Keys to Successful Exit Planning

What is Exit Planning?

Exit Planning combines the plan, concept, effort and process into a clear, simple strategy to build a business that is transferable through strong human, structural, customer, and social capital. The future of you, your family, and your business are addressed by exit planning through creating value today. Selling your business can be an intimidating task. An estimated 80% of a business owner’s wealth is tied to their business. Thus, planning your exit is pivotable to achieving your long term financial and personal goals.

This month’s Risk Management Tip will further explore several considerations for successful exit planning.

Timing Your Exit

It is never too early to start planning your exit. Precision planning and asking yourself “when is the right time to exit?” can make a big difference in obtaining your personal and financial goals.  If you pinpoint when you want to exit, you will be better positioned to target when to initiate the exit planning process and benchmark defined intervals for taking the steps needed to transition your business – and yourself – for the transition. Moreover, performing a routine exit plan evaluation can provide deep insight into the adjustments that should be made along the way to unlock additional value when it comes time to sell or transition the business.

Business owners often associate exit planning with retirement and the end of their professional careers. Having the mindset that planning your exit means you are giving up control of your business makes it difficult for some to actively prepare the exit plan. Business owners often do not realize that an exit plan also helps reduce risk and ensures business continuity should anything unexpected happen to the owner, for exit planning is paramount to maintaining control throughout any transitory period.

Importantly, exit plans are dynamic. Once created, the exit plan should be continually reviewed and revised as needed to meet the objectives and goals of the business and the owner. Thus, exit planning is not simply a way of getting out of a negative situation; rather, it is the best way to maximize the business’ value and achieve your financial and personal goals.

Understanding Your Financial and Personal Goals

As business owners begin to plan for their exit it is important that they understand and prioritize their long term financial and personal goals. Among other things, you should evaluate the financial impact of the proceeds of the sale of your business in comparison to the continuous stream of income you previously received from the business’ profits. Fully understanding your “Wealth Gap” or the amount you will need to sell your business for in order to achieve your personal lifestyle to provide for you and your family post transition. For example, do you want to travel the world, start a new business venture, or fund a charitable organization? Is estate planning to provide for the future of your family a factor in your exit plan and the target dollar amount you wish to achieve?  Analysis of this could in turn influence your decisions and impact the strategic steps needed to maximize the value of your business.

Maximizing Your Business’s Value

A key component of maximizing the value of your business is understanding what purchasers want. A trend in the market is for purchasers to look at competitive differentiation between your business and similarly situated businesses in your industry, considering marketplace opportunity, history of positive cash inflows and net profits, actual and potential recurring revenue streams, limited legal and regulatory risk, and tax efficient structuring.

Managing Your Legal Risks

As part of any business plan, risk mitigation can provide for increased business value as you plan and execute your transition. Internally, having strong contractual relationships with both your employees and your vendors will limit the legal issues that can be triggered with an ownership change. A purchaser being able to assume the contractual relationship and seamlessly transition into the business while limiting the chance of employee or vendor turnover will limit operational disruption likely increasing the value of your business on the open market.

Further, as you initiate the sale of your business it is important to understand your post-sale liability. Has the purchaser assumed all contracts and released you from forgoing liability? Do your agreements with the purchaser have favorable indemnification clauses? Having a well drafted purchase agreement between you and the purchaser will be a focal point of your post-sale risk mitigation.  Thus, it is important to retain experienced counsel to advise you through the process. Ensuring that you receive the full benefit of the bargain can be accomplished through a sale agreement that fully addresses areas of increased risk and possible disagreement between the parties.

Where the sale is a pure asset sale, you should consider the liabilities of the business once the majority of the assets are sold.  Under capitalization of the business post-sale can increase risk for the business owner and derail a successful exit plan. In equity sales, business owners should engage counsel to advise on the company formalities that must be followed to ensure a legally binding sale is accomplished. Analysis of a corporation’s bylaws or a limited liability company’s operating agreement will bring to light how to properly structure the deal, and/or help determine if the company’s business entity documents must be amended to facilitate a smooth and profitable sale.

Further, in heavily regulated industries, such as the financial services industry, it is important to engage counsel to structure the transaction, limiting regulatory risk upon exam of the sale and transition of management. Having counsel to assist in the business owner’s due diligence can greatly reduce risk and adverse actions from the applicable regulatory agencies. 


Exit planning is an important process in the life of every business owner. It requires forethought, analysis of financial and personal goals, pivoting, integration, and understanding which can be accomplished with transparency and effective collaboration with your team of professionals. Importantly, in the financial industry, exit planning is expected for one-person shops and requires experienced counsel to have a seat at the table to provide advice to business owners related to how an organizational change will impact the business.

JLG assists firms and individuals with exit planning, including M&A transactions, succession planning, and pre- and post-sale due diligence. For more information on this topic or to find out about our services, please contact us at (619) 298-2880 or at

Author: Jeremiah Baba Pagno, Attorney; Editor: Michelle L. Jacko, Managing Partner of Jacko Law Group, PC (“JLG”). JLG works extensively with investment advisers, broker-dealers, investment companies, private equity and hedge funds, banks and corporate clients on securities and corporate counsel matters.  For more information, please visit

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