By John P. Napolitano CFP®, CPA, PFS, MST | Founder & Chairman
Here’s the reality: exit planning happens either on your terms or not on your terms. Whether you plan to retire, sell, or transition the business to family or key employees, one thing is certain—you need a plan.
Today, I’m thinking about the 3-5 year runway you’ve probably heard about. It’s a common rule of thumb for good reason. When you’re 3-5 years from a potential exit, there are two critical facets I would begin looking at.
1. Get a Formal Valuation
Before making any decisions, you need a professional valuation. Some people put this off until they’re much closer to selling, and this is a serious mistake. A valuation isn’t just to give you a number for negotiations.
When you start the valuation process 3-5 years out, it gives you two things:
- A baseline for your personal financial planning–what do you need or want for an exit price and timeline?
- A to-do list of things that undercut your valuation. 3-5 years out, you have time to improve these.
Do yourself a favor here. Don’t go by your own numbers. Get a valuation early.
2. People & Brand
We all know that your valuation is most driven by the ongoing value of the business, not just at the point of sale. This is the most important strategic conversation you need to have, and again, start early.
The first critical area is people and processes. With 3-5 years of runway, you can specifically identify the key personnel and processes that need to be strengthened. If buyers have concerns about flight risk or lack of a transferable process, your valuation will show it.
This is more than ensuring the business can run effectively after you exit. We frequently strategize with owners around smart ways to help retain their key leaders through transition. This involves a few questions:
- Are we open to private equity buyers? They may be able to offer better financial terms, but do we risk a higher churn rate for our team members?
- Should we prepare for stay-on bonuses or phantom equity to reward continuity?
- When and how do we communicate a possible transition to our leaders?
We want minimum surprise and maximum alignment heading into an exit. That doesn’t happen by accident.
Most buyers want continuity. If the business crumbles without you, that’s a problem. Strengthen your team and systems now so the business can thrive long after you exit.
Do Your Homework
Exit planning isn’t just about maximizing the sale price—it’s about ensuring a smooth transition for you, your employees, and the new owner. The earlier you start, the more control you have.
Take the time to understand your valuation, identify key team members, and structure incentives to keep the business strong. A well-planned exit doesn’t happen by accident—it happens by design.
Thinking about your own exit strategy? Let’s start planning today. The best time to prepare for your future is now.
