Exit Planning

Leave a positive legacy: How to exit your company gracefully

“It’s not an exaggeration to say that a lot — maybe even everything — is riding on a successful exit.”

That’s the opinion of Patrick Ungashick, speaker, author and exit planning specialist. He founded NAVIX Consultants to guide business owners through the exit process after seeing how much it challenged nearly every CEO he’d encountered.

“They would struggle with understanding what drives value in a company,” he says. “They would struggle with succession planning. They would struggle with the emotional side of letting go and passing the baton. And they would struggle with personal issues, like what am I going to do with my time and talent?”

No one wants to build a robust company only to have their final days as a leader or the aftermath of their departure mar the legacy. So how can business owners ensure they’re ready for a positive exit?


Start early

Vistage Chair Kevin Trout, whose medical products distributorship was acquired in 2016, speaks from firsthand experience. “Most people who sell their businesses start later than they should,” he says. “They think, five years from now I’ll sell, so I’ll start a year or two before. That’s a mistake.”

Chris Younger, co-founder and managing director of Class VI Partners, an investment bank that has helped more than 100 clients exit their companies, explains the urgency in business development terms most owners can relate to.

“Think of the biggest sale you ever worked,” Younger says. “Think about how much energy you put into preparation. I would argue that the sale of the business is 10 to 100 times more significant. Putting in equivalent time pays huge dividends.”

So how far in advance should business owners begin? “The sooner you start, the less stressful it will be and the better equipped you’ll be to drive value,” he says. “And it will get you into the mindset of thinking about your business differently than if you were just running it.”

Ungashick agrees with an extended timeline. “We say that when you’re at five years, you’re already in the homeward stretch. Five years is the bare minimum.”

Think about life (and lifestyle)

Once you’re ready to embark on an exit plan, it’s time to figure out that first step. 

What is it? “Get absolutely clear about your goals,” Ungashick urges, “because your goals will determine what happens next.”

Younger elaborates, “I tend to think of it less as exit planning than as transition planning. If you trade concentrated ownership in a particular company for cash, for instance, what does that make possible that’s not possible today?” Younger should know; he’s assisted clients with budgeting for everything from an ambitious boat journey to the long-term care of children with special needs.

Envisioning what comes next shapes the exit plan itself. In Trout’s words, “What do you want your lifestyle to be? Will there be enough money to support it?” Or as Ungashick puts it, “What’s my magic number? What is the net amount financially that I want to achieve so that I can afford to do the things in my life and with my family that I aspire to do?”

Ungashick recommends going so far as test driving your future in advance. “You can take a couple of weeks away from your business to draw or work on that philanthropic organization you have in mind. See if it looks like it’ll have staying power for you.”

Compare your options

According to Ungashick, “There are four and only four ways to exit from a company. You sell it to an outside buyer. You sell it to an inside buyer. You pass it down to family, typically kids. Or you shut it down.”

Chris calls liquidation “the most depressing and least attractive” option, one most business owners would not characterize as a graceful exit. The other choices have their pros and cons.

Transferring ownership to family members, the COO, or a group of employees can be challenging.

“Maybe one percent of the world’s population is temperamentally suited to be an entrepreneur and tolerate that level of risk,” says Younger. “There’s no guarantee that a child or a colleague will be prepared to take on the business or the debt that may be required to purchase it.” 

An owner is unlikely to earn as much transferring a company to employees or family members, either, but legacy considerations may outweigh finances. And there are downsides to selling as well.

“A sales transaction is a blunt instrument,” says Younger. “It is really challenging. It’s time-consuming. It’s stressful. It’s an emotional roller coaster. If you could get what you needed without having to go through it, that’s worth a conversation.”

Consult with experts

Exit planning isn’t something to be undertaken alone. “Work with someone who has executed this process several times. That will greatly magnify your odds of success,” says Younger, adding a favorite metaphor. “It’s like playing golf with Phil Nicholson. You want to have a great caddy to advise you so you have a chance. If you’re going into that as an amateur, you’re not likely to come out on top without help.”

Trout’s mind runs to mountain climbing. “You need a trail guide who has already gone up this path,” he says. “They’ll tell you what to look out for, how slow to go to avoid altitude sickness, where the best campsites are.”

He’s adamant about encouraging business owners to speak counsel because “I really didn’t have a trail guide other than my attorney. He got me a good deal but that doesn’t mean it was the best deal possible.”

Asking for help may be hard to do, Ungashick empathizes, but do it anyway. “People found companies because they think they can build a better mousetrap,” he says. “And they’re usually right if they’re successful. But at some point, you’ve got to let go of that thought to have a successful outcome.”

Assess the business

The expert advice you seek should include an objective business assessment. Why ask a third party? Because, as Trout says, “we all have blind spots!”

Experienced exit strategists can also help you examine the business through investors’ eyes and provide an accurate valuation. 

“A lot of business owners and leaders don’t fully understand the relationship between growth and value,” Ungashick explains. “Growing top- and bottom-line revenue is a very different exercise than creating value that’s going to transfer to a buyer or successor. That’s often a paradigm shift for business owners and leaders who are introduced to some of those realities.”

Prepare your people

Plenty of ink has been spilled on the topic of succession planning, and business owners who will pass a company on to family or employees should consider how to transfer knowledge and responsibility.

Building out the organizational structure and delegating tasks will also reduce founder reliance and increase business value at the time of sale, according to Younger.

As essential as these steps are, however, it’s important not to become self-absorbed. “A  lot of business owners think exit planning is all about them,” says Trout. “It isn’t. It’s about everyone on the journey with you.”

“Get the team ready for this event,” Ungashick cautions. “A lot of small and medium-sized companies place genuine emphasis on culture and inclusivity and create a quasi-family work environment. This idea of exit on the horizon, if not handled properly, can stress those relationships.”

Putting others first in a true servant leadership style makes all the difference when you look back. Trout is exceptionally proud to have rallied his team to 51 percent growth in his last year and to hand over the reins in a way that gave them the confidence they could exceed that performance on their own.

Many of his former employees remain top producers in the new parent company, others have launched their own businesses. He glows as he admits, “I think I helped them prepare to be entrepreneurs.”

The bottom line for Trout? “Show that you care about them and that you set them up for success. That way you leave a legacy.” And you will enjoy a graceful exit.


Related resources

The 7 key actions to maximize your business value [webinar on-demand]

Life After the Sale [Vistage Perspectives Fall 2021 Issue]


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About the Author: Vistage Staff

Vistage facilitates confidential peer advisory groups for CEOs and other senior leaders, focusing on solving challenges, accelerating growth and improving business performance. Over 45,000 high-caliber execu

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