What is Exit Planning?

• Exit planning describes the process of preparing a closely held business for the exit of its owners at its maximum value. It is the preparation and implementation of a plan that maximizes the current and future value of the business. 

• Exit planners help owners understand the true value of their business today and what its potential value will be at the time of sale.

• Most business owners seeking to sell their business will not find a buyer.  Exit planning vastly improves the marketability of the business and captures the most value for the owners. 

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Succession and exit planning assure that the closely held business owner can maintain and preserve the financial and social legacy of their company, whether the goal is to retire, move to another venture, or simply reduce the need for day-to-day involvement in running the operation.

Studies indicate that 75 percent of private business owners would like to exit their business within the next 10 years.   2023 National State of Owner Readiness Report.  Closely held businesses are typically family-owned or controlled and most of the owners of those businesses favor passing the business to the next generation.  An effective exit plan will usually require three to five years to plan and implement.

Exit Planning Using Proven Strategies and an Extended Network of Professionals

The Exit Planning Institute (EPI) has developed a comprehensive, multidiscipliary framework for developing a robust exit strategy, focusing on maximizing value, ensuring business continuity, and preparing for the future. EPI’s network of Certified Exit Planning Advisors (CEPAs) includes lawyers, wealth consultants, insurance advisors, merger and acquisition firms, family business consultants, accountants, and management firms.

A CEPA has access to this network of professionals, in and out of EPI’s network of advisors, and a thorough understanding of a proven strategy for business value enhancement that can increase the value of some businesses by 2–8 times when implemented.

Exit plans provide the framework that enables owners to step back from their day-to-day responsibility for their closely held enterprise.  This process of transferring the day-to-day oversight to others not only enables a seamless transition that safeguards the owner’s legacy and financial security, but it also gives the owner a level of persona freedom that many have never experienced.

Understanding Succession and Exit Planning

Succession and exit planning is the process and implementation of course for the transition of business leadership and ownership. The owner, or owners, plan for the eventual transfer of control, in large part by assuring that the assets of the business are protected and stable and ensuring that the business continues to operate successfully without the continual involvement of the current owner.

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I am a lawyer, a certified valuation analyst, and a certified exit and succession planner.  I have worked with the owners of closely held businesses throughout my career.

Contact me if you have questions about valuing your business, developing an exit plan, or implementing the legal bulletproofing necessary to protect your investment.

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Effective exit planning also incorporates the personal and financial goals of the owner after exiting. The aim is to create a plan that aligns with the owner’s personal goals, the business’s needs, and the future leadership’s capabilities.

The Exit Planning Institute Framework

EPI provides a well-documented approach to exit planning, emphasizing the need for a well-rounded strategy that encompasses various facets of the business and the own

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The EPI approach is a multidisciplinary process known as the Value Acceleration Methodology. EPI certifies individuals in the planning process and provides them with the tools and resources to effectively guide business owners through the exit planning journey. CEPAs are found in a variety of related professions, including law, accounting, financial planning, valuation, and business consulting.

What is the EPI process?

The exit planning process is divided into key phases:

1. Goal Setting: Establish clear, measurable objectives for the exit. This includes financial needs, timeliness, and the desired legacy.
2. Business Valuation: Understand the current value of the business and identify factors that could enhance its worth. A comprehensive valuation is critical for informed decision-making.
3. Value Enhancement: Implement strategies to increase the business’s value, focusing on operational improvements, financial performance, and market positioning.
4. Contingency Planning: Prepare for unforeseen events with plans that protect the business, its employees, and the owner’s interests.
5. Ownership Transfer: Explore options for transferring ownership, which could include selling to an outside party, passing the business to family members, or arranging for employee ownership.
6. Wealth Preservation: Develop strategies to protect and grow the proceeds from the sale or transfer of the business, ensuring financial security for the owner and their family.Best Practices in Succession and Exit Planning

The Exit Planning Institute advocates for several best practices that are essential for a successful exit strategy:

• Early Planning: Begin the process well in advance of the anticipated exit date. Early planning affords the owner more options and opportunities to enhance business value.
• Collaborative Approach: Assemble a team of advisors, including legal, financial, and business experts, to guide the planning process. This team ensures that all aspects of the exit are considered and addressed.
• Communication: Engage with key stakeholders, including family members, business partners, and employees, about the exit plan. Transparency helps manage expectations and mitigate potential conflicts.
• Flexibility: Remain open to adjusting the plan as circumstances change. Flexibility is crucial to navigating the complexities of exit planning.

What is the role of the Certified Exit Planner (CEPA)?

The CEPA plays a central role in the exit planning process. CEPA professionals are trained to assist business owners in developing and implementing an exit or succession plan.

• Individual professional expertise The CEPA provides his or her own individual expertise. CEPAs are professionals in such areas as business law, trusts and estates law, accounting, tax planning, valuation, business management, wealth planning, family business dynamics, and insurance.
• CEPA Value Acceleration Plans. A CEPA acting as a value advisor will coordinate the discovery, valuation, and planning processes. The CEPA implementing the exit plan then guides the owner through implementation using shorter and longer-term planning and incorporating a series of 90-day “sprints” in which discrete projects are used to meet broader goals.
• Deciding when and how to exit. CEPAs work with owners to determine when the business is in a good position for their exit and then assist the owner in making a determination of whether to exit or continue in the business. Owners that continue in the business will ordinarily do so with a reduced role in day-to-day operations.
• Personal Planning for the ‘Next Chapter.’ In addition to the business issues, CEPAs work with owners to develop their “next chapter plan,” in which they define and implement their personal goals after they have exited the business. This planning involves the examination of the owner’s finances and personal goals.
• Coordinating the sale or transfer. For those owners who decide to exit, the CEPA assists in finding a successor or purchaser and implementing the exit plan. Options for exiting the business include sales to buyers as a turnkey operation, sales to strategic buyers, sales to private equity firms, sales to employees through Employee Stock Ownership Plans (ESOPs), or passing the company on to family members. Another option for exiting the business is liquidation.

By working with a CEPA, business owners can ensure that their exit plan is comprehensive, well-thought-out, and tailored to their specific needs and goals. The CEPA can also help coordinate and collaborate with the team of advisors to ensure a smooth and successful transition.

For entrepreneurs and business owners contemplating their future and the legacy of their business, succession and exit planning cannot be overlooked. The strategies and methods developed and implemented by the Exit Planning Institute provide a solid foundation for embarking on this critical journey.

If you’re ready to take the first step towards securing your business’s future, we can guide you through the intricacies of succession and exit planning. We understand the unique challenges that entrepreneurs face and are here to ensure that your exit strategy aligns with your goals and vision.