EP Wealth’s Brady Jardine, CFP^®, outlines some key steps to prepare for a business exit, from increasing valuation to planning ahead for tax, estate, and post-sale goals. 

How to Plan a Graceful Exit from Your Business

Selling a business isn’t a quick transaction. It’s a process that often takes years and requires a million decisions along the way. But before any of that starts, business owners need to answer one fundamental question: What do you want life to look like after the sale?

Whether that means stepping away entirely or staying on in some capacity, having clarity about your future goals makes everything else easier. What sale value would you be happy with? What role would you be comfortable playing post-transaction? If these questions go unanswered, you’re more likely to be pulled in different directions and end up with a deal that doesn’t feel right.

Here are some of the key considerations that I walk through with clients preparing to exit a business:

• Identifying common obstacles that can reduce business value or derail a sale
• Taking steps to improve financial records, team structure, and recurring income
• Addressing tax and estate implications well ahead of a transaction
• Having realistic expectations about the process and timeline
• Building a trusted advisory team that can support difficult decisions

Common Obstacles That Can Undermine a Smooth Exit

Some businesses may be profitable and even growing, but still difficult to sell. That’s often because of one or more underlying issues that hurt value or introduce risk for potential buyers. A few of the most common:

Over-reliance on the owner

If the business only runs smoothly when the owner is present, it’s hard to market that to a buyer. The less dependent the business is on any one person, the more transferable it becomes.

Poor or messy financial records

Many businesses are built from the ground up by entrepreneurs who did things their own way and made it work. But that DIY mentality can sometimes lead to messy financials that don’t hold up under due diligence. A buyer starts asking questions about expenses, purchase agreements, or cash flow, and the owner doesn’t have strong answers or documentation. That can quickly erode trust.

Lack of formal client agreements

Handshake deals may have worked in the past, but buyers typically want to see formal client contracts and documentation. If that paperwork doesn’t exist, the value of those client relationships may come into question.

Revenue concentration

A successful business may still raise concerns if 70–80% of its revenue comes from only one or two clients. Buyers may wonder whether that revenue will remain once the owner exits, especially if those clients were loyal to the person more than the product or service.

Pending legal issues

Unresolved lawsuits or legal disputes can significantly hurt the value of a business or delay a sale entirely. Buyers don’t want to inherit potential liabilities that could affect future operations or profitability.

Strategies to Improve Business Value Before You Sell

Even small operational changes can make a difference when it comes to valuation and buyer confidence.

Create recurring, predictable cash flow

Businesses with subscription or retainer-based models are often valued more highly than those that rely on one-off sales and need to continuously find new clients to generate revenue. That’s why businesses across a range of industries are finding creative ways to introduce more predictable cash flow. For example, a service-based company might offer ongoing maintenance or warranty plans to create more stable income.

Diversify the client base

I worked on a transaction recently where the business was profitable but 70% of its revenue came from one client. I explained to the owner why this hurt the valuation. From the prospective buyer’s perspective, they might ask, “What if the main reason this client buys from you is because of your personal relationship? If you’re no longer here, do we lose that account?” It’s often a valid concern.

Build a strong management team

A buyer wants to see that the company can keep running smoothly without the founder. If you’re serious about selling, it may be time to bring in a capable CFO or senior leadership team that can carry the business forward. Buyers want to see that operations won’t fall apart in your absence.

Maintain clean, accurate financials

Buyers and their accountants are going to ask for a lot of data. Make sure it’s organized and accurate. If you’ve grown the business your own way and are now generating significant revenue, it may be worth hiring someone with the right financial expertise to get your books in order.

Clear up any legal issues

Don’t wait until you’re in negotiations to clean up potential litigation complications. Buyers want confidence that they’re not walking into a legal mess.

Be realistic about the process

Even if you’ve done everything right in terms of preparation, the plain fact is that no business sale is smooth. Once the transaction begins, and due diligence ramps up, there are going to be some bumps and bruises along the way. It’s a demanding process, and sellers need to be mentally and emotionally ready for it. Maintaining patience and focus is key.

