A successful exit takes longer to prepare than most owners realize. Here is how we think about the window between the decision to sell and the day you actually do.
Much of what determines your price is shaped in the three years before you sign, not in the negotiation itself. By the time a buyer is at the table, the structure of your company, your tax position, and your personal balance sheet are largely fixed. Owners who plan for a sale as a process are often better positioned than those who treat it as a single event.
For most owners, the business is the single largest thing they own. In its 2023 National State of Owner Readiness Report, the Exit Planning Institute reports that roughly 80 percent of a typical owner’s net worth is tied up in the company, and that many owners reach the market with no written transition plan. The same research finds that only 20 to 30 percent of businesses that go to market actually sell. The distance between wanting to sell and being ready to sell is where value quietly leaks out.
The work changes shape as the date gets closer
Three years out, the work is the business. Clean financials, customer concentration, how much the company depends on you personally, and the strength of your management bench all shape how a buyer prices risk.
Two years out, the work is structure. Entity type, how proceeds will be taxed, and whether your trusts and estate plan can actually hold what a sale creates. Decisions made here are hard to reverse once an offer is on paper.
One year out, the work is readiness. Diligence preparation, the personal income plan that takes over when the paycheck stops, and the order of operations that helps you avoid surprises on the tax side.
Founders in Illinois and Tennessee play by different rules
Illinois layers its own income and estate tax on top of the federal system, and its trust law carries fiduciary standards a buyer’s counsel will test. Tennessee has no state income tax, which changes where and when a gain is recognized and how residency factors in before a sale. Owners with roots or operations in both states have a planning problem that is easy to miss without a multi-state view.
The most common miss is not on the business side. It is the handoff. Owners spend three years making the company sellable and almost no time making themselves ready for the wealth the sale produces. The tax structure, the estate documents, and the income plan that replaces a salary become an afterthought, and by then the better options have closed. Our role is to quarterback that handoff, working alongside your CPA and attorney so the business sale and the personal plan move as one.
Five things owners miss in the last three years
- Reducing owner dependence. Making the company run well when you are not in the room.
- Setting tax and entity structure early. Before an offer locks the treatment of your proceeds in place.
- Aligning trusts and estate documents. Sized to the liquidity event that is coming, not the company you have today.
- Building the income plan. The plan that replaces the paycheck the day it stops.
- Sequencing the moves. Ordering the sale and the tax steps so they do not work against each other.
Start the conversation
We can usually tell in one conversation where your three-year window actually starts. If a sale is anywhere on your horizon, that is the conversation worth having now.
Advisory services offered through United Advisor Group, LLC, a Registered Investment Adviser (CRD #324205). Securities offered through Purshe Kaplan Sterling Investments, Member FINRA/SIPC. Ftacek Financial Services, LLC and United Advisor Group are independent entities. This article is for educational purposes only and is not individualized investment, tax, or legal advice. Consult your own advisors before acting on any strategy described.