How to Sell Your Business: Succession Plan or Exit Plan

Sometimes a business owner or financial advisor will ask me the difference between a succession plan and an exit plan. While both types of plans involve planning for the future, they serve different purposes and address different concerns.

A succession plan outlines how you will transition leadership and ownership from one generation to the next, typically within the practice. This could involve identifying and training potential successors, transferring ownership to family members or key employees. In some circumstances (for example, if you are disabled or die suddenly) it may include selling the practice to an outside party. The goal of a succession plan is to ensure your practice can continue to operate smoothly and effectively after you step down.

By the way, if you don’t have a succession plan in case you’re suddenly incapable of running your business, you need one. Even if it’s just a one-page document, EVERY business needs a written succession plan.

On the other hand, an exit plan outlines how you will eventually leave the practice and turn ownership of the practice to someone else who will probably not continue the name of your firm. This could involve selling the practice to an outside party, transferring ownership to key employees, or simply closing the business down. The goal of an exit plan is to maximize the value of the practice and ensure you can retire or move on to other endeavors in a financially secure manner.

One key difference between a succession plan and an exit plan is the timing of the transition. A succession plan is typically implemented while you are still actively involved in the business, whereas an exit plan is implemented when you’re ready to leave the practice altogether. This means that a succession plan focuses on maintaining continuity and stability within the business, whereas an exit plan focuses on maximizing the value of the business for you.

Another difference between the two plans is the focus on the future of the business. A succession plan primarily concerns ensuring that the business will continue to thrive and grow after you step down, whereas an exit plan focuses more on your personal financial goals and the eventual disposal of your ownership in the business.

There are several key considerations you should keep in mind if you’re thinking about developing a succession plan or an exit plan. For both types of plans, it is important to consider the financial implications of the transition and to ensure that the business has the resources it needs to continue operating effectively. It is also important to consider the impact on employees and other stakeholders, and to communicate the plan clearly to ensure that everyone is on board with the transition.

Succession plans and exit plans are similar in some respects and different in others. I would say the reason for the plan is the driver of which approach you take: if you want to exit your practice and are not concerned if the business has a legacy, then you want an exit plan. If you want to ensure the business lives on after you leave, then you want a succession plan.

Are you ready to exit your business either through a succession plan or exit plan? ARE YOU READY?

If you don’t know and you’d like to have an outside expert view of your readiness to exit your business, please contact me. We collaborate with you to assess your business using 8 Key Variables and the result is an outcome you can use to plan your next steps – sell now or start the transition process to exit later.

Special Offer: from now until November 15, I’m offering 5 business owners an opportunity to have me take you through an Exit Readiness Check-Up at preferred fees. Please contact me ASAP to schedule a complimentary Get Acquainted session to discuss your business and how an Exit Readiness Check-Up might suit you. If you think it may be time to sell, let’s do this!