I had a conversation recently with a business owner who spent twenty-three years building a company from a two-person operation into a forty-person team generating significant revenue. He was disciplined, focused, and had built a great business. When the topic of his eventual exit came up, he leaned back and casually said something I've heard from other business owners more times than I can count.
"I figure I'll sell in the next few years and should be set for retirement after that."
He didn’t have a valuation or an exit strategy. The business represented the vast majority of his net worth, and he had spent very little time planning one of the most important transactions of his life for both the business and his financial plan. This gap between intention and preparation is exactly where wealth can quietly disappear.
This is not an unusual situation. Research shows that nearly 80% of business owners plan to fund retirement through the sale of their business, yet many have never had a formal valuation done, and fewer than 10% have a documented succession plan. If you own a business and expect it to fund the next chapter of your life, the questions in this blog could be impactful and highlight the need to take action.
Why the Exit Plan Has to Start Before You're Ready to Leave
A common mistake business owners make isn't waiting too long to sell. It's waiting too long to prepare. Those are very different things, and some owners don’t realize that distinction until it's too late.
An exit plan is not something you create after finding a potential buyer. It is a framework developed years in advance that shapes today’s business decisions, your personal financial structure, and the company’s readiness for a future sale. Owners that potentially benefit, usually start earlier than feels necessary, with a clear goal and enough time to reach it. Those who wait until they are ready to leave often end up reacting to circumstances instead of shaping the outcome.
There's also a tax dimension that shouldn’t be addressed at the last minute. The structures and strategies that preserve the most family wealth after a sale need to be in place well before a transaction becomes likely. Once a deal comes into focus, many of the most valuable planning windows close permanently. The families who keep the most from a business sale aren't necessarily the ones who received the highest offer. They're the ones who planned the transaction long before it happened, with an advisor who understood both the business side and the personal wealth side of the process.
What Is Your Business Actually Worth?
It might be surprising to realize that research suggests 98% of business owners don't actually know what their business is worth. And the gap between perception and reality tends to run in both directions. Some owners dramatically overestimate value based on revenue or years of personal success. Others underestimate what a well-positioned company could actually command in today's market.
A formal business valuation is not just a number. It's a planning tool that tells you where you stand relative to what you need, where the gaps are between your current business value and your personal financial independence, and which specific areas of the business are driving or dragging that value. Without an initial baseline, every other planning decision happens without the information it needs. For example, understanding areas of the business that may be holding you back gives you a chance to improve that gap before it impacts the sale.
Valuations should also be refreshed regularly, not only when a sale feels imminent. Markets shift, business performance changes, and the factors buyers prioritize evolve over time. An owner who gets a valuation done today and revisits it annually is in a fundamentally different position than one who waits until they're ready to sell. A financial advisor can also help you interpret what the numbers actually mean for your broader wealth picture and identify where focused attention would move the needle most before you go to market.
The Difference Between a Profitable Business and a Sellable One
This is one of the most important distinctions in exit planning, and most owners haven't thought about it carefully until the window to do something about it has narrowed considerably.
A profitable business can generate a high income for its owner. A sellable business generates that income without depending on the owner to show up every day to make it happen. Buyers aren't purchasing your past performance. They're purchasing their confidence in future performance under new ownership. If the business can't function without your daily presence, or if key relationships and institutional knowledge are tied too closely to you personally, a buyer will price that dependency into their offer.
Positioning a business for a sale takes time and intention. It involves building a management team that can operate independently, documenting processes a new owner can follow, diversifying the client base so no single relationship represents an outsized portion of revenue, and developing recurring revenue streams that give a buyer predictability. Those are items that get built in the years before the conversation even starts, ideally with someone helping you see the business the way a buyer eventually will.
Do You Know Your Number?
Every business owner needs to honestly answer one specific question: how much do I actually need from this sale to fund the life I want to live afterward?
This sounds straightforward. In practice, many owners have never modeled it because their personal finances and business finances have been intertwined for so long that separating them feels complicated. Salary, distributions, personal expenses running through the business, and retirement savings that never quite got the attention they deserved all have to be untangled before you can arrive at a number that actually means something.
