3 Common Objections to Business Exit Planning

From our experience working with many business owners, exit planning does not usually make their to-do list. Typically, they mention not having enough time, retirement still being many years away or some other reason—there are plenty of excuses that owners use to justify why they have not addressed exit planning.Since most business owners rely on their company’s value to fund retirement, why does exit planning often get pushed off? Here are three common objections:

1. “I don’t have time for it.”

Business owners are very busy. They often wear multiple hats in their company, which can be extremely time consuming. That, coupled with making time for family, often puts other tasks on the back burner. Of course, planning for an eventual exit takes time and energy, but when executed properly, it can enhance the value of the business while saving the owner time over the long run.

The owner’s retirement plan often relies on a future liquidity event surrounding the business. For this reason, time spent on exit planning to ensure the business is ready to transition to a buyer is critical—not only to the success of the owner’s retirement plan, but also in preserving the family’s overall wealth. Certainly, that is something worth making time for!

2. “I have no plans on exiting any time soon.”

Why plan for an exit that is not imminent? That would take focus away from day-to-day business activities and hinder company performance, right? Whether by choice or not, all owners will eventually exit their business. Without a plan in place, the owner’s sudden death or incapacity could cause irreparable damage to the company’s value, and perhaps even its viability. Also, even if the business owner believes their retirement is many years away, it’s never too soon to begin the planning process.

Waiting to create and implement an exit plan a few months after the owner decides they are burnt out will almost certainly result in a poorly constructed plan that lacks key components. In turn, a potential buyer could discover weaknesses in the business during the due diligence process and use them to push down the purchase price. Carving out ample time to work on the business will result in a solid exit plan and increased transferrable business value.

3. “I already know who I’m going to sell to.”

What is the point of planning if the owner already knows how they will exit? For example, even if an owner is sure their child will be buying the business, there’s still plenty of planning to be done to prepare for an effective transition. How will the business be valued for this transaction? How will the sale be structured? Will there be an earnout? How long will the owner need to stay in the business after the sale? Answering these questions, among many others, well ahead of a transition is crucial, even if the buyer is identified long before the transaction occurs.

There are many reasons a business owner might put off exit planning (some of them could be based on emotions) but making time to craft a carefully thought-out plan will likely result in increased owner confidence, enhanced transferable business value and an owner who exits the business without regrets or doubts. We recommend Engaging in the exit-planning process as early as possible to ensure a smooth and successful transition for not only the business owner, but also for their family.

This information is used for educational purposes and is not intended to provide accounting, legal, tax, insurance or investment advice and should not be used for accounting, legal, tax, insurance or investment advice. This does not constitute an offer to provide any services or a solicitation to purchase securities. These are not recommendations for any particular person or situation. We believe the information provided is accurate and reliable, but do not guarantee its completeness or accuracy. Such information may include opinions or forecasts, including investment strategies and economic and market conditions; However, there can be no assurance that such views or projections will prove to be correct, and they are subject to change without prior notice. We encourage you to discuss your situation and the applicable laws and rules at the time with a qualified professional.