World Class Mergers & Acquisitions  |  For Companies $5 Million to $100 Million in Revenue

8 Steps To Leaving Your Business

Selling your business is a transition and an important life pivot point, likely none in your life as big or as important as this.

Transitions begin with an end and end with a beginning, typically take longer than expected. They are often a time of confusion and always a time of opportunity. The value we add is helping you “unwrap the gift of change.” The possibilities ahead of you are wonderful and immensely positive, but require a planning runway that most underestimate.

Four stages of business owner transition. The business owner’s longest phase is Anticipation. Most have a 5 year goal of making an exit that seems to roll-over year after year. Anticipation is followed by Ending (approaching the business sale date, it’s not uncommon to experience fear). Then clients enter Passage (a period of time to figure out your next chapter….what are my possibilities)? Finally, the business owner then ends with New Normal, “from what was to what will be”.

The 8 Steps:   **What do you need?  **What’s your business worth?  **Increasing business value   **Who’s going to buy it?   **Your key people   **Protecting your assets   **Investing your assets  **What’s next in your life?

 Step #1 What do you need?

Do your assets fit your dreams? How much in liquid assets are necessary for you to leave your business with peace of mind?

The exit strategy should have one purpose; achieving your goals. Your financial independence will allow a complete exit to occur. But challenges and concerns remain: Are you willing to exit the business or transfer ownership with no assurance of financial security? Post exit will you spend less money? What activities will you and your spouse enjoy and how much will they cost?.

What is your asset gap?  Does the net amount required from the sale of the business meet your financial security goal? Is the amount you set accurate or unrealistically low? Is there a shortfall between financial resources and your dreams? What must you do to bridge your asset gap? Many owners realize the true extent of the asset gap only when they are ready to exit. At that point they are doomed to spend years creating value in a business they no longer want.

When making your transition to retirement, the sequence of investment returns is critical. Suffering a large financial loss in the first year of, say 20%, and you risk reduction in your income of 20% for the rest of your life. Sustainable distribution rates are typically 5% for someone age 60 to 70. At that distribution, the after-tax income is likely $42,000 for each million dollars of investable equity.

Gap analysis assessment. The amount of income required is $_____ as calculated by my CFP advisor. He / she also recommends a cost-of-living increase of ___% annually (my assumptions are now using 3%). I estimate my life expectancy to be age ___, rate of return ____% per year, the current value of my company is $____ and expected expected net proceeds from my sale will be $____)

Step #2  How do I determine what the business is worth?

With a long enough runway before sale, 3 to 5 years typically, and online valuation may be a low-cost option to estimate your business value and it will also provide you with your industry financial metrics necessary to do a S.W.O.T. analysis. If selling your business is imminent, a professional business valuation is a better option, especially when considering the experience and advice included along with the appraisal.

Headwinds to valuation include: tax increases, economic recession, loss of a key employee, new competition entering your market, your health and changes in technology (remember the corner video store)?

Step #3  Increasing Business Value.

Looking thru the lens of the buyer, what they want to see is Transferable Value; what is the business worth without you? Move from being a hub to acting as a spoke; delegate. Be hands off, outsource payroll and HR duties to focus on revenue. Review next level management and operating systems. Document a proven growth strategy, diversify your customer base, increase reoccurring revenue, and demonstrate growing cash flow and scale ability. Good accounting will also attract quality buyers, and don’t forget to be sure that your IT/information systems leverage technology to help the business expand and offer a buyer great systems and process.

Step #4 Who is going to buy the business?

Family members or key employees? Are they motivated and competent or is long-term supervision required?* Are you talking about a retirement for yourself or does this option basically become a work optional lifestyle that requires your time?  Also consider the benefits of an ESOP as a way of selling your company (in all or part) to employees assuming that you have a strong middle-management team. An ESOP may allow for continued tax deferral if company equity is exchanged into US common stock in a manner similar to a 1031 real estate exchange.

Finally, a 3rd party sale or a transaction with strategic buyer, is often the most attractive if you want to make a complete exit from the business and have a completed transition both financially and emotionally (no concerns over decisions about how the company will be run in the future).

