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What's in a Good Exit Plan?

Designing an exit plan can be the difference between liquidating your company and selling it for top dollar

Karen Jessey //November 14, 2018//

What's in a Good Exit Plan?

Designing an exit plan can be the difference between liquidating your company and selling it for top dollar

Karen Jessey //November 14, 2018//

At some point, all owners will exit their businesses. When that day arrives, owners will want to exit on their terms – terms that include financial independence and choosing the person or entity that will buy the business.

Designing a comprehensive exit plan – based on your key strategic objectives that are flexible enough to adapt to changing economic, business and personal circumstances – can be the difference between liquidating your company and selling it for top dollar.

Let's look at the characteristics of a good exit plan in light of a sad, but common story of two business owners who failed to plan, as told by an advisor:

Several years ago, I met with Jim and Tim McCoy, the owners of a thriving construction company. They were looking to get out – As successful as they were, the McCoys were tired of navigating the labyrinth of government regulation and paying ever-increasing taxes. Ultimately, the day-to-day grind of running a multimillion-dollar company had taken its toll.

For the McCoys, a sale to a third-party was not feasible – not only because neither brother was willing to remain after a sale, but also because they had failed to develop a strong management team.

Few savvy buyers will purchase a company without a great management team committed to remain after the sale.

Transferring ownership to one or more key employees was also out of the question. None had been groomed to assume ownership responsibilities, nor had the McCoys taken action to fund this type of buyout.

Transferring the company to children was impossible because the children were too young to be active in the company.

The McCoy's only exit option was to liquidate. Their highly profitable company had little worth beyond the value of its tangible assets. After the liquidation, dozens of employees lost jobs and Jim and Tim left millions of dollars on the table.

How can you avoid their fate?


The issues the individuals above ignored – grooming a management team and failing to plan – proved to be their downfall. These and most other issues – if addressed in advance – can be resolved in a manner that is:




In our experience, most owners with exit plans need five to 10 years to implement all strategies necessary to exit successfully. Owners without exit plans spend far longer waiting and hoping for a buyer.


Your exit plan must set goals, provide accountability and measure results. This is especially important when one goal is to protect and grow value and minimize taxes.


Create a plan with the flexibility necessary to react quickly and effectively when the unexpected happens/


Ultimately, we suggest you engage in BEI's Seven Step Exit Planning Process, which has helped thousands of owners exit in style.

One way to look at BEI’s Exit Planning Process is to associate each sttep with a question. As you progress through the process, you will be able to answer “Yes” to each one. (Note: If you pursue step four, step five will be irrelevant, and vice versa.)

1: SETTING EXIT OBJECTIVES: Do you know your retirement goals and what it will take—in cash—to reach them?

2: DETERMINING BUSINESS VALUE: Do you know what your business is worth today, in cash?

3: INCREASING BUSINESS VALUE  Business Value: Have you identified the best ways to increase your company’s value and cash flow?

4: THE THIRD-PARTY SALE: Do you know how to sell your business to a third party without getting killed by taxes?

5: TRANSFER YOUR BUSINESS TO INSIDERS: Do you know how to transfer your business to insiders (family members, co-owners, or employees) for cash rather than giving it away?

6: PROTECT YOUR BUSINESS: Do you have a continuity plan for your business should you die or become disabled?

7: PROTECT YOUR FAMILY: Do you have a plan to secure your family’s financial security should you die or become disabled?


The thoughts and actions that go into answering these questions constitute your unique exit plan.

Article presented by Karen Jessey, ChFC, CLU, CFP, RCIP, CExP, [email protected], a Member of BEI’s International Network of Exit Planning Professionals™. ©2018 BEI ™. ©2018Registered Representatives and Financial Advisors of Park Avenue Securities LLC (PAS), 6455 S Yosemite Street Suite 300 Greenwood Village CO  80111.  Securities products/services and advisory services are offered through PAS, a registered broker-dealer and investment advisor, 303-770-9020. Field Representatives, The Guardian Life Insurance Company of America (Guardian), New York, NY. PAS is an indirect, wholly owned subsidiary of Guardian.  Strategic Wealth Partners is not an affiliate or subsidiary of PAS or Guardian. PAS is a member FINRA, SIPC