A Multi-Year Exit Timeline:

1. Define post-exit goals
2. Clean up financials
3. Diversify income and client base
4. Structure for tax and estate
5. Build advisory team
6. Begin buyer conversations
7. Transition management
8. Final transaction and handoff

Start Estate Planning Conversations Early

Ideally, estate planning should begin 12 to 18 months or more before a potential sale. This gives your advisory team time to evaluate your projected estate value and discuss ways to manage exposure.

Does the Business Valuation Exceed the Exemption Threshold?

In 2025, the federal estate tax exemption is set at $13.99 million per individual and $27.98 million for married couples. Any estate value above the exemption could be subject to a 40% tax.

With this in mind, one of your first steps should be to get a third-party business valuation. If your valuation is approaching or exceeds the exemption amount, this may be the time to consider strategies that can freeze the value of your business for estate tax purposes. This is often done using irrevocable trusts. A few commonly used vehicles include:

• IDGT – An Intentionally Defective Grantor Trust allows an owner to “freeze” current value by selling business interests to the trust, while future appreciation occurs outside the estate.
• SLAT – A Spousal Lifetime Access Trust allows one spouse to gift assets into a trust while the other spouse retains access to the funds, creating flexibility while still removing the asset from the estate.

Here’s a real example of how this can play out. I worked with a client whose business we’ll say was valued at $20 million. After talking through their growth pipeline and upcoming investments, we realized the value could rise significantly in the coming years. By moving a portion of the business into a trust for their heirs at that $20 million valuation, we were able to freeze that amount for estate tax purposes.

When the business later sold for $45 million, the $25 million in appreciation was no longer subject to estate tax. That represents roughly $10 million in tax savings.

For higher-value businesses, the numbers can sometimes be even more staggering, but these outcomes may only be possible with early planning.

Irrevocable Trusts Have Trade-Offs; Talk Through Them With Your Team

Irrevocable trusts can sometimes have a big impact, but they’re not necessarily the right fit for every situation. There are always trade-offs. Moving business assets into a trust, for example, often means giving up some control over them, and you may need to rely on other sources of income going forward.

That’s why these conversations need to happen early and with the right people around the table. Your attorney, CPA, and advisor can help pressure-test the idea, flag potential issues, and talk through whether the trade-offs are worth it based on your goals. This is definitely not something to rush through in the last 90 days before a deal.

Real-World Illustration of Why Planning Conversations Should Happen Early

Business transactions aren’t always limited to operating entities. I’ve worked with families whose core asset was something like a ranch—something they never planned to sell but wanted to keep in the family long-term.

Here’s an example based on real scenarios I’ve encountered: Let’s say that in 2010, a family-owned ranch is valued at $50 million. The owners want to pass it on to their heirs, so they prepare for an estate tax of around $10 million, setting aside cash and purchasing insurance to help cover that future cost. But by 2025, the ranch is worth $200 million. That jump in value pushes the estate tax far beyond what they planned for. They can’t insure or save fast enough to cover the added tax liability, and it becomes nearly impossible for the next generation to hold onto the property.

This example demonstrates how starting early with tax planning gives you more flexibility to weigh decisions while there are still more options on the table.

Other Tax and Estate Planning Considerations

Assess your current business structure

Meet with your CPA and advisor well before a potential sale to evaluate whether your current business structure is still the right fit. There may be opportunities to adjust how revenue is reported, how expenses are timed, or even whether a different entity type could offer more favorable tax treatment in the context of a transaction. These decisions can affect both the tax impact of the sale and your net proceeds, so it's important to review them early.

Consider charitable giving strategies ahead of a sale

For charitably inclined owners, setting up a donor-advised fund or other vehicle before the transaction may help reduce capital gains tax exposure. After the sale, those same strategies may not provide the same benefits.

Build the Right Advisory Team

Selling a business often involves difficult conversations. You might have to face tough trade-offs between what you want personally and what’s most practical for the transaction. In some cases, it means reconsidering assumptions you’ve held for years, or having honest conversations with partners or heirs about what comes next. Those moments can be challenging, and they’re a lot harder if you don’t fully trust the people advising you.

That’s why building the right team early in the process is so important. Your core group should include:

• A financial advisor
• A CPA
• An attorney
• In larger transactions, possibly an M&A specialist

When you have a team that understands your goals and brings objective input, you’re more likely to stay grounded and make decisions that hold up long after the sale is complete.

Our business planning services are here to support you. Contact an advisor at EP Wealth to get started.

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