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Exit Planning for Forever Owners

Fri, 07/29/2022 - 08:03

Written by: mernzen

Have you ever worked with a business owner who is so invested in their business it seems they might never leave it?  

For some business owners, this might actually be the case. 

According to the 2019 Business Owner Survey, 81% of business owners want to stop working in their businesses in the next ten years. However, only 56% of those respondents plan to sell or transfer ownership. Which means roughly 25% of business owners have no declared intention, leaving us with a unique subset of business owners we’ve dubbed as “forever owners.” 

Forever owners, as discussed more in a Why We Plan podcast episode, “Planning for Forever Owners,” are those owners who have reasons they want to continue to own the business, but do not want to put in the day-to-day work anymore. They want to leave the business, but they do not want to sell it. They prefer to maintain ownership, but perhaps have become burnt out on the built-up managerial tasks that have been placed on them over the years. They want to reap the financial and legacy rewards of ownership – but do not want to come into the office or deal with the headaches any longer.  

This sentiment, as shown in the survey, typically lies among those in the baby boomer generation of business owners who have been immersed in their companies for a long time. As an Exit Planning Advisor, there are ways to approach this demographic by simply shifting focus and showing them the importance of Exit Planning, even if without a sale or ownership transfer at the end.  

How Exit Planning Advisors Can Approach Forever Owners 

The typical work of an Exit Planning Advisor is aimed at a sale to an outsider or a transfer to an insider involved in the business (a child, key employee, etc.). However, working with these forever owners can be just as important because if the owner wishes to become less involved over time, transitions and plans need to be put into place so the business can carry on without their involvement.  

Essentially, forever owners need to create an Exit Plan, just without an ownership transfer at the end. As an Exit Planning Advisor, the following tips should help you in working with forever owners to make an Exit Plan for this unique path:  

  1. Rephrase the Question 

At the beginning of an Exit Planning conversation, you might ask a prospect, “When do you want to leave the business?”  To a forever owner, their answer is: “never” In order for the conversation to progress from here, it would be wise to rephrase this question in regard to the business owner’s relationship to the business.

Try questions like:

  • What is your current relationship with the business?  
  • What is good and not good about the business?  
  • How do you want that relationship with your business to change in the future? And, do you have a timeline for this change?  

Forever owners may or may not have a timeline as they hope to just stop doing the things they do not want to do anymore on their own terms. However, getting to the root of what management and leadership responsibilities they currently have and those they want to give up eventually will assist you in helping them create a timeline. In addition, knowing these goals will help create actionable items to get them to the relationship they want with their business in the future.  

  1. Focus on Next-Level Management   

If the business owner plans to no longer be around, who will be? No matter the timeline of these forever owners, if they want to stop working one day, there will need to be some work done in improving next-level management. Next-level management, in almost all cases, is the most important value driver that owners should aim to instill in their companies.  

Next-level managers are those who know how to grow a company and can work with customers, vendors, advisors, consultants, and others in the market at levels to which your clients aspire to grow their companies. Forever owners can assess whether current managers can drive growth and bridge any asset gaps that would be needed for them to separate from the business.  

Determining who is going to take the reins and deal with those day-to-day tasks, as well as allocating the time it will take to train them, is a big factor that can be planned for ahead of time.  

3 Tasks for Owners in Building Next-Level Management
  1. Build Business Value

In any Exit Planning interaction, working to improve transferable value – what a business is worth without the owner’s presence and involvement – is what drives a successful exit. Increasing overall transferable business value drives a successful exit, even if not a traditional exit.

Next-level management, for example, will naturally improve business value. However, there are a variety of other Value Drivers that Exit Planners can help forever owners with, such as: diversified customer base, sustainable cash flow, competitive advantage, and recurring revenue, to name a few.  

The Top 9 Ways to Increase Business Value
  1. Business Continuity Planning  

No business owner wants their business to suffer because of their own failure to plan for all possible scenarios, especially when their own involvement in the business is concerned. As an Exit Planning Advisor, you know firsthand what it takes to coordinate planning efforts that include a variety of considerations, risks, stakeholders, and timelines. 

