Your Exit Planning Team: Who You Need and When

Mark Valentino, Head of Business Banking at Citizens

A successful exit plan requires a cross-functional team of professionals, typically including a business valuation specialist, a CPA, an M&A or business attorney, a financial advisor, an insurance and risk advisor, an investment banker or business broker and a business banker. Each plays a distinct, non-overlapping role. The sequence in which you bring them in, not just who you hire, determines how well prepared your business is when it counts.

Who should be on your exit planning team?

A strong exit planning team includes experts in valuation, tax, legal and financial planning. Depending on your plans, you may also need an insurance and risk advisor and an investment banker or business broker. Each one plays a different role, and when you bring them in matters.

Research¹ from the Exit Planning Institute found that 58% of Baby Boomers and 39% of Gen X owners expect to exit their businesses within five years, but most do not have a business transition plan. Citizens found that more than a third of businesses with $5 million or more in revenue plan to increase spending on expert advice, including accounting, advisory, tax strategy and legal services, this year. For small and midsize business owners, the right team of advisors supports informed decisions and the best chance of a successful exit.

I find that understanding what each advisor does makes it easier to see what each one contributes to the process.

The core exit planning team

Business valuation specialist

I encourage owners to engage a valuation specialist early because every other step depends on understanding what the business is worth. A valuation specialist analyzes your financial statements, industry and current market conditions to determine fair market value. They also support your CPA and estate planning attorney when tax and estate filings require an accurate valuation.

Bring this person in as early as possible, as questions about your exit emerge. Owners who wait until they are ready to sell may not have enough time to maximize valuation before an exit.

Certified public accountant (CPA) with transaction experience

A CPA with M&A experience plays a different role than the accountant who files your taxes. This professional provides tax strategy, identifies issues that could suppress your valuation and makes sure your financial statements are accurate, current and consistent. CPAs with transaction experience also know what documentation buyers expect.

This relationship should be in place early, alongside or shortly after the valuation specialist.

Business and estate planning attorney

A business attorney handles ownership structures, buy-sell agreements, intellectual property documentation, contracts and M&A transaction documents. An estate planning attorney addresses wealth transfer strategy, trust structures, gift and estate tax exemptions and family governance.

Depending on your situation, these roles may be filled by the same firm or separate attorneys. Choose attorneys with direct M&A transaction experience, in addition to any day-to-day legal expertise. Your business attorney should be an early addition to the team. Your estate planning attorney becomes especially important once your valuation and financial plan are in place.

Financial advisor

A financial advisor connects the business exit to your personal financial goals, retirement plans and long-term investment strategy. This advisor could also remain involved after the sale to help manage the proceeds and your financial plan.

Add this advisor early so your plans for life after the sale help shape your exit strategy.

Business banker

A business banker who knows your business understands your financial history, cash flow and credit profile. They may identify financing or transition issues before they become obstacles during a sale and help finance a management buyout, build a succession plan, support a family member acquisition or arrange financing for another ownership transition.

Lean on your business banker as a connector. They could introduce you to advisors with relevant transaction experience and help the team work together effectively.

Insurance and risk advisor

An insurance and risk advisor works with your attorney and financial advisor to structure life and disability insurance and fund your buy-sell agreement.

Bring this advisor in once your valuation is established and your team begins work on the buy-sell agreement.

Investment banker or business broker

Investment bankers typically work on mid-market transactions, while business brokers typically handle smaller deals. For a business with $5 million to $50 million in revenue, either may be appropriate, depending on the size and structure of the deal. They manage the sale process, including presenting the business, identifying and vetting buyers and negotiating terms.

Engage this specialist 1 to 2 years before your target exit date, once the business is ready to go to market.

Your internal team matters

External advisors help prepare your business for sale, but buyers also evaluate the people who run it. Your CFO, COO and head of sales may need to provide operational and financial information to advisors and prospective buyers. If your business has a board of directors, make sure the board is aligned with your transition goals.

The right sequence, and why the order matters

I've worked with enough business owners to know that the right team, engaged at the right time, can help you plan for a transition and avoid complications. A business banker is a natural starting point for building the team and can remain involved throughout the process.

From there, this is the sequence I generally recommend:

1. One of the first specialists to engage is your valuation specialist. Alongside your financial advisor, they establish what your business is worth and align your exit with your personal financial goals.
2. Bring in a CPA with transaction experience to identify tax considerations and any financial issues that need to be addressed.
3. Engage your business and estate planning attorneys to address ownership, legal documents and plans for transferring the business.
4. Add an insurance and risk advisor to fund contingency plans and your buy-sell agreement.
5. Bring in an investment banker or business broker once the business is ready to go to market.

Small and mid-size business exits are complex, so coordination among advisors is essential. Prioritize advisors who are willing to work together.

Timeline

3 to 7 years before exit

Begin planning. Start with the business banker and bring in the valuation specialist and financial advisor early in the process.

3 to 5 years before exit

Add a CPA with transaction experience, your business attorney and your estate planning attorney. Clean up financials and structure your ownership, documentation and transfer mechanisms.

1 to 2 years before exit

Bring in your insurance and risk advisor to fund contingency plans, then engage an investment banker or business broker once the business is ready to go to market.

Ongoing, from day 1

Your business banker stays involved throughout, providing financial continuity and connecting you to the rest of the team as needed.

Common issues and how to address them

Advisor silos

When each professional works in isolation, you may end up with conflicting advice and gaps in the plan. Ask one advisor, typically your financial advisor or business banker, to help coordinate the team.

Starting too late

Owners who begin planning within 12 months of a desired exit may have fewer options to increase the value of their business or prepare for the transition. Start assembling your team 3 to 7 years before your target date, even if your plans change over time.

Using the wrong specialist for transaction work

The attorney who handles your everyday contracts and the CPA who files your annual taxes may not have M&A experience. Verify credentials and transaction history before bringing anyone onto your exit planning team, regardless of how long you have worked with them.

Ignoring internal readiness

A business that depends too heavily on its owner for revenue, relationships or day-to-day decisions may be harder to sell or receive a lower valuation. Invest in leadership development and operational readiness well before your exit timeline begins.

A strong team is the first step toward a successful exit

Bringing in the right experts at the right time, and having them work together, helps you make informed decisions and get the most from the business you have built.

Speak with a Citizens advisor or explore Citizens business transition resources.

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Frequently asked questions

What happens if I receive an unsolicited offer before my team is assembled?

Start with your business banker and attorney to help assess the offer and bring in other advisors as needed.

How do I know if the advisors I already work with have M&A experience?

Ask how many transactions they have handled in the past 3 years, the size of those deals and whether they have relevant credentials. You can also ask for references from business owners they have helped through a sale.

How do I prepare my leadership team for the sales process?

Brief key leaders early on the due diligence process and the questions buyers are likely to ask. Buyers often want to meet directly with the CFO, COO and head of sales to understand how the business operates without the owner.