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Exit Your Business on Your Terms: A Guide for Entrepreneurs

By Michael Nedreski

As a business owner or entrepreneur, have you considered when the right time is to start planning your exit strategy? The answer may surprise you, and it's earlier than you think.

Why? According to the Exit Planning Institute Readiness Survey, 75% of business owners (1) experience some form of regret within a year of selling their business. The reasons are varied, but they often boil down to a few key points:

• Many owners realize they didn't give themselves enough time to properly prepare for the transition. This includes planning to reduce taxes and increase the sale's value, leading to a lower-than-expected return on their life's work.
• For those forced into a quick sale due to an unexpected event, the lack of preparation means they often don't get to exit on their terms, resulting in less favorable conditions and outcomes.
• When the time comes to sell, even a profitable business can be unattractive to potential buyers. If the owner is too involved in day-to-day operations or hasn't built a strong management team, it can deter buyers.
• Additionally, owners who haven't planned for a smooth transfer to family members or key employees may find themselves facing a difficult transition.

In our work with business owners, we stress the importance of taking a proactive approach to exit planning. Here are some key steps we recommend to entrepreneurs who want to be ahead of the curve and set themselves up for a successful exit.

Envision the Future

What will be the legacy of the business you leave behind? Who will carry on your vision? These and many other questions—especially those that address your role (if any) in the business afterward—should be carefully considered. Imagine what the business will look like in five or ten years after you're no longer there. Setting the foundation for this vision should be the first step.

Prepare for the Unexpected

Business owners know all too well that unexpected events can derail even the best-laid plans, so carry this tenet into planning for your business's future. Illness or serious accidents late in life can not only affect the day-to-day operations if you're not there, but the value of the business to potential buyers as well. You don't want circumstances and tragedy to dictate the terms and conditions of your exit, so be sure to put contingency plans in place.

Develop a Succession Plan Long Before You Need It

This is especially true if you plan on transitioning your business to family members or key employees. Employees, customers, and vendors will all need assurance the business can run well with your successors, and this trust takes time. You also want to have confidence ahead of time that those who lead the business after you have the strengths and skills to continue your success.

Integrate Your Exit With Your Personal Financial Plan

The Exit Planning Readiness Survey also stated that 80-90 percent of an average entrepreneur's wealth was locked up on their business. (2) When the exit and sale occurs, this could result in more liquid wealth than the owner has ever possessed at one time. What then?

Being prepared for this sudden wealth realization and incorporating this windfall into a thoughtful, carefully crafted financial and retirement plan is essential for every business owner. Without such a plan, which includes personal estate planning as well, retired entrepreneurs may feel overwhelmed and at a loss—having now relinquished their life's work and deciding how to best reinvest or allocate the proceeds of their business sale. This is at the heart of what White Oak Wealth Partners provides to our business-owner clients.

Reinvent Yourself

As business owners ourselves, we know all too well that running an enterprise is all-consuming and it may be difficult to simply turn off that motivation and inner drive once the purchase agreement is signed and sealed. In our experience, retired entrepreneurs often need to turn their still-considerable energies toward other endeavors. This can include charitable or volunteer work or devoting time to long-awaited hobbies or time with family and loved ones. Think about your new life and sense of purpose and lay a foundation ahead of time for your legacy and what's meaningful to you.

Don't Be a One-Person Show: Assemble Your Team

Many entrepreneurs relish the idea of independence and being a self-made success. After all, you may have been the captain of your business ship most of your adult life. But when it comes to business transitions, assemble a team of experts to counsel and guide you through this process. This includes financial advisors, tax professionals, and qualified attorneys.

Schedule Your Strategy Session

Proactive business transition planning can ease the pressure of stepping away from the company you've dedicated your life to and help the legacy you've built continue with purpose.

At White Oak Wealth Partners, we recognize the unique challenges business owners face when preparing for a transition. Our team is here to offer thoughtful, experienced guidance every step of the way. 

To get started, contact us by calling 814-835-4551, emailing MICHAEL.NEDRESKI@LPL.COM, or scheduling an appointment here.

About Michael

Michael Nedreski is managing partner at White Oak Wealth Partners, a specialized financial lifestyle and wealth management firm serving entrepreneurs, business owners, executives, and their families. Mike has 30-plus years of experience in the financial services industry and is committed to serving his clients through holistic financial planning, disciplined investment strategies, and proactive personal service. 

A native of Erie, Pennsylvania, Mike began his career in the financial services industry in 1988. He has earned the Chartered Retirement Planning CounselorSM (CRPC®) designation conferred by College for Financial Planning (188-LPL). Mike is also an active member of the Financial Services Institute (FSI) and Financial Planning Association (FPA).

When not working, Mike enjoys spending time with his wife, Amy, and their children. He volunteers in his community and at his church and his children's schools. An outdoors enthusiast, Mike loves hunting, fishing, golfing, and spending time near or on the water. He also enjoys working out and watching some of his favorite sports teams, the Pittsburgh Pirates and the Cleveland Browns. To learn more about Michael, connect with him on LinkedIn.

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(1) Exit Planning Institute, 2022, September

(2) Exit Planning Institute, 2022, September