Many business owners see their company as much more than a source of income. It represents years of sacrifice, hard work, risk, and perseverance. It’s typically the largest asset they own, and their primary source of financial security for the future. Despite its importance, many business owners spend far more time planning for and enjoying growth than planning for their eventual exit. If that’s true for you, you’re in good company.
Research shows that 79% of business owners are planning a transition within the next 10 years, yet nearly half have no written plan or process in place. Even more concerning, approximately 70% of all businesses brought to market never sell!
The problem is rarely a lack of effort. It’s a lack of preparation and coordination. At Anthem Advisors, we believe exit planning is a crucial part of good business planning. In this blog we’re going to break down our 5-Step Exit Planning Process. Let’s start with some important context.
3 Common Exit Paths
The truth is, every business owner will eventually leave their business. The question is a matter of how:
- Circumstance: Personal situations like burnout, health events/concerns, family situations, or changing priorities.
- Crisis: Upsets including business partner disputes, economic disruption, unexpected events, or market changes.
- Choice: A planned, voluntary departure that’s often aligned with personal goals, an intentional succession, or sale.
Obviously “choice” is the ideal exit path because it represents the one you create on your own terms. It’s important to remember that you may not be able to control when you exit, but you can influence how prepared you are when the opportunity (or necessity) arises.
How to Begin Planning a Business Exit Strategy
Many owners know their revenue, profitability, and growth metrics. Far fewer understand how those numbers translate into personal financial freedom. That’s why developing the right exit strategy begins with understanding what actually drives business value, and then asking the right questions.
What drives business value?
The factors listed below consistently influence business attractiveness and valuation. Weaknesses in any of these areas can reduce value, limit options, and create challenges during a transition, but they can all be improved long before an exit occurs:
- Growth potential
- Recurring revenue
- Financial performance
- Leadership team strength and owner dependence
- Transferability
- Profitability
- Customer diversification
- Systems and operational sustainability
With these factors in mind, consider the following questions:
- What is my business worth?
- What will I realistically net after taxes and transition fees?
- How much do I need to support my desired lifestyle, retirement, family goals, and charitable ambitions?
- Who will lead the business when I’m no longer involved?
The 3 Gaps that Most Often Derail a Business Exit
In our experience, most owners have at least one significant gap between where they are today and where they want to be. Unfortunately, this is also where many exit regrets occur.
- The Value Gap. This shows up in two forms:
- Buyers evaluate a business very differently than the owner does. Owners see the years of hard work and sacrifice they invested, the deep customer relationships they’ve built, and the long-term commitment they’ve made to see their business grow. Meanwhile, buyers see cash flow and profitability, systems and processes, leadership strength, transferability, and scalability. Buyers don’t pay for your effort, they pay for future opportunities.
- Current business value vs. potential value. Many owners underestimate how much value can be created before an exit. Improving profitability, strengthening leadership, documenting systems, and reducing owner dependence can dramatically increase company value over time. The question isn’t simply, “What is my business worth today?” It’s also “What could it be worth if I intentionally took some time preparing for the transition?” The more transferable, systemized, and sustainable your company (and profit) becomes, the more attractive it is to potential buyers and successors.
- The Wealth Gap. This represents your current personal wealth vs. your desired lifestyle and legacy goals. (We can help you understand what is “enough.”) Even if a business sells successfully, the proceeds may not fully support the owner’s future vision, because many omit to calculate.
- Retirement income needs
- Family support goals
- Charitable giving objectives
- Legacy planning desires
- Wealth transfer intentions
- The Profit Gap. Your current income vs. your potential. Profitability affects both your current lifestyle and your future exit value. Identifying opportunities to improve margins, operational efficiency, and financial performance can significantly impact outcomes. Increasing profits often creates a double benefit: more cash flow today, and greater business value when you’re ready to exit.
The Anthem Advisors 5-Step Exit Planning Process
At Anthem, we help business owners move from uncertainty to confidence through a structured process designed to address the value, wealth, and profit gaps we outlined above. Here’s how:
Step 1: Discovery
A high-level assessment of your current exit readiness
The process begins with a concise 22-question survey designed to gather insights into the goals of the business and the owner. We also review key documents and financial information to develop a clearer picture of your current position. The objective is simple: understand where you are today before determining where you want to go.
Step 2: Assessment
A five-meeting process that uncovers deeper evaluation of both the business and the owner
Guided by Anthem’s Certified Exit Planning Advisor (CEPA®), this process focuses on uncovering and quantifying the three critical gaps (value, wealth, and profit). Together we evaluate drivers, identify risks, uncover opportunities, and prioritize areas for improvement. The result is a clear, ranked and sequenced action plan designed to increase readiness and strengthen business attractiveness for potential buyers.
Step 3: Value Acceleration
Where strategy becomes action
The goal of this step is to create a stronger, more valuable business and a more prepared owner. Using the priorities we identified during the assessment, we help owners execute a plan to strengthen the business, reduce risk, and improve profitability and value. For some, this involves ongoing accountability and strategic coordination. For others, it may include specialized support from industry experts.
Step 4: Business Exit
The transition takes place
Because we’ve invested time preparing through the last three steps, when the time comes to actually transition away from your business, you’ll have more and better options. Whether the exit involves a third-party sale, family or employee succession, management buyout, or another strategy, we help coordinate the planning process and guide key decisions made along the way. We also work alongside trusted, vetted professionals, including CPAs, attorneys, valuation specialists, bankers, and transaction brokers, helping ensure the right team is in place should needs arise throughout the transition.
Step 5: Next Chapter
Helping you navigate life after business with clarity, purpose, and confidence.
A successful exit is the beginning of a new story. Step 5 emphasizes ongoing stewardship, and includes planning around:
- Retirement
- Family care
- Wealth management
- Tax coordination
- Estate planning
- Charitable giving
- Legacy planning
- Family stewardship
Your Financial Partner for Every Stage
Since 2018, Cavett and the Anthem team have helped business owners like you successfully transition out of their business phase and seamlessly into the next. We’re excited to have recently gained access to a powerful new tool called the ExitMapⓇ Assessment which guides our deep-dive into assessing your readiness by providing an even broader view beyond the numbers. In just 15-minutes, you can get a solid assessment of your current exit readiness, with simple strategies we can explore together. Whether you’re planning to transition in two years or twenty, understanding where you stand today can help you make better decisions for tomorrow. Get started now.
