Succession Planning - How Long Does Exit Planning Take?

"Building necessary business value can be the longest part of implementing an Exit Plan."

One of the first questions business owners ask about exiting their businesses is, “Just how long is all of this supposed to take?” The true answer is it depends. There are many things to consider as you shape your Exit Plan. You might have a business that’s worth $10 million but is overly reliant on you for success. You might have a small team or a partnership with other advisors, or a book with a mixed bag of client segments. Different obstacles provide different answers to “How long does this all take?”

Fortunately, there are some general guidelines for how long planning can take. However, Exit Planning timeline guidelines are primarily dependent on you. If you and your business are ready for an exit, advisors can shape and implement an Exit Plan for you. If neither you nor the business is prepared, planning will need to include a phase for getting both you and the business ready, as well as a phase devoted to designing and implementing the actual exit.

Time It Takes to Fully Implement and Execute the Plan

Once you’ve shaped your plan for your business’ future, it’s time to implement and execute it. If you are ready to act, implementation and execution can begin immediately. Here are a few things to consider.

It Takes Time to Build Necessary Business Value

Building necessary business value can be the longest part of implementing an Exit Plan. Many business owners have a sizeable gap between the resources they have and the resources they need to achieve their goals. This can mean that owners must increase the value of their businesses beyond what they’re worth today.

Compounding this challenge is the fact that you and your existing management may not have the know-how to grow the business further and achieve your Exit Goals. To build necessary value, you’ll likely need a growth plan. A strong growth plan positions you and your management to implement strong Value Drivers in the business.

Different Exit Paths Have Different Timelines

Recall that you have two overarching options when you sell or transfer ownership. You can sell to a third party, like a strategic buyer, or transfer to an insider, such as a child or your employees. If you and your business are prepared for an exit, and you commit to pursuing a third-party sale, it’s possible for you to sell your business and be completely out within a year or so.

Typically, transfers to insiders take longer, even if you and your business are ready for your exit. The additional time is due primarily to incoming ownership’s financing capabilities. But the time it takes to sell a business to a third party or transfer to insiders is not primarily dependent on the nature of the Exit Path. It’s dependent on whether you are ready to exit and whether your business can support your exit.

Time Binds Your Decision

In Exit Planning, time binds all decisions. As you look toward your future, whether your timeline is one year or 20 years, consider asking yourself, “Do I want to wait until I’m ready to move on to do all these things?” Experience shows that the answer is “No.”

If you’d like to explore your personal exit planning timeline, let’s connect.

For a dive into the various aspects of Succession Planning and to better understand your options, get our Succession Planning Playbook.