 Business continuity, which is at the core of Exit Planning, is being able to keep a business running through unexpected events and without the owner at the helm (which is a forever owner’s dream!). Exit Planning will help ensure that proper “what if” initiatives are put into place to mitigate risks and put processes in place in case of emergencies.  

  1. Other Considerations:  

Shared Ownership 

Forever owners want to maintain their stake in the company, but perhaps they would be open to shared ownership if presented with an opportunity. Without a sale at the end, it can be hard for business owners to replace cash flow and compensation of a well-run business as a means of income when they leave. 

With shared ownership, business owners can reallocate the percentage of ownership as the business grows. For example, with an incoming co-owner, their percentage of ownership grows equal to the growth they accomplish. With this structure, the remaining ownership of the forever owner maintains value as the company grows.  

Alternate Exit Options  

Business owners have plenty of options in terms of business exit paths. For forever owners who intend to leave the business but maintain ownership, they might not care to hear about other options. However, as an Exit Planning Advisor, it is important to have knowledge of each of the exit paths to share an alternative path that would be better suited. By getting to know their post-exit goals, it may deem a conversation about an exit path that might help them reach their goals in a way they hadn’t considered.  

The Bottom Line  

While “forever ownership” may not be a traditional exit path, it is still important to put in the Exit Planning work. Even without an ownership transfer, aspects of Exit Planning come into play so that the business continues to be successful when the owner chooses to stop working. By focusing on the relationship, the owner has with the company, building business value and next-level management, and securing a business continuity plan, Exit Planning Advisors can ensure that forever owners are prepared to separate from their business on their terms.  


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Exit Planning for Forever Owners

Selecting the Best-Suited Business Exit Path

Fri, 07/22/2022 - 08:21

Written by: mernzen

Those who have been following BEI for some time know that there are weekly opportunities for Exit Planning education in the form of online webinars. BEI believes that some of the best insights and advice come from peers who are actively using Exit Planning strategies in their daily work, which is why we invite guests and strategic partners to host some of the webinars.  

In today’s blog, we want to feature one of our recent presentations put on by Footprint Capital as it gave an informative take on each of the business exit paths. Michael Butler, Senior Director of Footprint Capital, is responsible for leading sell-side and buy-side engagements with business owners. In addition, Michael cultivates relationships with clients, prospects, centers of influence, private equity firms, and family offices. His diverse and uniquely suited background helps him to advise owners on their business exit strategies, no matter their preferred exit path.  

Titled “Everything You Need to Know About the Exit Process,” this webinar gave a great overview of the benefits and downfalls of each type of exit path. Sharing notes from this portion of the presentation gives a functional, high-level pros and cons list of the various business exit paths, all in one place. In addition, the links included in the descriptor lists below link back to more in-depth BEI blog posts about specific exit paths. 

Footprint Capital’s Take on the Exit Planning Process 

Footprint Capital is a mergers and acquisitions firm at its core. However, as Michael and many other BEI Members would attest, the Exit Planning Process requires advisors of many industries to play a role.  

Exit Planning combines the plan, concept, effort, and process into a clear and simple strategy to build a business that is transferable through strong human, structural, customer, and social capital. Regardless of the specific industry an advisor serves, those who act as Exit Planning Advisors:  

  • Look at Exit Planning as a business strategy 
  • Seek to build, harvest, and preserve wealth  
  • Work to identify, protect, build, harvest, and manage enterprise value  
  • Simplify the process and clarify the roadmap to success 
  • Create and document a plan  

The timeline and tasks required when assisting a business owner choose their exit strategy.

This is an image that Footprint Capital used in their webinar outlining the timeline and tasks to use when assisting a business owner in finalizing their exit strategy.

