Most Business Owners Are Clueless About Exit Planning

Could you do it if I asked you to sell your business tomorrow? For most business owners, the answer is a resounding no. This harsh reality stems from a critical misconception that exit planning is something you do when you’re ready to retire. Let me be clear — you’re already behind if you’re not preparing your business for sale from day one.

I’ve spent years advising business owners, and proper exit planning is the most overlooked aspect of running a successful company. It’s not just about having a great product or service. It’s about creating a business that can thrive without you.

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The Cash Flow Conundrum

Here’s a startling fact: 75% to 80% of businesses fail to sell. Why? The number one reason is poor cash flow management. Too many owners treat their business like a piggy bank, blurring the lines between company and personal finances. This creates an unclear financial picture that scares potential buyers.

Think about it. Would you buy a business if you couldn’t clearly see its financial health? Of course not. So why would you expect someone else to buy yours under those conditions?

Breaking the Owner-Dependent Cycle

Another major hurdle is over-reliance on the owner. Your business should be able to run without you. If it can’t, you don’t have a business — you have a job.

It is crucial to build a strong leadership team and create systems that allow for autonomy. This shift involves transitioning from being the person who does everything to being the CEO who oversees everything. It doesn’t happen overnight; it requires intentional planning and execution.

The Myth of the Forever Business

Many owners fall into the trap of thinking they’ll work in their business forever. While this is a comforting thought, it’s not realistic. Life happens. Markets change. Priorities shift.

I recently spoke with a business owner in her late 40s. She’s owned her company for 15 years and is ready to sell — not because she wants to retire, but because she’s tired of managing people. This scenario is more common than you might think.

Exit planning isn’t just about preparing for the end. It’s about creating options for yourself and your business at any stage.

The Power of Professional Perspective

Here’s a question that often stumps business owners: If you were looking at your business today as an outsider, would you buy it? If the answer is no, it’s time to make some changes.

The first step? Assemble a team of professionals. You need a CPA, a tax planner, a financial planner, and an exit strategist working together. Each brings a unique perspective that, when combined, can dramatically increase your business’s value and saleability.

Financial Clarity: The Foundation of Exit Planning

Let’s talk about your books. Even if you’re using accounting software, you need a professional bookkeeper. Why? Because unless you have a financial background, you shouldn’t be doing data entry. Your time is better spent elsewhere.

Once your books are in order, it’s time for a cost-reduction analysis. Cost reduction isn’t about penny-pinching. It’s about identifying and plugging financial leaks that could drain your business’s value.

The Tax Factor

Many business owners don’t realize that not all CPAs are created equal. It might be time for a change if your CPA isn’t helping you maximize your business’s value. There are dozens of tax credits and deductions available to companies that many CPAs aren’t aware of.

Consider bringing in a tax professional who can work alongside your CPA. Their job? Ensure you’re taking advantage of every possible tax benefit you’re eligible for. This strategy can significantly impact your bottom line and, by extension, your business’s value.

Legal Considerations in Exit Planning

Depending on your business, you might also need to engage a Fractional General Counsel. What do they do? They help to ensure your vendor contracts are up-to-date and protect you from liability. This type of clarity might seem minor, but it can make a huge difference when it comes to selling the business.

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Personal Financial Planning: The Other Side of the Coin

Exit planning isn’t just about your business. It’s also about your financial future. A skilled financial planner can work with your CPA and tax planner to ensure you use your business’s free cash flow to optimize your retirement. This often involves tax-deductible investments — another way to maximize value for your business and personal wealth.

The Long Game of Exit Planning

Let me be clear: this is not an overnight process. It takes time to gather the right team, create a comprehensive plan, and execute it effectively. But the payoff is worth it.

By starting your exit planning now—regardless of when you plan to sell—you’ll set yourself up for success and create a more valuable, efficient, and attractive business for potential buyers.

Remember, the goal isn’t just to build a successful business. It’s to build a company that someone else will want to buy. And that process starts today.

So, ask yourself: If you had to sell your business tomorrow, could you? If the answer is no, it’s time to start your exit planning. Don’t wait until you’re ready to sell. By then, it might be too late.

Exit planning isn’t just about the end game. It’s about building a better business right now. It’s about creating options for yourself and ensuring that the years of hard work you’ve poured into your company don’t go to waste.

The shocking truth about selling your business is that it’s not something you do when you’re ready to sell. It’s something you do from the moment you start your business. Selling your business is a mindset, a strategy, and a continuous process of improvement and preparation.

Are you ready to start planning your exit? Remember, the best time to plant a tree was 20 years ago. The second-best time is now. The same applies to exit planning. Start today, and you’ll thank yourself tomorrow.