Answering Personal Life Questions: Key to an Effective Exit Plan

• Business owners that fail to plan for their lives after exiting their business often report ‘seller’s remorse’ and dissatisfaction with their lives.

• Understanding and planning for the personal after exiting a business focuses on two-part personal question: who we are outside of our business and what are our personal goals.

• Formal written plans for life after exiting a business are a critical aspect of exit planning.

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Business owners thinking about exiting their companies tend to focus on financial and operational considerations. However, an often-overlooked, yet crucial component is the personal leg of the exit planning stool, a framework popularized by the Exit Planning Institute (EPI). Effective exit planning, as outlined by the EPI, involves balancing three critical legs of an exit planning stool: business, personal, and financial. This more-holistic approach ensures that all aspects of the owner’s life are considered to achieve a successful transition.

The personal leg, which encompasses the owner’s personal goals, well-being, and plans for life after the business, is frequently neglected in favor of more tangible financial or business concerns. However, the EPI’s 2019 and 2023 surveys show that business owners who fail to plan personally for life after the transition are at risk of dissatisfaction post-exit, potentially leading to “seller’s remorse.”

The Importance of the Personal Leg in Exit Planning

Exit planning is about much more than maximizing the value of your business. It’s also about ensuring a fulfilling and secure life after the transition. The EPI’s “Three Legs of the Stool™” framework stresses that an effective exit strategy cannot just focus on business performance and financial returns; it must also align with the owner’s personal objectives and future aspirations.

Addressing the personal leg early ensures that the owner’s goals for life after the business are clear, reducing the emotional uncertainty that often accompanies the exit process.

The EPI regularly surveys business owners. In its report from its most recent survey, the 2023 State of Owner Readiness Report, EPI reports that “75% of business owners want to exit within the next 10 years,” representing trillions of dollars in personal wealth tied up in privately held businesses​.

Yet, one of the key insights from the report is that most business owners fail to integrate personal planning into their overall exit strategy early enough. Historically, personal planning has been the most neglected aspect of exit planning, as shown in the 2013 survey, where 62% of respondents expressed negative emotional feelings about their future post-exit​. This reveals a major gap in how owners prepare themselves emotionally for life after they leave their companies.

EPI’s Findings on Personal Planning

The Exit Planning Institute’s surveys from 2019 and 2023 provide essential data on how personal readiness impacts overall exit satisfaction. According to the 2019 National State of Owner Readiness Report, only 4% of business owners had a formal “Life After Business” plan​. This lack of planning often leads to dissatisfaction after the transition. PwC research cited by EPI reveals that 75% of business owners experience seller’s remorse within a year of selling their company​.

The 2023 report paints a more optimistic picture, showing that 41% of owners now have a formal written plan for life post-business, and an additional 50% have at least an informal idea of what they want to do​. However, this still leaves 9% of owners without any plan for their personal lives post-exit, a number that underscores the need for better awareness and early personal planning​.

The 2023 survey data also highlights the value of early personal assessments. Owners who engage in personal planning earlier in the exit process are more likely to report a smoother, more satisfying transition. By focusing on personal goals from the outset, business owners can ensure that their post-exit life is fulfilling and that their transition feels like a success, both financially and emotionally.

The Personal Leg: A Key to Long-Term Satisfaction

Satisfaction post-transition largely depends on whether the owner feels fulfilled in their life after the business. Business owners invest years, often decades, in building their companies. For many, their identity and daily routine are deeply intertwined with the business. Thus, the emotional and psychological impacts of transitioning away from a company can be profound.

The 2019 survey found that 48% of business owners had no clear plans for what they would do after they left their businesses​. Without a vision for post-exit life, many owners feel a loss of purpose, leading to dissatisfaction. The reality is that a successful exit doesn’t only mean a financially lucrative one—it means transitioning into a life that provides personal fulfillment.

The 2023 survey also provides some insight into what business owners are planning to do after they exit. The survey revealed that 47.5% of respondents plan to focus on philanthropy post-exit, while 35.6% plan to retire fully​. Others plan to remain involved in business in some capacity—32.2% plan to consult, and 22% plan to invest or serve on boards​. These results indicate that while many owners have a general idea of what they will do post-exit, a significant number still lack a detailed plan.

The Risks of Neglecting Personal Planning

Neglecting the personal leg of the stool can lead to several risks for business owners. These risks include:

• Emotional Regret: A common issue for business owners is seller’s remorse. Without a plan for what to do after exiting, many feel a sense of loss, which can overshadow even a financially successful transition. The 2023 report highlights that emotional readiness is essential for a smooth transition​.
• Loss of Identity: For many owners, their business is a key part of their identity. Transitioning out of that role without a clear plan for what comes next can lead to a loss of self-worth. EPI’s findings show that business owners who don’t plan for their personal life after the exit are more likely to feel disconnected and adrift post-sale​​.
• Financial Discrepancies: The personal leg of the stool also includes ensuring that personal financial goals align with business goals. According to the 2019 survey, many business owners overlook integrating their exit plan with their estate and financial plans, which can create significant financial problems after the transition​.

How an Early Personal Assessment Helps

Engaging in personal planning early in the exit process helps mitigate the risks outlined above. A Certified Exit Planning Advisor (CEPA) typically begins the exit planning process by asking owners to reflect on their personal goals. This ensures that the owner’s desires for their future are built into the exit strategy from the start.

Incorporating personal goals early also allows owners to gradually transition into their post-exit life. For example, some owners may choose to step back from daily operations over time, while others may pursue personal passions or philanthropy. An early personal assessment provides the clarity needed to make these decisions confidently.

A Successful Exit Plan Take Time to Develop and Implement.

If you’re considering exiting your business, it’s critical to begin planning your personal life post-exit as soon as possible. Working with a Certified Exit Planning Advisor (CEPA) can help you address all three legs of the stool—business, financial, and personal. A comprehensive exit plan ensures that your financial goals are met and that your personal life after the exit is fulfilling and rewarding.