Exit Planning: The Personal Side of the Equation


[fname], in this email I want to give you an overview of what every business owner needs to consider from a personal perspective when planning a future exit from your business. This information should be used as a guide to assist you in preparing your personal life and finances by aligning your liquid and illiquid assets towards achieving your goals for your exit.

Setting and Measuring Personal Goals

The first step in any planning process is setting goals. Just like you choose a destination prior to setting on a voyage, so too must you define your goals and what you want to achieve with your exit. Think back to when you started your business. Aside from the ability to control your own destiny, what were the dreams and aspirations that you valued when your future success would arrive? How did you envision living once you had the financial freedom to choose how you spend your days?

You see, not only are the most successful exits planned in the owner's mind well in advance of any transfer of ownership, this type of forward thinking is essential to reaching your envisioned milestone. Amidst a recession and the ongoing challenges of running your business, deep down there is a life that you were envisioning living once the dust settled and your business venture were complete.

How would you spend your time if you're not working in your business?

Often the threshold question when contemplating your future life is 'how would you spend your time without working in your business?'. This is the question upon which all things rest because without this type of focus, it is unlikely that you will escape the ever-present demands of your private business.

As a tool to assist you in developing these goals, it is helpful to construct a calendar of events that you would participate in once your business exit is complete. Take detailed notes, filling in the days on a future calendar and how you would fill them. You should visualize this occurring and act as if it already exits.

One helpful tool to assist in this exercise is to detail each of the expenses that are a part of your future lifestyle (without your business). When you engage your mind in this direction, you begin to form thought of your exit and let them guide your decisions within your business. This can be tough to do for owners who simply live and pay for their lifestyle out of their business. Remember that this is a critically important step, not to be overlooked due to its seeming simplicity.

Increase your personal savings

Most owners of private businesses have very little money saved outside of the business. This is largely because you have successfully bet on yourself throughout your career, not trusting the volatility of liquid investments. But remember that personal diversification can only be achieved by increasing your liquidity. You cannot pay your bills with real estate equity or shares of your private business. So even if it means being taxed on those dollars, you ultimately have more options for your exit if you are personally prepared from a financial perspective.

Close your 'Value Gap'

The value gap is the amount of money that you need to extract from your business, net of fees and taxes. Once you can measure this amount, you can look to achieve your equity extractions through a series of exit options scenarios to figure out which one best meets your goals.

Checking your insurance plans

Too often, insurance is purchased for a variety of reasons for issues that exist as well as potential contingencies that need to be managed through the use of insurance. It is likely that time has removed many of these risks but you are continuing to hold onto those policies. Remove excess policies where risks no longer need to be insured. After this exercise, be certain to bolster areas that do require continued insurance.

Updating your buy-sell agreements

If you have partners in your business, you have likely had exposure to a buy-sell arrangement. Since that buy-sell was put in place and funded with insurance, many changes have likely taken place. It is not uncommon to see 'legacy' policies that need updating.

Insure against estate taxes

Note that if your total net worth exceeds $7 million (for a married couple), you should look into your current estate tax exposure. This simply means that Congress is set to review and update the estate tax laws this Fall. It is common for owners to let 10 or more years pass without updating their estate planning documents. Conduct a review of these vital documents to protect against onerous taxes. It is a shame to work a lifetime only to have the wealth go to the government.

Charitable, Family, and Philanthropic Gifting

Give due consideration to where you want your wealth to end up. You have likely amassed a large amount of wealth that can go to family, friend, charities, and/or foundations. One of the rewards of beginning a gifting program while you are alive is the benefits of enjoying the distributions of your wealth. One of the advantages of such a strategy is to utilize the gifting laws to transfer more of your wealth.

Although our recessionary times continue, you should note that a great opportunity to transfer more of your wealth exists today. Lower business values, low interest rates, and the continuation of certain gifting vehicles (such as Grantor Retained Annuity Trusts GRATs) are still in place to aid you with your gifting programs.


Remember that your personal affairs, starting with your goals and ending with a review of your financial and gifting strategies, is the optimal way to begin pursuing your personal readiness for a future exit.


As always if you need some advice, you're welcome to email me of call me here at the office at 281-993-4530.


Regards, Charlie


Charles Wilson, CPA/CFF, CGMA, CBEC

Charles Wilson, LLC

307 S. Friendswood Dr, Ste B-2
Friendswood, TX 77546
281-993-4530 (O)
866-567-3975 (F)





Charles Wilson, CPA/CFF, CGMA, CBEC is a Certified Business Exit Consultant and is affiliated with Pinnacle Equity Solutions, Inc., an Exit Strategies Training and Solutions company.  Parts of the content in this email are taken from previous Pinnacle Equity Solutions, Inc's. newsletter library and website in accordance with Charles Wilson's certification in Pinnacle's Certification and Membership Program. All Copyrights are the properties of Pinnacle Equity Solutions, Inc. and Charles Wilson, LLC and their respective owners.