There are at least seven reasons a given business owner may not have developed a well-defined exit strategy and exit plan:

  1. The owner doesn’t know what is required and how to start exit planning.
  2. Exit planning requires an organized approach that takes time to develop.
  3. Exit planning may be viewed by the owner as important, but not urgent.
  4. Exit planning requires input and support from several expert advisors and this effort has to be planned for and coordinated.
  5. Most owners do not appreciate the significant ROI that exit planning provides.
  6. Doing an exit plan requires the business owner to deal with thinking about leaving the business that they have spent many years building.
  7. Most owners do not have a good vision of what they will do after exiting their current business.

A business owner has conflicting roles relating to their business.  They are simultaneously responsible for running the business, building wealth for their family, and considering the needs of their family.  The need of the three are often conflicting, i.e. invest in the business, versus generate cash flow from the business, versus prepare the business to be passed along to family members.

The failure to create a well-defined exit or transition plan virtually guarantees that business owners will:

  1. Exit their companies as a result of pressure from outside circumstances, not as a result of their own desires.
  2. Exit their companies on a timetable that’s forced on them instead of one that meets their needs.
  3. Undervalue their companies and leave hard-earned wealth on the table
  4. Pay too much in taxes
  5. Lose control over the process by being reactive and limiting their exit options
  6. Fail to realize all their business and personal goals
  7. Suffer unnecessary psychological stress
  8. Watch a lifetime of work disintegrate as a result of poor business continuity planning
  9. Lose confidentiality during the sale or exit process