Whoever the buyer, keep in mind that prior to sale, a grantor retained annuity trust or a charitable remainder trust can help reduce the taxable amount upon sale of your company. But remember, more complicated trust strategies like these require much advanced time for evaluation and implementation.

*Also consider family dynamics and if other adult children not involved in the business will be resentful.

Step #5  Who are the key people?

If key people leave, transferable value will plunge. Consider a non-qualified deferred compensation plan (NQDC) to retain these valued employees. This is a good option if you are an owner that has legitimate reasons to not give company ownership to employees. A NQDC plan is basically just a promise of future payment of benefits. This will help retain people pre-and post-sale. If planning is made far enough in advance of a sale, it could also be effective in recruiting talent.

Step #6  Protecting your assets.

Make sure you are protected both from lawsuits and the risk of non-payment from your buyers.

Single owner business valuation evaporates without you, term life insurance fills the gap for your beneficiaries.
Business partnerships need a Buy-Sell agreement funded with term insurance to buy out your partners beneficiaries.
Businesses also need current insurance to ensure you against a past liability, referred to as a towel policy.
EPLI Employment Practices Liability will protect you from claims by employees; discrimination wrongful termination sexual-harassment etc.

Step #7  Investing your assets.

Worst case scenario is to work very hard in your final few years of business ownership only to invest the money and see a drop in value. This is why we take risk management seriously and separate your sales proceeds into three buckets. The first bucket is a ladder and maturity of bonds, that will provide you with an income in spite of a potential market decline. The other two buckets are invested in the market to help you stay ahead of inflation and to fund any unforeseen expenses as future healthcare costs and emergencies

 Have an investment approach that is repeatable, discipline, and includes a risk management strategy. Asset allocation is responsible for the bulk of returns but don’t mistake asset allocation as a risk management strategy. In 2008 and 2019 when markets fell, everything went down in value except government bonds. And today, because interest rates are so low, few advisors recommend bonds, and that’s okay, as long as there is another process in place for managing risk.

In March 2000 we entered a COVID-19 induced recession and we are still in the recovery phase. When making investments, having offense defense or special teams will allow you to put different investment players on the field as necessary. On my annual investment reviews with clients what I always like to remind them is this; watch which way the government is leaning, and lean with them. Today, more than ever, this is great investment advice.

Step #8  What’s next in your life?

 When you and your spouse determine that it’s time to retire, what will you do? Psychologist find that people who have plenty of activities to keep them busy stay happy and content. Activities should include things that are Routine, Social, Challenging, and Measurable.


Planning takes effort. We suggest breaking the planning work into tasks by category: Now Soon and Later. Now. Evaluate and decide Who should be on your advisory team; special projects, temporary advisors, or permanent members. Engage us to develop a personal financial plan to estimate your gap. Soon. Do a Business Valuation and a S.W.O.T. Analysis. Evaluate your risks, consider having your numbers audited, and do everything you can to make the business attractive thru the lens of a buyer.  Transferable Value is the goal, and to accomplish that strengthen your management team. Install a NQDC plan to retain key employees. Later. Select a tax and estate attorney to investigate tax strategy, hire a valuation expert and an investment banker/broker.


Please reach out to me at or at 813-732-5190 with any questions or to have a discussion about how I might be able to be of service to you.

Richard Happle, CFP® is an Investment Advisor Representative at Jaffe Tilchin Wealth Management. He specializes in investment management services and wealth management strategies for business owners.

Jaffe Tilchin Investment Partners is a Registered Investment Advisor. Certain representatives of Jaffe Tilchin Investment Partners are also Registered Representatives offering securities through APW Capital, Inc., Member FINRA/SIPC. 100 Enterprise Drive, Suite 504, Rockaway, NJ 07866 (800)637-3211.

The views expressed represent the opinion of Richard Happle and not that of Jaffe Tilchin Investment Partners. These views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment or tax advice and is not intended as an endorsement of any specific investment or tax strategy.