Types of Exits: Inside & Outside  

There are many types of exit paths - both to insiders and outsiders

Business owners have plenty of options in terms of business exit paths. With the large number of choices to make, they often find themselves at a crossroads, faced with choosing which business exit path is most reasonable and potentially most profitable. It is up to the team of Exit Planning Advisors to ask the appropriate questions that will get to the root of their post-exit aspirations. They should also lay out the pros and cons to each path in a way that shows the owners which path makes the most sense for their personal and financial goals and give them a starting point. 

Pros & Cons of Inside Transitions  

Family Transfer  


  • Business legacy preservation 
  • Planned from an earlier start   
  • Lower costs involved 
  • More control of the transition process  
  • Less disruption to business operations



Sale to Employees (Employee Stock Ownership Plan, ESOP)  


  • The business stays in the “extended family.” 
  • Shares purchased with pre-tax dollars by the ESOP  
  • Taxable gain on the shares sold to the ESOP by the owner may sometimes be deferred (1042 rollover
  • ESOP is an employee benefit and may cause employees to act like owners 


  • Can be complicated and expensive 
  • May not work for some entities (culture) 
  • Company compelled to buy back shares from departing employees (repurchase obligation) 
  • Generally will not maximize proceeds (Fair Market Value standard) 


Management or Partner Buyout  


  • Business continuity 
  • Highly motivated buyers 
  • Preserves human capital 
  • Planned from an earlier start 
  • Can be combined with private equity to access additional capital and resources for growth  


  • Distraction 
  • Threat of flight (coercion of owner) 
  • Illiquid buyers 
  • Lower price and heavy seller financing (increases risk)  


Pros & Cons of Outside Transitions  

Strategic Buyer or Independent Sponsor 


  • Higher price (generally highest of all options) 
  • More cash up front  
  • Business owners can walk away faster 
  • Stable deal terms  


  • Can create distraction or loss of focus for the business owner  
  • May give way to privacy concerns 
  • Can be emotional for owner  
  • Potential employee concerns  


Private Equity & Family Office  


  • Higher price (generally at or near highest of all options) 
  • Often the ability of the owner to maximize total business value and retain equity 
  • Retention of employees and incentive to key people 
  • Experienced and professional buyers  


  • Owners are generally required to remain working post close 
  • Can create distraction or loss of focus for the owner 
  • May cause privacy concerns by involving key employees  
  • Sell side process sometimes seems complex to business owners 


While this list is not comprehensive, it is wise for advisors involved in the Exit Planning Process, no matter their industry, to be familiar with each of the business exit paths in order to determine which is best suited for their client’s situation. Many concepts that fall under each of the exit paths seem complex and unfamiliar to business owners and it requires Exit Planning knowledge, even if just at a high level when working with business owner clients.  

To begin gaining knowledge in Exit Planning, take a look at the BEI schedule of free weekly webinars & tune in to learn some of the industry’s best tips and tricks.  

Additionally, to listen to the recording of the webinar outlined above by Footprint Capital’s Michael Butler, visit the link below. In this recording, Michael continues to further break down the role of advisors, as well as a step-by-step guide to the sell-side process.  

Watch the Webinar Recording

Selecting the Best Suited Exit Path

Avoiding Common Pitfalls During the Sale of a Business

According to the Small Business Administration (SBA), 75% of small businesses fail to sell successfully. That’s right – 3 out of 4 small businesses are unable to sell. This is in large part due to a lack of tools and resources available to assist the business owner historically. As a result, millions of business owners are forced to continue trying to sell their businesses or shutting down, which is both expensive and time-consuming.

Maximizing Net After Tax Proceeds – Planning for Pre and Post Closing

In this webinar, our guest Michael Niemann, CEO and Founder of Niemann Group, will explore the ways to prepare your client’s business for sale and maximize the after-tax proceeds with creative structuring regardless of where your owner clients are in the sale cycle. If you have already assisted your owner clients in the selling of the business, Michael will also review ways to lower 2022 and future taxes including structuring rolled-over equity for tax-free growth.