Does planning your business exit strategy feel overwhelming? You’re not alone. For many business owners, the process of stepping away from a company they’ve built—their baby—is not easy.

However, having a clear and structured business exit strategy will help. In this article, we’ll explore the twelve essential steps that will guide you through a smooth business exit.

Step One: What Comes Next?

The first step in planning a successful business exit strategy is asking yourself: What do I want to do next? A well-planned exit isn’t just about leaving your business—it’s about transitioning to a meaningful next chapter. Whether it’s retirement, starting a new venture, or pursuing personal passions, owners need a “pull factor” that excites them about the future.

A compelling vision for life after your business is critical. Without it, you risk falling into one of the most common exit traps—sabotaging your own exit because of fear or uncertainty. In fact, up to 85% of business owners inadvertently sabotage their exit process because they lack clarity about what comes next.

Worse, 72% of exiting owners report feeling dissatisfied with the transition because they didn’t plan for a fulfilling post-exit life. The truth is, you can only spend so much time playing golf or being with the grandkids. Many successful exiting owners discover that even after they exit, they need and want to do something that feels engaging, challenging, and meaningful.

Define a picture of your next step. For most people, it should include a sense of autonomy, freedom, and continued purpose. This will keep you moving forward.

Step Two: Determine What You Need Financially

Once you have a vision for life after business, you need to know what it takes financially to make it work. Ask yourself: What do I need from the sale of my business to make that next chapter happen?

A clear financial target will help you structure your exit, negotiate effectively, and ensure that your next phase is fully funded.

Think about your future lifestyle, new ventures you might want to fund, and any legacy you wish to leave behind. Your business exit strategy must align with these financial goals. I often recommend talking to a skilled financial planner at this stage.

Step Three: Identify the Current Value of Your Business

To build a plan from “here” to “there,” you need to define where “here” is. And that comes down to a realistic, objective understanding of your business’s worth.

Obtaining a professional business valuation is the best way to assess the current market value of your company. Knowing your business’s worth will allow you to determine if it’s sufficient to fund your next chapter.

Step Four: Assess If There’s a Value Gap

Often, business owners find that the current value of their business is less than what they need to achieve their post-exit goals. This difference is known as the “Value Gap.” Closing this gap is essential before selling your business. This might involve growing revenue, improving profitability, or reducing risks to enhance your company’s appeal to potential buyers.

Step Five: Plan to Close the Value Gap

If there is a value gap, the next step is to create a plan to close it. Look for opportunities to boost your business’s value over time. Strategies could include expanding your customer base, improving operational efficiency, or developing new revenue streams. The key is to focus on the areas that will make your business more attractive and valuable to buyers.

It’s also important to remember that if, for example, you need $5 million from the sale to fund your next chapter, you may need to sell your business for $7-8 million or more. Transactional fees may absorb up to 20% of the sale price. Taxes can take even more. The transactional fees are usually worth it because good advisors will help you earn much more on your sale, structure far better terms, and help you save on taxes. But they still need to be considered.

Step Six: Protect Your Business

As you prepare for your business exit strategy, it’s important to safeguard your business. Protecting your business means ensuring that all legal, financial, and operational aspects are in good standing. This includes securing intellectual property, solidifying customer contracts, and addressing any legal risks or liabilities. It also includes developing strategies to ensure key employees will stay through an ownership transition. These steps will help you avoid potential deal-breakers and make the due diligence process smoother for buyers.

Step Seven: Build the Value of Your Business

Beyond closing the value gap, you should work on increasing the intrinsic value of your business. This means focusing on elements like ensuring the business doesn’t depend on your day-to-day involvement to operate, maintaining clean and current financials, building solid recurring revenue, developing a healthy management team, diversifying your customer base, and ensuring efficient operations. A well-structured, self-sustaining business is both attractive to potential buyers and ready to sell. Both of these factors increase value.

Similar to how it is unwise to attempt to time the stock market, it isn’t wise to try to time your business exit strategy. Instead, build a business that operates well and can be exited for your desired value at any time.

Step Eight: Explore Exit Strategies

There are many ways to exit your business, but not all exits are created equal, or are equally a good fit for you. Common business exit strategies include selling to a third party, passing the business on to family members, or transitioning ownership to employees. Each option has multiple possibilities within it—and each comes with its own pros and cons.

Additionally, you’ll want to consider the terms you prefer, especially as they relate to a possible earn-out period, and the financing options for a sale to family or employees.

The right choice depends on your personal goals, financial needs, and the long-term vision for the business. Once you know your preferred business exit strategy, your plan can be developed.

Step Nine: Prepare to Execute Your Exit Plan

Once you’ve chosen your exit strategy, it’s time to start executing the plan. This includes selecting advisors, structuring the sale or transition, and negotiating terms. Surround yourself with experts—usually including an exit strategy consultant, an intermediary (broker, M&A advisor, or investment banker), an accountant, a financial planner, and legal counsel—to ensure a smooth transaction.

Step Ten: Exit the Business

The actual exit is the culmination of all your planning and preparation. This step usually involves finding a buyer, going through their due diligence process, addressing any concerns they have, negotiating, and closing the deal.

You should anticipate that it will take 9-18 months to go through this process.

Step Eleven: Earn Out or Transition Support

As part of the sale, you’ll negotiate your ‘earn out’ or ‘transition support’ terms. Most buyers will want or require some ongoing involvement from you to mitigate their risk. They will often make a large percentage of the buy-out price dependent on your performance during the earn-out period.

This period typically lasts for two to three years, though it can be much shorter or longer. Your ability to negotiate these time frames and terms is directly tied to the careful work done earlier to build a business that is attractive to buyers and ready to sell.

Step Twelve: Embrace Your Next Chapter

With the exit complete, it’s time to embrace your next chapter. Having already built a clear vision and plan for this phase, you’ll be better prepared to enjoy it without regret. Whether it’s starting a new business, exploring unique investment opportunities, traveling, dedicating time to a cause, or all of the above, this is your opportunity to live the life you’ve worked hard for.

Conclusion

Planning a smooth business exit strategy is complicated. It’s the nature of the beast. But done well, it can be extremely rewarding. By following these twelve steps, you ensure that your exit will be financially successful but personally fulfilling.

The key is to start early, have a clear vision, and surround yourself with the right team to guide you through the process.