Exit Planning: It May Not Be What You Think

Exit planning is often misunderstood, yet it is a crucial aspect of long-term business owner success. Many business owners believe it is something to think about only when they are ready to sell or retire. However, the reality is that a well-structured exit plan is an essential component of a thriving business, providing multiple options for owners to transition out of the business, on their own terms. Which, by the way, happens to everyone.

According to surveys conducted by the Exit Planning Institute (EPI):
• On average, 80-90% of an owner's wealth is typically tied up in their company.
• 60% of owners admit they do not understand their exit options.
• 49% have done no planning at all, yet 40% want to sell within five years.
• Only 20% of lower middle-market businesses successfully sell to a third party.
• As a result, 50% of business transitions are involuntary, often due to unforeseen circumstances.

This lack of planning is even more concerning given today’s economic climate. Business owners face significant challenges, including:
• Rising or stubbornly high inflation
• High interest rates
• Supply chain disruptions and tariffs (or tariff threats/uncertainty)
• Labor shortages
• Disruptive technologies such as artificial intelligence (AI)

In such an environment, exit planning is not just a best practice - it’s a necessity.

The Best Businesses Are Always Exit-Ready

The most successful businesses operate in a constant state of exit readiness because they are well-run and well-prepared. Business owners who adopt a dynamic exit plan typically:
1. Develop a Succession Plan – They are constantly identifying and grooming natural leaders to ensure a smooth transition of leadership and for other key positions.
2. Mitigate Business Risks – Recognize potential risks and implement strategies to minimize them.
3. Invest in Growth – Relentlessly execute a practical growth strategy to drive enterprise value.

They regularly assess whether they want to grow or to exit.

Why Do So Many Business Owners Procrastinate?

Despite the clear benefits of exit planning, many business owners continue to put it off. Common reasons include:
• Not knowing where to start
• Being too busy with daily operations
• Uncertainty about who to consult with
The reality is that exit planning is business planning - just with a few strategic twists. It is a forward-thinking process grounded in action and relentless execution. More importantly, it adds enterprise value today because exit planning is not just about the future - it is about strengthening the business in the present.

By adopting a proactive and dynamic approach to exit planning, business owners ensure they are prepared for any eventuality and gain the flexibility to exit under their own terms.

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