exit planning Archives - Randel Law, Inc., Your Business and Succession Planning Lawyer as well as Corporate Transparency Compliance

Exit Planning is a Misnomer

May 21, 2025 By Rick Randel

Rick Randel Exit and Succession Planning

I suspect the main reason many business owners put off exit planning is they don’t like the word “exit”. For many, their business isn’t just a job; it’s a huge part of their identity and their reason for getting out of bed every morning. So the word “exit” conjures up images of being put out to pasture, or facing a future with nothing to do but lie around the house or play golf every day.

But “exit planning” is really a misnomer. It’s not about leaving, it’s about building a stronger, more successful, transferable business. It’s about ensuring a smooth transition and the continuity of the enterprise you’ve worked so hard to build. And here’s the best part: engaging in this kind of planning almost always increases your company’s revenue and profits.

The Benefits of a Success(ion) Mindset
When you reframe exit planning as success(ion) planning, you unlock immediate advantages that benefit you and your business long before any actual exit. This proactive approach focuses on:

Building a More Valuable Business: Success(ion) planning identifies and strengthens your business’s value drivers. This includes hiring, training, and appropriately compensating key team members who can take on more responsibility, making your business less dependent on your constant oversight and more attractive to potential investors or buyers down the line.
Achieving Greater Flexibility and Work-Life Balance: Want to slow down, take a step back, and let others run the day-to-day operations and work the long hours? Success(ion) planning allows you to do just that, giving you more time for personal pursuits while still reaping the rewards of ownership. You can reduce your hours, take extended vacations, or simply enjoy less day-to-day stress without exiting the business.
Generating Liquidity When You Need It: Life happens. Whether you need to pay for college tuition, buy a vacation home, cover a parent’s skilled nursing care, or fund a trip around the world, success(ion) planning can provide options to fund those endeavors. This might involve selling a minority stake to a pre-designated senior manager or group of managers, giving you access to capital without giving up control or exiting the business.
Reducing Taxes: Bringing in your tax advisors as part of the success(ion) planning process can greatly reduce income and/or estate taxes, ensuring that more of the wealth you’ve built stays in your pocket to fund your retirement, or passes more efficiently to your loved ones, rather than going to Uncle Sam or the FTB.

Planning for Future Scenarios

While many benefits of success(ion) planning are realized while you’re still actively involved, it also prepares for those scenarios where you might, either gradually or suddenly, step away from the business. A comprehensive plan ensures continuity and minimizes disruption, no matter how or when that transition occurs:

Your Planned Retirement: For owners who do eventually decide to retire, having a well-crafted plan in place is invaluable. Think of how many business owners wait until after they’re burnt out, only to realize they now have to work another 2-5 years just to get their business ready for transition. Success(ion) planning prevents this stress, allowing you to transition whenever you decide to. You will have already groomed the next generation of owners who can buy you out and take over the business when you retire.
Leaving on Your Own Terms (or Not at All): Perhaps you decide to continue working indefinitely, even into old age. With a success(ion) plan, you’ll have a clear framework and a strong team in place to ensure that clients continue to be cared for, employees maintain their jobs, and your legacy remains intact.
The Unexpected Departure: We’ve all heard the tragic stories: owners who suddenly drop dead or suffer an incapacitating illness, leaving their spouse or unprepared employees to try to keep the business afloat. Those who have engaged in success(ion) planning have a contingency plan in place. This foresight ensures the business can continue smoothly, alleviating immense pressure on grieving family members, safeguarding client relationships, and protecting employee livelihoods. Even if you feel like it’s too much trouble, don’t do it for yourself, do it for them.

Plan for Success, Not Just an Exit

So maybe it’s time we stop calling it “exit planning” and start calling it “success(ion) planning”. After all, “success(ion)” has the word “success” built right into it, and that’s precisely what this type of planning ensures: the ongoing success of your business, your legacy, and your future.

This post is not intended and should not be relied upon as legal or tax advice pertaining to any specific matter. You are encouraged to seek competent legal and tax counsel before proceeding with any transaction involving any of the matters discussed above.

