Dr. House

Small Business Exit Planning

Dr. Gerald House
5 min readDec 8, 2023

There comes a time when you will want to either sell or pass along your business to your heirs. How do you exit your business? What are the steps involved? How long will it take? What resources are available to assist in this process?

Several professional advisors are available specifically to assist you with exiting your business. Some of these professionals can offer excellent advice in certain areas concerning the overall progression of your exit planning. In addition, a business financial planner can tie all this together and walk you through the process from investigating your needs to a successful transition of ownership.

Here are a few of the professional advisors you will deal with during the transition:

Business and Estate Attorney — You want to find someone very familiar with business transactions in addition to estate planning.

Certified Public Accountant — hopefully, you have already established a relationship with a good CPA for your accounting and tax needs.

Business Financial Advisor — an experienced business professional well versed in business ownership and planning — including the sales process. They will assist you with your goals and objectives and guide you toward meeting these needs.

Business Broker — the person to turn to for marketing who will tap their resources of buyers to find a buyer for your business. A good business broker can be an invaluable resource.

Investment Advisor — this person can make a few recommendations for investing the income from the sale of your business and managing those assets.

Insurance Agent — your insurance needs may change after the sale of your business, leaving you with some holes to fill in your insurance coverage — especially health and life insurance.

Business Appraiser — will give you a third-party evaluation of your business to facilitate the sale or transfer of ownership.

The 10-Step Process to Selling Your Business.

Step 1: Establish Goals and Objectives

The first area to consider is the goals and objectives you have as a business owner. Do you want to pass along the business to one of your children? Is your preference to sell the business to one of your employees or just sell and retire?

Step 2: Get Your Books in Order

The next item to tackle is getting your financial books in order. This may be your biggest challenge and a real “game-changer” if you have not been diligent in your efforts to manage and run your business as a separate entity. I have seen many businesses fail to maximize their value because of poor financial record-keeping. Any prudent buyer will insist on examining the financial books to verify the income and expenses of your business. After all, they are buying a future income stream. Buyers want to be sure they are not buying a “pig in a poke.” Sloppy record-keeping can quickly extinguish a buyer’s enthusiasm for purchasing your business.

Step 3: Establish Business Value

You need to know the value of the business to implement a plan to exit your business. Never “wing it.” — you may either set unrealistic prices or “leave money on the table.” Consequently, never go by so-called “rules of thumb” for valuing your business. This never works. A professional business valuation may even uncover some deficiencies that can be corrected before placing your business on the market or leaving it to your family.

Step 4: Increase the Value of Your Company

Take a hard look at the business appraisal and a report card on how you “stack up” against your peers. This information becomes your roadmap to making profitable improvements to increase your company’s value. At the very least, increase your business’ marketability by making it more attractive to a buyer.

Step 5: Protect Business Value — Contracts

This is the time to enlist your business attorney and update those critical contracts. Start reviewing your customer, vendor, client, and real estate contracts and eliminating contracts that adversely affect your business. Remember always to keep the buyer in mind when establishing new contracts or updating existing contracts so they will not face this task once they purchase the business. Traditionally, greater value exists when contracts are not up for negotiations during or immediately after the sale of the business.

Step 6: Protect Your Business Value — Assets

Look at all your company assets, including key employees. Start recording fixed assets according to their usefulness or life expectancy and get rid of any asset that is not used or outdated. This is an excellent time to “clean house” — so to speak. It will not impress buyers to see old equipment. Record serial numbers available and place a “cost value” on each. By the way, the cost is always the value this asset would bring if sold today — not the value new.

Step 7: Retirement Planning

Now that you have a preliminary value for your business and assets, it is time to do personal financial planning. If you have never created a professional financial plan, now is the time to start. Your financial plan is a critical component of your overall exit strategy. Ensure you work with a professional financial planner to optimize your investment goals.

Step 8: Estate Planning and Tax Considerations

Next, you must arrange a meeting with your CPA and estate attorney to incorporate the sale or transfer of your business while minimizing the tax burden on you or your family. Your estate plan may include wills and trusts and should be based on your overall goals and objectives established earlier.

Step 9: The Sales Process

You may elect to sell your business yourself or employ a business intermediary/broker to market and sell it. Depending on your type of business and how it operates, it might be better for you to let a third-party deal with the hassle of working with inquiries and qualifying them before bringing offers to you. Be prepared to pay a broker or intermediary a commission for completing the sale.

Step 10: The Training and Transition Period

Last, working through the training and transition period after the sale or transfer of your business becomes the best part of the entire project. Of course, if you do not place some guidelines on your participation, it may become a veritable nightmare. This area of the entire plan determines how well you have prepared.

From start to finish, the time involved may take a few years. The earlier you get started, the less stressful it becomes. This process is not designed to work in a few weeks. Get your advisory team together now.

Your faithful servant