Written Exit Plans Provide a Variety of Benefits for Business Owners

Crystal Faulkner, CPA & Tom Cooney, CPA, Partners, MCM CPAs & Advisors

When you are first beginning the process, planning a business exit can seem overwhelming. There are many steps in the exit planning process, including building business value, developing capable successors and planning exactly what you want to do after you leave. In our experience, designing a successful exit isn’t something that business owners can tackle alone if they want to depart on their terms. So, where should you start?

We recommend beginning with the basics. Write it down. Committing your exit plan to writing can provide several benefits when done properly.

Written communication can force clarity and specificity that verbal communications often does not. Typically, the act of writing causes business owners to think carefully, minimizing chances for misinterpretation. This can cut down immensely on the amount of time it takes to implement the plan by months or even years.

Written exit plans encourage accountability. In a written plan, all participating advisors have responsibilities and deadlines which makes it an executable document. It also helps you avoid procrastination. Too often we see business owners develop a strategy only to have it sit in their offices with no execution or timeline. Having a document that tracks deadlines and responsibilities can keep you accountable and help you avoid falling prey to the “rolling five-year plan,” wherein you’re always looking to exit five years from now.

Finally, simply writing your goals down increases the likelihood that you’ll achieve them. According to studies on goal setting, written plans are much likelier to be executed. Dr. Gail Matthews, a psychology professor at Dominican University in California, found that individuals are 42% more likely to achieve their goals just by writing them down.

A common exit planning paradox is that most business owners don’t want to give up control of their companies before they’re ready, but they also don’t want to spend too much time on exit planning. Having a written plan gives owners a chance to maintain control of the process while also controlling when and how they transition out of ownership.

Owners who write their plans down—typically aided by an advisor—can easily hand the plan over to a team of advising professionals who help in its execution. This means that once you’ve confirmed your goals and written them down, your team of advisors can get to work addressing the issues and generate results. Formalizing your exit goals can increase your planning efficiency and give you the time to continue to build your company’s value.

In general, creating an exit plan can take several months, while executing it can take several years. This usually requires input from owners and several advisors including your attorney, CPA, insurance professional, banker, estate attorney and financial advisor. Exit planning should also involve an owner’s family and management team. With so many moving parts, it’s easy for owners to use more time and money to exit than necessary. A written exit plan helps mitigate these burdens.

Written exit plans can make the process more time- and cost-effective because they allow you to see where everyone is in the plan. Rather than wasting hours calling each advisor to ask what they’re doing—time that you could be spending working to generate company revenue—a written plan allows you to track everyone’s progress. Your exit planning advisor acts as the team quarterback and is responsible for keeping the document current and making sure that it reflects the resources, goals and assets relevant to your exit. When your advisors are all on the same page, knowing what they must do and when, it usually minimizes the time and money you’ll need to spend on the process itself.

Written exit plans can benefit you as you begin to plan your business exit, and it’s important to remember that “written down” does not mean “chiseled in stone.” They can, and often do, change. As your business and goals evolve, a written plan gives your planning strategies a chance to evolve in lockstep. We highly recommend working with an exit plan advisor to get your own exit plan down on paper to ensure the exit process is moving forward efficiently and in the right direction.