Top Ten Tips For Business Succession Planning

June 1, 2019 By Rick Randel

Start planning early (at least 2-3 years before exit if possible, if not longer).
Get a valuation (this helps us determine whether the business will provide enough value to fund your retirement, what kind of tax hit you are looking at, whether there are estate tax issues, and what level of planning and associated cost are warranted).
See a financial advisor (this helps you determine how much you need to retire among other things).
Train your successor: build the next generation of ownership who can run the company after you leave (this also creates potential buyers).
Build a transferable business, one that can run without you (this runs counter to a lot of owners’ need for control, but you’re just going to have to let go of that).
Be clear about your objectives, including what you’re going to do when you retire. Do you want the most money as soon as possible or are other factors more important e.g. your legacy, the continuity of the firm, continuing its mission, or what happens to your employees and clients? Many owners get their sense of identity from their business and lose that when they retire. Be sure you know who you are going to be when you retire.
Have a Hit by a Bus Plan in case something happens to you before the full exit/succession plan unfolds.
Be flexible/adaptable. Exit/succession plans rarely unfold exactly how they are written at the beginning. Stuff happens. You and your buyer(s) need to be okay with adapting the plan to deal with changed circumstances.
Find buyer(s) with compatible personalities and communication styles, trust, shared vision and compatible goals.
Build a good adviser team. Make sure one of them is clearly designated as the quarterback with overall responsibility to coordinate the process. Let them communicate directly w/each other; don’t keep each one in his or her own silo and only communicate with them yourself.

I hope you enjoyed reading the Top Ten Tips. Feel free to contact me if you have any questions.

Rick Randel Business and Succession Planning San Francisco Bay Area, San Ramon, Walnut Creek

This article is not intended and should not be relied upon as legal or tax advice pertaining to any specific matter. You are encouraged to seek competent legal and tax counsel before proceeding with any transaction involving any of the matters discussed above.

How to Exit a Business Without Leaving

January 9, 2015 By Rick Randel

Many business people think the term “exit” means selling the business to a third party. Many other options are available. In fact, the term “exit” doesn’t necessarily mean leaving the business at all.

Only a small fraction of owners succeed in actually selling their business to a third party. Owners often think their business is worth more than what a buyer is willing to pay. Many times the business simply isn’t saleable, or cannot be sold for enough money to fund the owner’s retirement. The books may be a mess; or the business may be too dependent on the owner’s involvement. If the owner begins the process early enough, these issues can be addressed and the business can eventually be sold. In other cases, the owner can’t wait that long and needs cash right away. This scenario is a potential candidate for an Employee Stock Ownership Plan (ESOP), a management buy-out, or a private equity group recapitalization (PEG recap).

GRADUAL OR PARTIAL EXITS
Gradual or partial exits are excellent options for owners who want to unlock some of the equity in their business, but want to continue running the business for an extended period of time. An owner who isn’t ready to retire may still be driven to grow the business she founded. But she may need cash to fund a significant expense, such as kids in college, caring for aging parents, etc. Or perhaps additional capital is needed to diversify or expand the business. These situations are potential candidates for a PEG recap or a leveraged ESOP.

Change the above facts slightly so the owner doesn’t need to raise cash now. But she realizes she will be leaving the business some day, and wants to plan ahead and do it on her own terms. She wants her eventual exit to be as tax-advantageous as possible, and/or wants to see her senior management team take over the business when she leaves. These are ideal scenarios for an ESOP or ownership transition plan, or even a gifting/estate planning solution.

PRESERVING THE MISSION
Perhaps the owner is ready to retire, but doesn’t want to hand his “baby” over to an external buyer, who may not preserve the owner’s mission or values. He may be concerned the buyer will lay off some of his valued employees, or simply not treat them or his customers the way he thinks is best. If the owner has valued senior employees who have expressed an interest in taking over the business when he retires, this is an ideal opportunity for a management buy-out or ownership transition plan.

In other cases, an owner may want to keep the business in the family. One or more of his children may be involved in the business and willing and able to take over. A sale to a third party is obviously inconsistent with that goal. However, employing gifting and estate planning techniques will help achieve the owner’s objectives.

Business owners who fit any of the above scenarios have many options other than selling their business. They should seek the counsel of a qualified exit and succession planner to work with their business attorney, CPA, and other advisors, depending on the options being considered. The process requires bringing in advisors at an early stage to conceive and execute a plan, which usually occurs over a period of several years. Owners with enough foresight to start this process early on will see that the term “exit” doesn’t necessarily mean selling their business to a third party, and in some cases, doesn’t mean leaving the business at all.