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The Most Important Exit Planning Goal

Submitted by Elizabeth J Mower on Mon, 09/17/2018 - 6:00am
A man in a sweater holding a red and white flag in front of a foggy mountain.

As business owners approach their business exits, they face countless considerations. When do I want out? How will my exit affect my family? What would I do without my business? It’s easy for owners to get overwhelmed by the possibilities, which can cause them to give up or postpone Exit Planning. Fortunately, every business owner must begin with the same goal, no matter the kind of business, the size of the business, or the other goals they have in their exits. The most important Exit Planning goal business owners pursue is financial independence.

Why Is Financial Independence the Most Important Exit Planning Goal?

When Exit Planning, every action owners and advisors take stems from financial independence. Unless business owners can exit their businesses with enough money to support their post-exit lifestyles, they cannot adequately pursue their other goals. As experts, advisors must show business owners three reasons why financial independence is the most important goal in Exit Planning:

  1. Financial independence means that business owners can sell or transfer ownership of their businesses with enough money to fund their post-exit lifestyles indefinitely.
  2. Financial independence means that business owners have enough after-tax money from their business exits to never have to work again, unless they choose to.
  3. Financial independence means that business owners can still provide for their families if they die before their planned exit date.

In short, financial independence gives business owners the freedom to provide for themselves and those they care about after they exit their businesses.

How Do We Calculate Financial Independence?

To calculate what qualifies as financial independence for any given business owner, advisors must first show owners the difference between their financial needs and financial wants. The amount an owner needs is the bare minimum the owner must receive as annual income post-exit. It cannot be adjusted downward. The amount the owner wants, however, can be adjusted at any time throughout the Exit Planning Process.

After owners understand the difference between need and want, how do they find out what they need? A guess or rule of thumb is not the answer. It is the responsibility of advisors to help owners determine the concrete amount of money they will need for a financially independent exit. The best way advisors can help is by putting owners in contact with a financial advisor. Financial advisors can determine three things relevant to a successful, financially independent business exit.

  1. The financial-independence needs an owner has.
  2. How much additional money the owner’s non-business assets can generate.
  3. The rate at which the owner (and the owner’s family) will spend all investment assets (including money collected from the business exit) post-exit.

So, What Do Non-Financial Advisors Do Here?

Advisors may look at this and say, “If I’m not a financial advisor, what am I supposed to do?” Whether based in finance or not, all advisors play a crucial role in determining an owner’s financial needs. The crucial role is to show owners why financial independence is important (which we discussed earlier) and then help them set their financial-need goal. Advisors of all stripes can help business owners set their financial-need goal by encouraging owners to shoot for PAR (precision, accuracy, realism) in determining their financial needs.

Why Precision Matters

Determining financial needs is one of the few aspects of Exit Planning that has no flexibility. Advisors must encourage owners to consider all of the criteria that affect their post-exit financial independence. This includes when they want to exit, the type of lifestyle they currently live, and any potential health issues they expect to face in the future. Once business owners determine precisely how they picture life as and after they exit, advisors can then find them qualified financial planners to quantify the costs.

Why Accuracy Matters

The rest of the owner’s life depends on an accurate determination of what the owner will need to live comfortably post-exit. Given the weight of this fact, it’s mandatory that advisors refuse to accept guesses, rules of thumb, or anything other than a financial professional’s determination when helping owners discover their financial needs. Accepting anything less than a professional determination does a disservice to everyone involved and can cost owners and their families dearly.

Why Realism Matters

Time and again, business owners vastly underestimate how much money they will spend post-exit. Financial advisors generally agree that retirees must continue to earn at least 80% of their pre-retirement income annually after they retire. This baseline percentage fluctuates depending on the lifestyles owners foresee themselves living after they exit.

Thus, all advisors must work with owners to determine a realistic post-exit lifestyle. After exiting, business owners often find themselves with more free time than they’re used to, and they tend to spend money to fill that time. It’s every advisor’s duty to bring that fact to the forefront so that owners can realistically prepare for their post-exit lives in terms of finances. This means considering whether they’ll travel, whether they’ll spoil their grandchildren, and whether they’ll take up a long-desired hobby that they could never afford before.


For advisors, it’s important to remember that many entrepreneurs tend to shoot first and ask questions later in their decision making. It’s the job of advisors to guide owners toward precision, accuracy, and realism when determining their post-exit financial needs. With the right training, tools, and strategies, advisors can give business owners access to the professionals, plans, and programs that allow them to exit their businesses on their terms.

All advisors play an important role in helping owners achieve financial independence. Financial advisors must quantify the owner’s financial needs to assure a successful business exit. Non-financial advisors must explain why financial independence is important. They must show owners why shooting for PAR in their financial-need goal will make the back nine of their lives more fulfilling and successful. They must connect them with qualified financial advisors to discover how much they’ll need to achieve financial independence. Exit Planning Advisors tie both roles together through their skills and advisor networks.


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