Deciding to move on from your business is a momentous decision that will affect every aspect of your personal, professional and financial life. Yet a surprising number of business owners who want to leave their company don’t have a concrete exit plan in place – whether they’re considering an outside sale, a transfer to a family member, a sale to an employee stock ownership plan (ESOP) or another exit strategy.

According to a national survey of business owners conducted by the Exit Planning Institute:

• Most financial planners estimate that 85% to 90% of the average business owner’s net worth is tied up in the company

• 76% of respondents plan to transition out of their companies within 10 years, and 50% within three years

• 83% either don’t have a transition plan (49%) or have a plan that hasn’t been documented or communicated (34%)

• 75% are dissatisfied after they sell their businesses

These numbers are sobering, but as a wealth manager and a Certified Exit Planning Advisor, I often see them reflected in my work with clients. Many business owners simply aren’t ready or have unrealistic expectations for this transition. But with the right plan and the right team in place, owners can make their exit as smooth as possible.

If you are thinking about leaving your business, take the time to reflect on your goals and focus on three main objectives:

• Business: Maximize the value of your business. I encourage clients to increase revenue by 5%, increase margins by 5% and reduce selling, general and administrative expenses (SG&A) by 5%. These three simple actions have resulted in owners doubling the value of their business.

• Financial: Make sure you, as an individual, are financially prepared for your exit. Are your personal finances in good order? What will your income requirements be after you leave the business? Will the net proceeds meet your expectations? Face any credit issues or financial concerns head-on before you go any further.

• Personal: Mull over the next chapter of your life. How do you plan to spend your time after you leave the company? What are your interests and passions? Do you want to start a new act in your career, or do you hope to dedicate yourself to philanthropy, hobbies or time with family? Many owners underestimate the emotional impact of leaving their business. But contemplating the question, “What’s next?” is a huge part of this transition.

Once you have completed these three steps, you’ll be in a better place to determine your overall readiness to leave your business. With our clients, we go through a detailed checklist to cover each phase of the transition:

Examine All Exit Options

You may already have a specific idea of what you want to do with your business, but make sure you have fully explored all of your options before making a decision. We encourage business owners to take a step back and look at different possibilities, and the pros and cons of each. It’s an illuminating exercise, and by the end of it, the best solution usually reveals itself – and it’s not always what the owner originally planned.

For example, the owner of a construction company came to us with the intention of passing ownership to his children when he retired. But when we sat down to talk to his children, they confessed that they didn’t want to take over the company. With this information, we were able to make a plan going forward. We established a professional management team, the owner sold the company and the family happily moved onto other ventures.

Create A Written Transition Plan

Just talking about an exit strategy is not enough. You and your stakeholders need to write a strategic transition blueprint that details everything about the succession plan, timeline of events, financial and tax details and contingency plans. As you map out your transition plan, you and your team will begin to identify problem areas and questions that need to be addressed.

Establish a Formal Transition Advisory Team

Assemble a core advisory team for your transition – composed of existing advisors within your company or outside professionals. Depending on the type of transition you are making, you may need to enlist trust and estate accountants, mergers and acquisition advisors, investment banker to negotiate the sale with a buyer or corporate counsel to review contracts before signing. Take your time forming this team; these people will be crucial to a successful transition.

Exit planning can feel daunting, as it combines your most important business, financial and personal interests. But by being proactive and planning in advance, you can secure the best possible outcome for you, your business and your family.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

Securities and Advisory Services offered through Cantella & Co., Inc. Member FINRA/SIPC.