of the business but act in a consulting capacity.

Activities What are you going to do with your time?  It’s like you’ve spent 40, 60, 80 hours or more during any given week working on your business.  What will keep you engaged with this found “free time”?  Travel?  Family? Hobbies? Volunteer work?  Or perhaps starting a new venture?

Family How will the transition from business ownership affect your family?  Is your spouse ready for you to be “retired”?  Will you take on new responsibilities at home?  Will you maintain your current residence or make a move?  How does your age or health affect these plans?  What about the age and health of your family members?

Business Envisioning

The business envisioning process starts with setting (or revisiting) long term goals and measurable objectives for your business for the next three to five years.

  • What is your vision for the business – the “big picture” of what you want to accomplish and the core values that drive your decisions to realize your vision? A vision statement is future-based and meant to inspire and give direction internally.
  • What is the company’s mission statement – that is, what is the purpose of your business today? The mission statement should communicate why the company exists to both internal (employees) and external stakeholders (customers).
  • What is your company’s value proposition? What is your unique, sustainable competitive advantage that creates value for your customers?
  • What are your strategic capabilities – the internal strengths (and weaknesses) of your business?
  • What are the trends within your industry and market that create opportunities (and threats) for the future of your business?
  • What is the fiscal “health” of your business? What is the current financial position and what trends do you see in key performance indicators such as gross margin, inventory turns, and net profit?  How does the financial performance of your business compare to others in your industry?
  • What is your business actually worth? Have you ever had a preliminary valuation prepared for your business?


Exit strategy is part of a good business strategy.  Following the personal and business envisioning exercise, it’s time to develop strategies to maximize the value of your business over the next three to five years so that when you are ready to exit, you can reap the rewards of your investment and hard work.

Personal Financial Plan

Do you have a personal financial plan, and has it been recently updated?  Do you know how much money you will need to finance your life-after-business?  Based on the valuation of your business, will the net proceeds from your exit strategy be sufficient to meet your financial needs (and wants)?

Composition of wealth What is the makeup of your financial picture?  Do you have a balanced portfolio that allocates your assets among financial tools that maximize return, minimize taxes, and reflect your tolerance for risk?  What sources of income will you have after you exit your business?  Will you need the business to provide you with an income stream after you exit?

Needs vs. wants – How much income do you need to finance your necessary living expenses?  And above and beyond these “needs”, how much money do you need to finance the things you “want” that are part of your “life-after-business”?

InsuranceHave you talked with an insurance agent to ensure you have adequate health insurance coverage for yourself and your family?  How about life, disability and long term care insurance?

Estate plan Does your personal financial plan include planning for distribution of your estate in the event of your death?  At a minimum, do you have a will and/or a trust that spells out the disposition of assets outside of probate?

Do you have powers of attorney, healthcare directives, or a living will in place?  Do you have charitable goals to share your wealth with a non-profit organization that fulfills a mission for which you are passionate?

Value Maximization

Potential strategic buyers pay more for a business that has better than average revenue growth, a set of quality internal processes, long term and high quality customer relationships, a good brand in the industry and is structurally sound.

Revenue and profitability are easy to quantify from financial statements and are important variables in calculating the value of a business.  But it’s often the intangible assets of a business that drives the value of a business when it’s time for the owner to exit.

TeamDeveloping a talented team that delivers on the mission and brand commitment of your business is critical to increasing value.  For “A” team players, it’s not a job but a passion.  The stronger the team, the less dependent the company is on the owner.

Infrastructure A clearly defined business model with documented systems and processes is critical to the transferability of the business in preparation for your exit.  These processes are the “brains” of the business – the knowledge assets that allow the team to create value for the customers and generate revenue for the company.

Customers Strong relationships with customers add value.  They are even more valuable if these relationships are long-term and contractual and the customers’ success depends on the unique value proposition of your product offerings.  And most importantly, these relationships are most valuable if they are transferable – customers will stay with the company after your exit.

Brand A company’s brand is so much more than a logo.  It represents the mission, the culture, the rhythm, the team dynamics, and the way you communicate with your customers.  It takes a while to build a brand but once you have it, people know it.  A brand that is recognized in the industry and market as the leader truly adds value to the business, independent of the owner.


Plans are only as good as their execution.  Based on the organizational assessment of your business and identification of opportunities to grow and add value, a strategic plan outlines specific strategies to achieve long term goals.  A plan for your future transition from the business is the capstone of the strategic plan.

Strategic Business Plan

If the goal is to maximize value through growth, then your strategies may include hiring new employees, buying new equipment or expanding to additional space, implementing process improvements to increase efficiencies, diversifying your customer base and exploring new markets, or looking for opportunities to grow through acquisition.

