Fifteen Steps for CEOs Who Think They’re Ready to Exit The Business

By Patrick Ungashick

If you thought you were close to being able to exit your business, it’s time to realize that your exit plan is probably full of holes …

With the economy broadly rebounding, long-term capital gains tax rates increasing in the near future, and liquidity access returning to something resembling “normal,” there are a lot of small- to mid-market company owners and CEOs wondering if the time is right to consider exiting their business sometime soon.

The best answer is “maybe” — but you cannot consider this if you and your business are not ready.

Unfortunately, too many business leaders and their businesses are not. Nearly 90 percent of 450 Vistage members had significant holes in their exit preparations, according to White Horse Advisors’ Study of Closely Held Business Owners and Exit Planning. [See the survey’s complete findings here:].

What does “ready” look like? Review the following checklist of 15 areas to evaluate your preparedness. The assessment also highlights where there is work to be done.

1. Do you have a clear time frame for when you would prefer to exit from the business?

Without clearly defining your ideal “when,” it is impossible to measure how much time remains, and whether you are on track to exit successfully or not.

2. Of the four ways to exit from a business (pass to family, sell to outsiders, sell to key employees or orderly liquidation), have you clearly determined your likely exit strategy?

The four possible exit strategies require four different paths to success. If you do not know your likely strategy, you risk having poor or mismatched tactics that do not lead to success.

3. Does the business growth plan clearly align with the business exit plan?

“Seven Habits of Highly Effective People” author Stephen Covey might have said it best: “Begin with the end in mind.” If your business grows in the manner you wish, does that lead to a successful exit? Does the last page of your business growth plan show how accomplishing that plan directly leads to exit success?

4. Have you identified the net dollar value you need from the business to achieve personal financial security or other post-exit financial goals?

Almost 98 percent of owners we surveyed stated that reaching financial independence was the primary goal at exit. If you do not know how much it takes to get there, then how do you know if you will succeed?

5. Have you identified and implemented the tactics you will use to achieve this net amount?

Knowing how much you need, and being on time and on course to get there, are two different things. You must implement tactics now to achieve your net amount by exit.

6. Do you have written analysis of the tax impact of the exit and have you implemented the tactics available to minimize these taxes?

Your exit will almost certainly be the most heavily taxed transaction of your life. Can you afford to not anticipate and plan for the tax burden?

7. Are you fully utilizing the business to create tax-favorable wealth outside of the business during the years prior to exit?

Because exit success is tax-sensitive, reducing taxes between now and when you exit is a critical step. The greater you diversify prior to your exit, the easier the exit often becomes.

8. Do you have a written compensation program to retain top employees and to protect against losing them prior to the exit in the event of their defection, disability or premature death?

Losing a key employee is difficult enough, but losing one shortly before or after your exit can set back or even derail your exit success.

9. Do you have a written, up-to-date contingency plan should you become disabled or prematurely die, and do you own adequate disability and life insurance?

Setbacks to your health, or premature death, cannot be allowed to erode or collapse your business. Your family, key employees, valued customers and others depend on your business survival, even if you suffer unexpected illness or death.

10. Have you identified and implemented the tactics available to reduce creditor risk against the business and personal assets?

Business owners face risk every day. Inadequate creditor protection risks not only affect the business today, but can also block success at exit.

11. Are you confident that the business’ current legal arrangements (buy-sell agreements, book and records, operating agreements, stock certificates, etc.) are properly organized and reflect your exit-planning needs?

Disorderly business books and records make exit more difficult, expensive and time-consuming. It also often erodes business value.

12. Do you have trusted tax, legal and financial advisers who are qualified to meet your exit-planning needs?

Don’t cut your teeth on your own exit. You may have only one big exit in your career — there is too much money and time at risk to not get professional help. Exit planning is a team effort: It takes advisers with experience in the business, legal, accounting, tax and financial issues associated with exiting.

13. Have your advisers met as a group with you, and have they clearly identified a quarterback who is accountable for driving the exit-planning process?

A team without cohesion and leadership cannot serve your exit needs well.

14. Have you fully shared the exit plans with loved ones and have their support?

Exiting your business should not cause family strife. Discuss your exit plans with loved ones, not only to share, but also to listen to their input and ideas.

15. Do you have a clear vision of what you want to do and accomplish in life after exit?

Uncertainty and fears about life after exit can cause owners to not exit when they probably should, and other owners who have exited without figuring this out to experience “exitor’s remorse” afterwards.

Use this checklist to assess where you stand today. Whether you exit in 12 months or 12 years, having clear goals and making decisions today that lead to future success is essential. A business that is “not ready” to exit is a business with some significant weakness.

Can YOU afford to be “not ready” at any point in time?

Patrick Ungashick is a founding partner and the CEO of White Horse Advisors. He has focused on helping business owners for close to 20 years. His experience includes working with organizations throughout the U.S. in a variety of industries. Patrick is the author of “Dance in the End Zone: The Business Owner’s Exit Planning Playbook” and is a frequent speaker to business-owner groups. To learn more about the services White Horse Advisors provides, visit
Originally published: Sep 14, 2011

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