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Your Business Exit Strategy - Sink or Swim?

March 5, 2018
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By Dulcidia Lazzaro and Autumn Eschmann

Although most business owners (88%) believe their family will control their business in five years, statistics show that 33% survive to transfer to the next generation, and only 10- 15% continue to the third generation (Family Business Institute). There are many reasons why these statistics exist. Biggest reason why businesses fail to establish a system to assume a smooth exit from their business? Lack of planning! With proper planning, you can create a successful and effective strategic plan. Here are a few key steps which will guide you on a path of a successful exit.


Creating, designing, and implementing any plan will take time. Time will provide you the ability to be pro-active as opposed to reactive. Plans must be put in place with the flexibility for adaptation and change, and they should be re-evaluated consistently and monitored to adapt to new circumstances. They must include a contingency strategy in case of sudden events – like disability or death. 


Communication is key in all aspects of succession planning and is essential in order to keep your strategic plan unified and aligned. One way to accomplish this is by seeking input from involved family members, key employees, and professionals. Avoiding friction between key employees and family involved in the business is vital. Consistent communication can greatly help to make sure everyone is working towards the same goals, with the same enthusiasm, for success and trust between parties.


What do you envision the future to look like? What are your business goals? What are your retirement goals? Do you need to sell the business? Are you or your spouse dependent on the business for cash flow? Identify early what you are looking to accomplish – both personally and professionally. Identifying goals of next generation management, retirement goals, and the importance of keeping the family business in the family, are all factors that need to be addressed early in the process.


Once you have established the goals and objectives, you can then take the next step to create a successful strategic plan. There are a number of options for a successful exit:

- Family Succession - Transfer the business to a family member(s)
- Internal Succession - Sell or transfer the business to one or more key employees or co-workers, or sell to employees using an Employee Stock Ownership Plan (ESOP)
- External Succession - Sell the business to an outside third party, engage in an Initial Public Offering (IPO), strategic merger, or investment by an outside party


The process of exiting a business successfully, no matter what path, is a challenging one for all. Once a decision is made to follow a particular succession path, all parties must be prepared for the transition. There has to be unity around the goals and objectives. This begins with identifying successors, and identifying active and non-active roles and responsibilities for all family members. Working together in a cohesive manner will help members make joint decisions about how to manage the company, and will ultimately deliver success. A successful transition could also result in a lower tax impact for all parties with proper tax planning.


Most business owners don’t think about who will run the business in the future; they are too busy with the day-to-day operations of the business. It is essential that a business owner avoid putting it off to “someday” (procrastinating), trying to do too much too soon, not having specific goals, or trying to do it alone by not seeking collaborative professional help. Owners who do not plan may inadvertently give up control of their legacy. They could be forced to sell the business at a much lower price than its true value, have disputes over its control, and be subject to excessive taxes.

When one of the owners dies, does their ownership transfer to someone with no connection to the business? Will that person want to be involved? Will they have the capabilities to be involved? Will they be accepted by other owner and key employees? These situations are ripe with potential conflict and friction that could devastate the future of the company. With thoughtful, detailed planning now, all of this could be avoided.


Citrin Cooperman works with business owners every day who focus on their company’s day-to-day business objectives and are challenged to make the time for succession planning. With careful preparation, a business owner can work with a group of advisors such as accountants, lawyers, and business and insurance brokers to start taking the steps now, to plan for a successful exit in the future.


Citrin Cooperman, along with the XPX Exit Planning Exchange, are proud to present, “Guide to Building Your Successful Exit Plan,” on Thursday, May 24, 2018, at the Fairview Country Club. This seminar will give you an exclusive opportunity to hear from business advisors on the importance of succession planning and provide insight on creating a successful and effective strategic plan for your business. For additional details or to register for this complimentary seminar, please contact Laura Di Diego at


Dulcidia Lazzaro is a tax director in Citrin Cooperman’s White Plains office and can be reached at 914.949.2990 or at Autumn Eschmann is an associate in Citrin Cooperman’s White Plains office and can be reached at 914.949.2990 or at Citrin Cooperman is a full-service accounting and consulting firm with 10 locations on the East Coast.