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Your Business May Not Survive Without Exit Planning

By November 11, 2020December 23rd, 2021No Comments

While many business owners are brimming over with ideas for next quarter or next year, very little have thought about their exit plan. Even when they do, owners tend to give it only perfunctory thought, preferring to think on just about anything else. You’ve committed much of your life to building your business. Treat it like the asset it is by devising a clear exit plan that preserves as much wealth as possible.

As we have discussed in previous articles and presentations, there is more than one way to exit a business. Some options include:

  • Sell to a strategic buyer, private equity, competitor, or investor.
  • Sell to a family member.
  • Sell to Employees (ESOPs)
  • Sell to Key Employees / Management Team
  • Liquidate the business’s assets


The exit process should begin with receiving a business valuation from an accredited appraiser. This valuation should incorporate a range of values depending upon who would be the ultimate buyer (family, strategic, etc). Each option presents its own challenges as there is no one size fits all exit strategy.

Family members might not have the necessary skills to take over the business, or the resources to purchase it for market value. It’s common for owners to dream of their child taking over the business, without even confirming that’s what their child wants. One day they realize that, though they’re ready to leave, their chosen successor isn’t available. Ensure that, whomever you intend to give the business to, they are prepared to take it and your staff is equipped to help them keep things running.

If you elect to sell to an outsider, different considerations are at play. The strategic buyer hopes to strengthen their existing portfolio, while a financial buyer seeks to grow the company so they can quickly leverage big returns on their investment. This sort of sell requires you to carefully weigh what happens when you close the deal. In most cases, you’ll have no more say in the operations of the business. Even if you negotiate an earnout or stay on the team, things may change dramatically, affecting how you feel about the sale and your potential earnings.

Transferring the company to employees is another option. One way to structure this deal is via an Employee Stock Ownership Plan (ESOP). This sort of transition takes time and the proper due diligence to meet the Department of Labor’s best practices. Some financial institutions have more of an appetite to lend for an ESOP transaction than others and it is best to use a bank that has experience with multiple ESOP clients so the process goes as smoothly as possible. It is still imperative that even with a transfer to employees, the Company has a solid management team in place to maintain operations.

If there is no clear exit plan and no buyer, the only option might be to liquidate the business. This is usually the worst option. When you liquidate, the only thing you’ll have to show for your business is the cash you get from selling off assets. There’s no legacy, nothing that remains of your work. For a lot of owners, this is a painful reality.

No matter where you are in the life cycle of your business, failing to engage in meaningful exit plans substantially limits your options for retirement. Now is the time to think about what comes next.

If you’re anticipating an exit in the next 5 to 10 years, don’t wait until then to begin planning. Exit planning begins early, and is a significant source of value for owners who can devise and stick with an intelligent plan.

About Vision Point Capital
For over 20 years, our team has supported our clients with comprehensive advisory services to help them with their complex business valuation and transition needs. Few other firms offer such a complete suite of business transition services as it relates to M&A, Valuation, and ESOPs.

Our client’s personal goals are at the heart of everything we do. We are well versed in advising clients across a broad range of industries and help them manage and navigate valuation and all the business transition alternatives available to them. In fact, when you work with Vision Point Capital, you leverage our resources, experience, and expertise to help you grow faster and optimize value for reaching a successful business transition.