Most owners think about succession usually when they’re tired or ready to slow down. But here’s the truth — you can’t confidently let go of your company until you know two things:

1. Your financial future is secure (you won’t outlive your money).
2. Your company can perform without you (succession is in place).

Both require planning — one for you, and one for your business.

However, the big picture is that the company is not salable until you can replace the owner, which requires a succession strategy. Why? Let's look at external and internal sales.

• External Sale to Private Equity or Consolidator: The buyer purchases the future sustainable cash produced by experienced management. They are buying the management team without the owner.
• Internal Sales to Management, Employees, or Family: These sales are structured over five to 10 years. The profits buy out the owner's stock. The owner cannot pull back until the team can perform independently. The owner’s risk is not being paid by an underperforming management team.

Why Exit Planning Comes First

For most contractors, 70% of their wealth is trapped inside the business. That makes your exit the single largest financial event of your life. Without a clear plan, you risk losing control of timing, value, and taxes.

And the odds are not in the owner's favor:

• 70% of first-generation and 90% of second-generation businesses fail to sell or transfer to the next generation of family or management.
• Less than 20% of businesses brought to market sell. For contractors, that number drops closer to 15%.
• If you sell, exit taxes can take up to 55% of your proceeds if not properly structured.

This is why an exit plan is a strategic financial plan. It creates a written roadmap that shows you how to unlock your wealth, minimize taxes, and secure retirement. Once you have this financial clarity, you can focus on succession and retirement.

Exit Plan Vs. Succession Plan

Exit Plan: Your financial strategy.

• Monetizes business and protects your wealth.
• Defines how much you’ll keep after taxes and fees.
• Aligns your company and personal finances with your retirement goals.
• Puts structure in place for a controlled, intentional exit.

Succession Plan: Your leadership strategy.

• Prepare the company to run without you.
• Develops and trains managers into true leaders.
• Locks in key people and sets up future ownership.
• Ensure the company’s performance and sustainability after you step away.

Think of it this way: An exit plan protects your wealth, succession protects your company, and both protect your legacy.

What The Exit Plan Looks Like

An exit plan is not a one-page wish list — it’s a customized strategy that:

• Defines your goals (personal, business, financial).
• Values your company and outlines your transfer options (sale, recap, ESOP, MBO, family transfer, gifting) aligned with your personal and business goals.
• Quantifies taxes and builds strategies to reduce or eliminate them.
• Coordinates legal, tax, financial, and insurance issues into one cohesive plan.

Like building a project, you need a “design-build” approach: the exit planner acts as the architect, creating one master plan before turning it over to accountants, lawyers, and advisors to implement. Writing the plan takes four to eight months. Execution often takes one to five years. Unlike a reaction to a buyer, the plan puts the owner in control with a tax-efficient exit that funds your retirement and goals.

What The Succession Plan Looks Like

Succession is about building a company that thrives in your absence. This means:

• Professionalizing management and systems.
• Training for management leadership by addressing blind spots and stretching the team.
• Locking in key players with incentives and clear ownership paths.
• Selecting and preparing for the next CEO.

A written succession plan may take months to draft but several years to fully execute. A smaller company needs to build a management team. Otherwise, the owner will struggle to take a week’s vacation until the team matures.

An owner should be able to take a month's vacation in a larger company with seasoned management and measurable systems. Their succession focuses on professional management and leadership, and who will eventually lead the team in the owner's absence. That company is probably “sale-ready.”

Where To Begin

The sequence matters:

1. Start with the exit plan. Gain confidence that your financial future is secure.
2. Move into succession. Build and train your championship team to run the business without you.

Succession is ongoing. Leadership development and bench strength are constantly being worked on in best-of-class companies. That makes your company more valuable, whether you sell internally or externally.

The Bottom Line

Exiting and succession are not events but complex processes that take time. The exit plan will visualize your financial independence, and the succession plan will bring the next generation together to allow the owner to gracefully exit your business, protect your wealth, and leave an intentional legacy

Owners who wait too long often fumble in the red zone of their careers, leaving money and legacy behind. Owners who plan early create three wins:

• Financial security for themselves and their family
• A thriving business for employees and customers
• A lasting legacy in their community.

If you want to get it right the first time, start now. Smart owners plan early and implement slowly. An intentional exit plan leads to a strong succession plan — and together, they allow you to leave your business gracefully, protect your wealth, and move confidently into the next stage of life.

The information provided is not intended to be legal, accounting, insurance, or tax advice. Beacon is a process consultant that provides written plans, consulting, and support programs to private owners for succession and exiting their businesses.