The written strategic business plan prioritizes these strategies, identifies the resources needed to execute, sets a timeline for implementation, and establishes metrics to measure success.

Exit Options

Whether you’ve been in business for one year or 20, exit planning is good for businesses at any stage.  Planning for the future today gives you control over how and when you exit your business.  It also gives you time to understand your exit options.  There are three overarching options.

Insiders – Sale or transition of the business to key employees, the existing management team or to existing partners are possible exit strategies for a business owner.  These transitions can be structured as a management buyout, an Employee Stock Option Plan, or executing a buy/sell agreement.

For family-owned businesses, an intergenerational transfer is another form of “insider” transition.

Outsiders – Selling to an outside third party can take many forms.  A strategic buyer sees the synergistic value of your business, therefore, may be willing to pay a higher price.  This could be a competitor or a supplier.  Other outside buyers may be individuals you know – or don’t know.

You may be approached by someone who wants to buy your business, or you may solicit potential buyers by engaging the services of a broker.

Liquidation – Selling off assets and closing the doors is a viable exit option but mostly likely the option of last resort.


Establishing the value of your business now gives you a reality check of how much your business is actually worth in the eyes of a third party.  You can them implement strategies to increase the value in preparation for exit at some future date.  There are three primary approaches of valuation.

The asset approach uses the current value of a company’s tangible net assets to determine fair market value. This approach is typically used where a business is not a going concern.

The income approach determines the value of future earnings discounted to today’s dollars.  Capitalization of earnings and discounted cash flow are two common methodologies to arrive at a value.

The market approach determines fair market value by reviewing actual transactions of comparable companies.  These “rules of thumb” multiples of earning or multiples of sales are applied to the company’s financial position to determine a range of value.

Trusted Advisors

As you undertake the journey that will ultimately lead to your exit commitment to that journey will be critical, or a successful ownership transition will be doubtful. Part of that commitment will be to get the right information, become educated in the process, and to engage talented advisors who have experience.

However, it is important to remember that you are at the center of this effort, you will make the final decisions and you are responsible. Here are the key groups of advisors who can help form your team:

  • Attorney
    • A critical player on your team, this individual needs have experience working with small businesses and the owners of those businesses. The more they understand your business and your personal goals, the better.
  • CPA (Certified Public Accountant)
    • This group is often the most trusted of small business owner advisors, with good reason. They are typically close to the numbers in your business and help you improve the bottom line. However, this individual must understand and embrace your decision to leave the business. A good CPA will insist you maintain clean financial records and make suggestions to continuously build equity. Often they help to assess value, but don’t assume they are experts in all types of appraisals.
  • Financial Planner or “Wealth Advisor”
    • It is important that this individual be involved in the process at an early stage. They will assess the financial condition of your estate and make recommendations for action. Both your personal and business situations should be examined. Strategies in critical areas such as tax, investments, trusts, and insurance require planning and time to execute.
  • Banker
    • An ongoing trusting relationship with your banker is always an advantage. Since some time during the transaction that transfers your business, financing will probably be an option, this person can be a valuable member of your team.
  • Business Appraiser
    • It may seem obvious that as you begin your exit process it will be essential to know the value of your business. All too often an owner does not have a realistic number in mind. It is unfortunate because this is the critical piece of data that will drive many decisions in the exit process. Therefore, be sure an accurate appraisal is done by a competent business valuator experienced in work with ownership transitions.
  • Value Advisor / CEPA (Certified Exit Planning Advisor)
    • The focus of this advisor is likely to be twofold. First, to concentrate on maximizing enterprise “value.” Very often an owner who thinks in terms of exiting the business will discover that a current realistic sale price will not yield his/her expectations and a “value enhancement” program must be executed. This advisor is experienced in growing value and probably has expertise in one or more of the other groups above. Second, this individual should be skilled in the exit process (preferably a certified exit planner) and qualified to serve as a “quarterback” on your team helping to manage the project.

Other Key Stakeholders:

  • Family
    • Your business may have direct involvement of your family members. Whether or not this is true, including your spouse and/or certain children in the exit process is advisable.
  • Board of Advisors and/or Board of Directors
    • The members of these groups would typically be relatively knowledgeable about the business. If they are frank and open with their observations the input could be invaluable.
  • Partners
    • Of course if your business has multiple owners the other equity holders should be brought into your exit process.
  • Key Employees
    • In many cases including key employees can be a distinct advantage, especially early in the process. Even though maintaining privacy is important, normally confidentiality can be managed. The exit option you choose will have a bearing on this group.