An owner’s exit from a business will probably be the largest financial event of their life. Further, harvesting the illiquid wealth trapped in a business can also be one of the most complex transactions an owner will face.

Owners intuitively understand the complex business operations disciplines but have probably never exited or sold a business.

Residential and commercial roofing companies receive weekly calls from brokers to sell externally, but most contractors sell internally to their families or management. Before moving forward, you must determine your personal, company, and financial goals.

The key to navigating this process is gathering the best information to minimize risk, make correct decisions, and understand the financial and strategic control issues required to replace an owner’s income. This planning process protects an owner’s hard-earned wealth and legacy.

A successful exit requires the owner to develop a comprehensive, multifaceted plan. The exit plan necessitates that owners combine eight business disciplines, from valuation analysis to succession to tax planning. Throughout this process, owners will need to seek the input of various advisors, including attorneys, accountants, estate planners, insurance advisers, financial planners and business consultants.

The critical problem is that the advisers are good at talking to you but not particularly good at talking to each other. This leaves you in the middle, spending all your time managing the advisers who are supposed to manage your exit.

Owners might also seek the services of an exit planner to act as a process consultant and help guide them through the various disciplines, working with numerous collaborators. The exit planner coordinates the multiple disciplines to move an owner down the exit path to reach goals, reduce risk, and achieve the best result.

Before beginning the exit process and seeking input from advisors, owners should fully understand the eight disciplines that comprise the exit planning process.

An owner may feel disjointed by the different discussions among advisers. The conversations often focus on their transactional space and critical practice areas, providing one fragmented aspect of an exit plan rather than a holistic solution coordinating and encompassing all disciplines. An exit planner can ease this process and help owners address these challenges.

1. Contingency Planning

Contingency planning addresses what will happen to an owner’s business stock and family if they die unexpectedly. Contingency planning is often framed in terms of a buy-sell agreement.

2. Business Planning

Business planning in anticipation of selling a business involves discussing the timing of the sale, the strength of the cash flows, and business value drivers.

3. Valuation Analysis

A valuation analysis provides information about a company's worth within a range of values. It should only be completed by an accredited business appraiser and is central to meeting the value gap and replacing income.

4. Succession Planning

Succession planning requires owners to consider replacing themselves with strong managers and a management team and move them into leadership for the next business generation. We have observed this to be a significant problem with smaller companies.

5. Financial Planning

Financial planning is required for an owner to discuss income replacement and harvesting their business in retirement. During this process, an owner addresses how their primary asset, the illiquid business, will be critical for meeting their financial needs.

6. Estate Planning

Estate planning addresses how a business owner will transfer privately held stock to children and future generations tax-efficiently by protecting wealth in trusts. This is a meaningful conversation that can assist an owner in protecting wealth against estate taxes. Owners should seek input from their attorney in estate planning.

7. Tax Planning

Tax planning addresses the various tax implications to an owner, the business, and the estate, as well as tax reduction strategies. This is a critical aspect of business transfers, as there is the possible exposure to over 55% taxation in such transactions that will directly affect their retirement.

8. Emotional Attachment

While a less traditional “discipline,” owners must also address and consider issues of emotional and financial attachment to their business during the exit planning process.

Suppose an owner has difficulty figuring out their exit's when, who, and how particulars. They may be still stuck in the business. They may have trouble delegating, training, letting go, and seeing themselves outside the company in another helpful endeavor.

Most advisers are not trained to measure and understand this level of emotional and financial attachment to the business. An exit planner can assist an owner in this area.