What is Exit Planning and Why Is It Important?

Baby Boomers own two-thirds of U.S. businesses. Over the next decade, these owners will transition out of their businesses—whether they are prepared to or not.

Statistics show that only 20%-30% of businesses that go to market actually sell. This leaves 70%-80% of enterprises stranded without solid options for owners to transition their wealth and secure their legacies. In fact, studies show that business owners spend more time planning vacations than preparing to sell their businesses!

Thoughtful business owners who have taken the time to prepare their businesses and themselves for sale significantly increase their odds of a successful transition.

What Is Exit Planning?

Exit planning refers to a broad series of activities that prepare businesses for an optimal sales process. It also ensures that business owners are psychologically and financially prepared to exit.

Why Is Exit Planning Important?

The goal of exit planning is to increase the probability of your success. Additionally, sellers who go through exit planning gain benefits like:

  • Attracting higher-quality buyers
  • Increasing the probability of closing
  • Expediating the closing process
  • Maximizing cash at closing
  • Optimizing tax position
  • Reducing escrow amounts and hold-backs
  • Pre-empting common buyer and lender questions and concerns

What Does the Exit Planning Process Look Like?

The exit planning process occurs in three steps:

  • Exit planning prep (9-12 months)
  • M&A process (9-12 months)
  • Post-closing transition (3-6 months)

When Should Sellers Start to Prepare?

Sellers should start the process at least two years before they’d like to exit. Given that most sales processes take 6-9 months (and sellers typically stay involved a few months post-closing), two years allows ample time to plan, sell, close, and transition after closing.

Who Is Involved in Exit Planning?

Exit planning involves five key players:

  • The business owner
  • A corporate attorney
  • A CPA or wealth manager
  • The CFO or COO
  • An M&A advisor

What Are the Key Exit Planning Workstreams?

There are three critical workstreams in exit planning.

Finance and Accounting

The finance and accounting workstream includes preparing GAAP financials. This workstream also involves preparing audited or reviewed financial statements and conducting a quality of earnings assessment. Further, the finance and accounting workstream substantiates personal and nonrecurring expenses. Lastly, it ensures that monthly or quarterly processes are in place.

Legal, Operations, and HR

Within the legal, operations, and HR workstream, responsibilities include:

  • Locating and cataloging company agreements
  • Addressing major deficiencies (like. staffing, IT, and insurance)
  • Creating employee retention and incentive plans

Legal, operations, and HR also updates job descriptions, training materials, and the org chart.


Some responsibilities in the marketing workstream include creating a marketing plan, building a virtual data room, and pre-screening deals with potential lenders. The marketing team also prepares the CIM, Teaser, and buyer lists.

Working with a trusted M&A Advisory firm will increase your odds of a successful transition. If you or a client is interested in learning more about exit planning, business valuation, or the M&A process, our team at Kinected Advisors would love to have a confidential conversation.

Kevin Berson

Kevin Berson

Mergers and Acquisitions (M&A) Advisor | Business Broker

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