Your number isn't just about retirement income. It needs to account for the lifestyle you intend to maintain, the tax burden of the transaction itself, the loss of business-provided benefits and expenses, and the cost of whatever comes next. Once you know that number with real precision, you can evaluate any offer clearly rather than reacting emotionally to a figure that sounds significant but may not actually get you where you need to go. This is one of the most valuable things a financial advisor brings to the exit planning process. Not the negotiation of the deal, but the clarity about what the deal actually needs to deliver for your life to work on the other side of it.
The Part of the Exit Nobody Prepares For
The financial mechanics of selling a business get most of the attention. The personal side is often neglected, which is why research from the Exit Planning Institute finds that more than three in four former business owners report regret within a year of selling. Among those, the majority trace it back to not having a plan for life after the transaction closed.
For owners who built something over decades, the business often represents their identity, structure, purpose, and community. When it's gone, the absence of those things can be disorienting in ways that financial preparation alone can't address. The owners who navigate the transition well are the ones who thought about what they were moving toward, not just what they were leaving behind. What does a meaningful day look like when you're no longer running the company? Who are the people in your life outside the business? What have you been putting off that you genuinely intend to pursue?
These questions belong in the exit planning conversation just as much as valuation multiples and tax structures do. An advisor who only focuses on the transaction is leaving the most important part of the outcome unaddressed.
The Five Risks That Can Force an Exit Before You're Ready
Not every exit happens on the owner's timeline, and this is one of the least discussed dimensions of the whole conversation. Business advisors often reference what they call the five D's: distress, disability, divorce, disagreement among partners, and death. Any one of these events can trigger a forced exit under circumstances where leverage is low, emotions are high, and planning time is gone.
Disability is particularly underappreciated as a risk. If the primary driver of a business becomes unable to work, the impact on business value can be immediate and severe. Life insurance, disability coverage, buy-sell agreements with co-owners, and succession protocols that don't depend entirely on one person's continued involvement are all decisions that matter most in the moments nobody saw coming. The owners who are protected in those moments are the ones who addressed them years before they needed to, usually as part of a broader conversation about how their business and personal wealth fit together.
Making sure your business is prepared for the five D’s is one of the earliest steps you can take in the Succession Planning process, as you never know when the unexpected will arrive.
Where a Financial Advisor Fits Into All of This
This is worth mentioning because it's a question I hear from business owner clients regularly. Exit planning involves attorneys, CPAs, business brokers, and valuation specialists, all of whom play important roles in the process. Where a financial advisor fits is in helping you see the full picture across all of those moving parts and making sure your personal wealth strategy stays connected to what's happening on the business side.
That means helping you establish your personal financial independence number before evaluating any offer, modeling the after-tax outcome of different transaction structures so you understand what you're actually keeping, and making sure your investment strategy, estate plan, and retirement picture are all updated to reflect the liquidity event you're planning for. It also means being a steady resource through a process that can be emotionally charged and financially complex at the same time.
Your financial advisor doesn't need to be in the deal room to add meaningful value to the outcome. The planning that happens before and after the transaction is where most of the real wealth preservation work gets done.
The Question Worth Asking Today
Some of the retired business owners I’ve worked with say the same thing. They wish they had started this conversation earlier. Not because their exit was imminent, but because they could see in hindsight how much more control and flexibility they would have had if the planning had begun sooner.
The best time to think seriously about your exit is well before you're thinking about leaving. The conversations that shape the outcome, around valuation, tax positioning, business transferability, and personal readiness, are far more productive when they happen from a position of strength rather than urgency.
If you own a business and haven't had this conversation yet, that's a good place to start. Whether you're looking to sell in the next few years or simply want to make sure you're prepared if one of the five D's shows up unexpectedly, the planning work that matters most happens well before the moment arrives. If any of these raised questions about where you stand, that's a good sign. Those questions are worth exploring, and I'm happy to be a resource whenever the conversation feels right.
This content is for informational purposes only and does not constitute financial, legal, or tax advice. Business exit planning involves complex considerations specific to each owner's situation. Please consult with a qualified team of financial, legal, and tax professionals before making any decisions related to the sale or transfer of your business.