10 Steps To Creating A Successful Exit Plan For CEOs

8 min read

September 12th, 2024

This year, the Baby Boomer generation is hitting what's being called "peak 65." This means that more people than ever before are reaching retirement age with over 11,200 Americans turning 65 every day in 2024. Baby Boomers are currently the CEOs of about 75% of all Fortune 500 companies, and according to the Exit Planning Institute's 2023 National State of Owner Readiness Report, Baby Boomers own 51% of businesses in the United States. As they continue hitting retirement age, these business leaders are set to transition to zero ownership over the next decade.

 This means that business leaders are currently conducting an unprecedented volume of exit planning. Whether you are a CEO, a business owner, or both, getting your exit plan right is essential to the future success of your business and leadership legacy. 

What Is a Business Exit Plan?

A business exit plan is a strategy for successfully transitioning leadership and/or ownership of a company as a CEO or business owner sells his or her stake and leaves the business. 

A business exit strategy can impact the way a business operates and develops. As a result, it is ideal for an exit strategy to be included in a business's initial plan - before the business even first launches. This, however, is not always the case, and business leaders can take action while running their businesses to create successful exit strategies that will generate a profit in addition to leaving their companies in good standing and their leadership legacies intact. 

Create an Exit Strategy for Business Leaders in 10 Steps

1. Start Planning and Preparing Early

As stated above, having an exit strategy in place at the time of founding can help you develop an entire business plan. If a business owner already knows how they want to exit a company, then they can build their exit into the business's development. For example, exit strategies such as a strategic acquisition, initial public offering (IPO), management buyout, or family succession can significantly influence the business's goals from the start. 

Whether or not you are an owner or a CEO and have decided on the way you plan to exit, you can begin preparing the business now by ensuring your back office is in order. Your back office must be operating compliantly and ideally using the generally accepted accounting principles (GAAP). This will help you justify your business valuation and ensure that your financial records and reports are easily readable and comparable to other businesses in your industry and market. 

Read More: Why You Need to Think About Your Business Exit Strategy Now

2. Recognize When It's Time to Step Down or Sell

If you are a business owner and you plan to sell your company, then it's important to try to get the timing right based on the market, your business's valuation, and the company's needs. While timing the market can be tricky, economists are predicting that another economic recession will hit sometime in the 2030s. Keep a close eye on the market and your industry to determine when is the right time to sell or to transition to new leadership. Likewise, it's not ideal for an acting CEO to step down in the middle of an economic crisis, forcing a business to deal with two significant challenges at once. 

3. Set Exit Strategy Goals

A business exit plan should accomplish a few objectives such as minimizing risk, maximizing business valuation, and facilitating a smooth transition of leadership and/or ownership. An exit strategy should:

• Alleviate uncertainty about succession
• Reduce the odds of potential disputes
• Provide a clear vision of the future
• Maximize business value and shareholder liquidity
• Offer clarity
• Address tax planning considerations
• Preserve or improve the company's culture, community, and employees

You should consider the goals and objectives of your exit plan and prioritize them. Consider what is most important to you, your stakeholders, your clients, and your employees. These goals should guide your exit strategy planning. 

4. Determine Your Exit Plan

If you are a CEO but not an owner, then you will need to determine who your successor will be. Consider whether you will promote an internal individual from within the company or hire someone outside of the company. Then develop a plan for how you will select this individual, train and develop them, and transition them into your position. 

If you are an owner, you must determine whether you plan to sell your stake, pass it on to a relative in a family succession, hold an IPO, initiate a management or employee buyout, sell the business outright, or liquidate the business's assets. 

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5. Create a Timeline

Executing an exit strategy doesn't happen overnight. You should create a timeline for your exit, which could require anywhere from six months to a year to complete. This timeline should include deadlines for hiring or promoting, training and development, transferring knowledge, and your own offboarding. 

6. Develop a Communication Strategy

Part of your exit strategy should also include a communication strategy. During times of major transition and significant change, it is essential that you provide transparent, thorough, and open communication with your employees, clients, and stakeholders. You do not want the news of your exit to spread through a rumor mill. Instead, business leaders should take charge of communicating their exit and exit strategy with the organization. By communicating proactively, you can ensure that you control the story and how optimistically the news is received while helping to continue creating a sense of psychological safety for everyone in the company. 

Read More: 5 Steps to Establishing Effective Leadership Teams             

7. Shore up Your Business

Your exit plan should include a thorough assessment of business operations and your leadership role. Take steps to optimize and streamline operations. Increasing efficiency and productivity should improve your profits, projections, and valuation.

Additionally, take time to assess your role by thinking about your responsibilities and what you do for the company. Consider whether there is any way to improve your list of responsibilities. Create a thorough job description for your position to ensure your successor will be prepared to step into your office without any hiccups or oversights. 

8. Leave With a Personal Plan in Place

While focusing on the health and longevity of their companies, business leaders often forget to think about their own futures. Whether you are retiring or transitioning to a new leadership role at another company, your exit strategy must also include a personal plan. Think about your next steps such as how soon you wish to begin a new job or whether you want to continue professional life during retirement for a smoother transition to full retirement. Retirees can be incredibly valuable in consulting and mentoring positions or filling places on advisory boards. 

Read More: 5 Quick Financial KPIs To Help Check Your Business’s Health

Additionally, business leaders should decide whether or not they wish to remain available to the business in an advisory role after exiting. Staying on in an advisory capacity for a longer transition can help to facilitate a more successful transition of power, improving the success of your successor and increasing revenue growth. 

9. Stick to Your Exit Plan

Throughout your exit strategy timeline, you will gain momentum as you near your exit. Once your departure date is set, do not delay it. Remaining longer than planned can make it look like you don't have confidence in the new leadership. Sticking to your plan - whether that's a clean break or remaining available in an advisory role - will improve your credibility and that of your new CEO. 

10. Close the Door

If you're leaving with a clean break, give yourself permission to hand over the keys, say goodbye, walk away, and close the door. Congratulate yourself on a job well done and look to the future with optimism and excitement - whether the future holds a new leadership position or plans for retirement like finally traveling or taking up those hobbies you never had time for when you were busy putting out fires and running a company.

Perfect Your Business Strategy and Prepare to Exit With an Outsourced Accounting Department

Having your back office in order and a long history of compliant, reliable, and accurate financial documents makes it much easier for business leaders to exit their roles. Whether you are a business owner or a CEO planning to pass the torch, outsourcing accounting now can help you get your historical and current financial data in order. This will help you devise an accurate and reasonable business valuation which is vital if you plan to sell the business. Having sound financials in place can also ensure that a new CEO will be able to take the reins with a full understanding of the business's financial health and strategy. With an outsourced accounting department and the guidance of an experienced virtual CFO, you can develop a successful business exit strategy to leave your business and leadership legacy intact.